Reference no: EM13844712

CASE APPLICATION- Self-governance at LRN

Self-governance. Sounds like a term you would read in a political science textbook, but not a management textbook. However, a self-governing organisation is what Dov Seidman has created in his own company, LRN (a consulting firm), and it is what he advocates for other organisations that want to prosper in the new realities of today's environment of interdependence. So, how does it work at LRN?

LRN, which stands for Legal Research Network, is an organisation that was created in 1992 in New York by Dov Seidman. It was founded on Seidman's idea that information should be democratised in order to help people around the world do the right thing. Seidman set out to build an organisation that could provide shared-cost legal expertise for corporate legal departments needing to navigate complex legal and regulatory environments and at the same time foster ethical cultures. Today, LRN consults with companies on legal and regulatory compliance, reputation and principled performance, environmental sustainability, business ethics, governance, leadership and culture change. It has expanded its operations to more than 120 countries, with offices in the US, Europe and India. Some of the company's partners (as they prefer to label their clients) include 3M, Dow, Johnson & Johnson, Loews, Pfizer and Siemens.

Seidman has long argued that the most moral businesses were also the most successful. Through research and experience, he began to realise that the old system of top-down command and control in organisations was not working. A large-scale study (a survey of almost 5000 managers and executives in the US) gave Seidman interesting insights into values by asking questions such as: ‘When people go around their boss because they believe it is the right thing to do, are they punished or rewarded? Are people trusted to make decisions?' and so forth. The results showed three general categories of organisations: (1) ‘blind obedience', which typifies companies that rely on coercion, formal authority, policing and command-and-control leadership; (2) ‘informed acquiescence', which is characteristic of companies that have clear-cut rules and policies, wellestablished procedures, and performance-based rewards and punishments; and (3) ‘selfgovernance', where there is a shared purpose and common values guiding people at all levels of the company, who are trusted to act on their own initiative and to collaboratively innovate. Siedman calls this a ‘theory of organisational evolution: from blind obedience to informed acquiescence to self-governance'. So, he decided to make his organisation self-governing.

Seidman's company originally had an organisational chart that showed the formal arrangement of jobs and who reported to whom. One day in 2009, in front of his 300 colleagues at LRN, Seidman ripped up the chart and announced that ‘none of us would report to a boss anymore. From that point on, we would all "report" to our company mission'. Thus began LRN's journey to become a self-governing company. Seidman would be the first to admit that it has not been an easy process. Self-governance does not just mean making the organisation flatter (that is, eliminating reporting levels); nor is it about empowering, since the concept of empowerment reinforces the idea of ‘bestowing' power from someone at a higher level. It does mean power and authority are used in a ‘highly collaborative way. Information is shared openly and immediately.

Employees make decisions and behave not in reaction to rules or a supervisor's directive, but in accordance with a company mission built on shared values'. Elected employee councils at LRN handle things like recruiting, performance management and conflict resolution. LNR values character and integrity above all, and it hires people who share the company's core values, which are integrity, humility, passion and truth.

Dov Seidman has received a lot of attention for his radical approach to running and structuring an organisation like LRN in a new and revolutionary way. For example, LRN has established an unlimited vacation policy, where partners can take as much vacation as they like, as long as they are open about doing so and it does not interfere with their work. Another unconventional approach is that LRN has eliminated traditional approval processes for spending and based it on trust. The company has also thrown out its traditional performance management review process. Instead, performance assessments are based on the individual collecting information from 20 or so colleagues, and then giving themselves their own annual performance rating. LRN trusts employees to weigh the feedback they collect into their own ratings. The only ‘control' is transparency. Self-ratings of all 300 employees are published internally. Even Dov Seidman's own performance evaluation, which is based on the assessment that 67 of his colleagues completed, is open to be accessed by anyone in the company. ‘While it felt unnerving as a leader to have my performance appraisals published for all of my colleagues to see, it also felt necessary,' Seidman says. ‘Our effort to become self-governing has been enlightening, frustrating, nerve-racking, authentic and urgent. It remains a work in progress.'

Welcome to the fascinating world of organisational structure and design in the 21st century! Did you ever consider that a business might actually be structured so that employees would not report to a boss and instead would all work together collaboratively? Dov Seidman and LRN were open to trying new ways of doing what they are in business to do, and the unusual structural experiment seems to be working well. Although organisational self-governance is still fairly rare - a survey done by LRN shows that only 3 per cent of employees observed high levels of selfgoverning behaviour within their organisation - the trust, shared values, and deep understanding and commitment to a purpose-inspired mission can help self-governed organisations gain competitive advantage and achieve superior business performance.

Discussion questions

1. What is your reaction to this concept of self-governing organisations?

2. Could you see yourself working in such an organisation? You may want to look up some of the videos that are available on LRN's website about its culture and leadership.

3. How does the fact that employees at LRN are highly trained professionals affect why a selfgoverning structure would work in this organisation?

4. Seidman has said: ‘Our effort to become self-governing has been enlightening, frustrating, nerve-racking, authentic and urgent. It remains a work in progress.' Why do you think he says this? What are the challenges in introducing a new organisational structure and way of operating like LRN has done?