What might a teal organisational structure look like?
The majority of organisations today operate primarily from an orange paradigm. They follow the rules and structures invented during the industrial revolution. A handful of organisations have, however, transitioned towards the more evolved teal paradigm according to Frederic Laloux’s organisational development model. This post takes a high-level look at the difference between predominantly orange and teal operating models relating to organisational structure. It also outlines a possible map to help you transition from orange to teal.
The organisational structure is arguably the most important aspect of an organisation. No matter how agile your individual teams are, without a supportive structure, you will never be as “teal” or agile as you hope to be.
Characteristics of an ‘orange’ hierarchical pyramid structure
A predominantly orange organisation has a typical hierarchical pyramid structure most people are familiar with. A main decision-maker (CEO) is typically at the top of the pyramid. In a division-of-work model, each layer in the hierarchy divides the responsibilities in a waterfall-like structure. Information typically flows downward in a one directional stream. There is little to no feedback loop back up, thus the term waterfall.
Typically, the people on the floor have little decision-making power. They serve as metaphorical ‘spokes in the wheel’ of a much bigger machine - machine being the describing metaphor for a typical 'orange' organization. The top decision-makers decide the why, the what, and the how while the people on the ground follow these instructions without question.
A predominantly ‘orange’ organisation usually have a lot of layers within the hierarchy. Typically they consist of team leads, managers, group managers, directors, group directors, and executives. The higher you are in the hierarchy the more decision-making power you have.
Fun fact: Did you know that the first organisational structure was developed in 1854 and has remained mainly unchanged to this day?
The bottom layer of the pyramid operates on the tactical level while the top layers typically monitor the status of work by means of status reports and numbers. Often they don’t have direct contact with the bottom-layer workers, relying on written reports via a middleman. Mostly, the CEO addresses the organisation as a whole only a few times a year with limited interaction.
Information in this waterfall-like structure flows down in a need-to-know manner. The public usually is not privy to information like roadmaps, financial performance, internal processes etc.
The goal at the heart of this hierarchical structure is short-term profit. Yearly profits are the primary indicator of success. Decisions are driven by looking at the numbers.
Characteristics of a ‘teal’ self-organising team structure
A predominantly 'teal' organisation has a number of self-organising teams. The structure is fluid and changes as the projects within the organisation change. Typically there are either no titles, everyone being a “partner” or “associate” with different roles and responsibilities. Whether there are titles or not, though, the key difference between orange and teal structures is the lack of hierarchy.
Each self-organising team consists of a fully cross-functional team, meaning all the different functions like finance, risk, safety etc. have representatives within the team. The organisation effectively consists of a number of startups with a strategic team mainly responsible for the coordination of the bigger organisation.
The octopus model
This model can be compared to an octopus. The head is the part responsible for coordination, while each different leg has full decision-making power and is autonomous in its operation. There needs to be agreement within all different parts for it to function effectively. Each leg has a different perspective on a topic, adding information to give a more complete picture of any situation.
The circular economy
The design of the organisational structure is typically circular rather than the pyramid, reflecting a circular economy, or whole system, within itself. Systems thinking is at the heart of anorganization operating from a teal paradigm. The primary goal is to minimise inputs and waste in a generative way. The value chain takes into consideration the impact of waste on the environment and any changes in the outside climate. Whenever the climate changes, the structure adapts to either add or repurpose teams to ensure sustainability.
A fully connected system
Decision-making power never lies with only one person in an organization operating from a teal paradigm. A key characteristic of this structure is that it’s connected to all parts of the system. Where in an ‘orange’ organisation there is no direct contact between the CEO and the people on the ground, for example, in a teal organisation everyone is connected in some way. Some connections might be weaker than others, but there are clear connections between all parts.
Typically teams consist of 8 – 10 people and a specific organisational unit never has more than 120 – 150 people. Some people experience the optimal size as low as 40. When a unit grows to more than 150 people a new unit with a specific purpose is defined. If you’re interested to find out more about these magical numbers, I highly recommend reading The Tipping Point by Malcolm Gladwell.
The heart of the organisation is contributing to the world with a meaningful purpose. Profit is the result of success rather than the primary goal.
Getting from orange to teal
Knowing what the goal is, here is a rough guide to help you get from an orange structure to a more teal organisational structure.
1. Know where you are
In order to get where you want to be, it is necessary to admit to where you are. Many organisations tend to be positively optimistic about where they are, unwilling to admit to reality. In order to change, though, you have to be willing to admit where you are.
2. Start with one cross-functional team on a low-risk project
One key principle supporting organisations operating from a teal paradigm is that they grow organically. Identify a low-risk project where going through the growing pains and experimenting with what works for your unique organisation to serve as starting point. Identify and include a fully cross-functional team for this project in a mini-startup way with a clearly defined purpose and outcome.
3. Add teams organically
Following the Fibonacci sequence, start adding similarly structured teams. First add only one cross-functional team, clearly defining the boundaries and connections between these two teams in addition to the unique purpose and outcome. Then, add two more teams in a similar way, then four, etc.
4. Repurpose middle management
A fundamental difference between a predominant orange and teal organisation is that in self-organising and autonomous teams there’s no need for management. Similar to how Artificial Intelligence requires that job requirements changes, so too moving towards operating from a teal paradigm requires the role of management to adapt.
Help the managers to find a suitable role within the new structure that best suits their skills and is something they want. If a manager sees the process as a demotion, they are probably not ready to transition to teal. It will feel like the natural next step when the organisation is ready for the transition, not like loss or forced adaptation.
This could typically look like becoming a specialist in an area or choosing to become an advisor or coach.
There is still a need for leadership within a teal organisation. Managers could also become mentors to others to help them develop their leadership skills and thus increase the level of autonomy in the organization. The core difference is that the management responsibilities are rotated within a team. For example, there is not one Scrum Master with the function of facilitating agile rituals, in each sprint or iteration the team selects someone who will perform the role of the Scrum Master, or distribute the responsibilities among the different team members.
5. Define the organisational structure
Just like the anatomy of a human body helps us understand where a problem lies when diagnosing a disease, so too having a map of the interconnections within an organisation greatly improves efficiency. Creating a visual representation of an organisation helps align everyone.
Define a structure showing the boundaries and connections but without the names of people. Define the different business units with their core purpose and relationships to other units. You can then, as a second layer (as an example) add the names of the people associated with the unit.
The key is that the structure should support fluidity and regular changes. Specific people don’t define a business unit, roles do. The names of the people should be expected to change regularly.
6. Rotate roles
Finally, before the start of each iteration, determine who will rotate to a different team and who will remain. Factors that might be considered in this decision include continuity, personal development, redundancy, and time off.
For example, it is useful to have a key person remain in the team to ensure stability and minimise handover time. On the other hand, developing people and creating a more sustainable team by rotating people to different projects and teams will greatly satisfy the need for challenge and learning. It also means that if one person, for any reason, leaves the team, there is always a backup who can take over at short notice. As a bonus, anyone can take leave at any time without any major impact on existing projects.
The structures we know, including organisational structures, are due for a rework. Invented more than 100 years ago and mostly unchanged, it is time to more critically look at the future of work and what it practically looks like.
The most fundamental change to support organisational growth from a predominantly orange paradigm to teal requires a more fluid, circular structure. A ‘teal’ organisational structure supports an ever-changing environment and a closer relationship with the customers and the environment. To be efficient it requires self-organising and autonomous teams, or what is most commonly known as distributed leadership or boss-less organisations.
It’s been proven that this model of leadership works surprisingly well with more and more success stories and case studies becoming available. So the question is no longer whether it’s possible.
The question is – are you ready for growth?
Originally published on https://peopledevelopmentmagazine.com/2023/05/18/teal-organisational-structure/