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Is Teal Organizational Structure The New Way To Innovate?

Can binning the old organizational structures promote innovation?

25Apr

The concept of a teal organisational structure is not particularly cutting edge, but is one that most people will not have heard of. Many of those who have heard of it believe that it is the next natural evolution in the ways that businesses are organized, others believe that it is simply a hippy concept that has little impact in the real world. However, the success of many companies who have implemented it, both in terms of employee happiness and profits, suggests that it is a concept that has legs and could be the next big shift in corporate innovation.

A teal structure is one that follows on from red, amber, orange, and green structures that have come before. Red structures are almost like dictatorships, with a single leader directing everything that happens, like a king or gang leader. Amber structures have strictly formal roles within the organization which allow for stable, repeatable roles and tasks, such as the Army today. Orange structures are the kind that we see in large multinational companies today, where the goal is always to beat the competition through hierarchy and where professionalism is a key driver, people should have a work self and a home self. Green companies focus on culture, employee development, and empowerment of stakeholders, both internally and externally. This would be companies like Starbucks and Ben & Jerry’s who aim to be sustainable and project a message of empowerment for their workers and customers.

Teal takes the next step, essentially removing the hierarchical elements of a company and empowering people to not only do good (as with a green company) but to be themselves and work towards a shared purpose beyond competition.

For the majority of us, this sounds like hippy rubbish, everybody holding hands and hugging in the office, but this isn’t the case and many of the companies who have adopted it have found success. For instance, Patagonia, one of the best known climbing brands in the world who sold over $10 million of clothing on Black Friday in 2015 (and donated every penny to charity).

Their innovative approach saw them double their size of operations and triple its sustainability under CEO Rose Marcario, who moved from corporate banking to the company after having an epiphany in the back of a limo following a frustrating incident involving somebody crossing the street. All of this has come from them very literally telling people not to buy their products, with their ‘don’t buy this jacket’ ad or taking out Black Friday ads saying ‘don’t buy our products.’ Their approach to business is very much the opposite of orange companies, with the company not looking at maximizing profits, but instead looking to maximize their impact. For instance, rather than saving money they invested huge sums in a documentary, DamNation, which discussed dam removal - a contentious subject. In an interview with Fast Company, Marcacio said of it that ‘this documentary took on an issue we didn’t feel that anyone else could take on in the way that we could. Any fight worth fighting is the sort of attitude that we take.’ The cause-first approach is a major element of a teal structure.

Frederic Laloux, author of Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness, a book that many believe is the bible for teal organizations, noted of teal organizations that they had three main breakthroughs compared to previous models:

  • Self-management. Teal organizations operate effectively, even at a large scale, with a system based on peer relationships. They set up structures and practices in which people have high autonomy in their domain, and are accountable for coordinating with others. Power and control are deeply embedded throughout the organizations, no longer tied to the specific positions of a few top leaders.
  • Wholeness. Whereas Orange and Green organizations encourage people to show only their narrow ‘professional’ selves, Teal organizations invite people to reclaim their inner wholeness. They create an environment wherein people feel free to fully express themselves, bringing unprecedented levels of energy, passion, and creativity to work.
  • Evolutionary purpose. Teal organizations base their strategies on what they sense the world is asking from them. Agile practices that sense and respond replace the machinery of plans, budgets, targets, and incentives. Paradoxically, by focusing less on the bottom line and shareholder value, they generate financial results that outpace those of competitors.

  • These three key elements of a teal structure are key drivers of innovation, creating an empowered and excited work force who are working towards common goals beyond profit making. If every person knows what they are working towards and each has dominion and ownership over their own areas whilst still feeling valued, they are going to work passionately to improve the company and its goals.

    Breaking away from the norms of how businesses have been run for decades is never an easy thing to do and in the case of teal organizations, requires a huge amount of trust in those working at the company. However, when the huge successes of companies like Patagonia are down to an approach allowed by the teal model, perhaps it shows that adopting a new mission and flat hierarchy based model can really reap rewards. 

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