perfidy

Interesting title, from a story in yesterday's WSJ (subscription).

Short answer? "Yes, in some cases, if the company's really, really tiny."

Slightly longer answer? "Are you nuts?"

The article centers around the management practices in place at a company called Ternary Software Inc.

During a recent strategy meeting at Ternary Software Inc., a programmer criticized the chief executive's new incentive plan for employees. An hourlong discussion ensued, in which several participants, including the CEO, critiqued the proposal. Ultimately, all six participants agreed to handle incentives differently.

That part was crucial: Ternary runs itself as a democracy, and every decision must be unanimous. Any of Ternary's 13 other employees could have challenged the incentive decision and forced it to be revisited.

...

The 19-person Exton, Pa., company has a policy-setting team of seven people, including two frontline workers elected by their peers. The team is linked to smaller groups through the company that ultimately give all employees a voice. The team meets to set policy for two hours once or twice a month.

The article's author cites instances of similar management practice, including Honest Tea Inc., of Bethesda, MD and Continuum Inc. from West Newton, MA. She also includes, for comparison, I guess, Google, which

...prides itself on an egalitarian culture that includes weekly updates from executives who field questions from employees.

As though that's somehow applicable.

The article goes on to include quotes from several b-school professors, including this from Ryan Quinn, a management professor at the University of Virginia's Darden School who says:

...these companies typically are willing to sacrifice some short-term profit to pursue innovation or other goals. Mr. Quinn says unorthodox practices can succeed at large and small companies, but says he has never seen a company like Ternary, that strives for unanimous agreement.

Note, he didn't say that this practice can succeed at large and small companies, just that unorthodox practices can. Like, for instance, having everyone wear a funny hat on alternating Fridays. So, overall, his response strikes me almost as a polite way of asking "Are you nuts?"

An additional bit of insight, from Harry Katz, dean of Cornell University's School of Industrial and Labor Relations, goes a bit further:

...[he] doubts a system like Ternary's could work on a large scale. In bigger companies, "there's an inevitable conflict of interest between managers and employees," Mr. Katz says.

The article also provides several other instructional views life within Ternary. Two excerpts:

Ternary's path to workplace democracy wasn't painless. The company, founded in 2001, first tried to draft a mission statement by consensus in 2004, when it had grown to more than a dozen employees. The meeting lasted two days and ended as participants too exhausted to continue arguing agreed in principle to run the company as a democracy. An attempt the next year to create a salary system by consensus was no better. But Mr. Robertson persevered, guided by two out-of-print books about a Dutch management technique called "sociocracy" or "dynamic governance." He has dubbed Ternary's system "holacracy" and has begun marketing it as a managing style.

I'll let the dripping irony in that passage speak for itself.

The meeting where the incentive scheme was discussed was typically busy. The team rejected Mr. Robertson's proposal to replace the profit-sharing program with an "ad hoc bonus system" based on performance, formulating a new plan that would keep the profit-sharing program and introduce monthly bonus incentives. The group also assigned the CEO new responsibility for spurring growth, gave the sales manager more authority to negotiate contracts, and decided to bill clients by the day, rather than by the hour.

Technology chief Anthony Moquin, one of the founders of the company, said his gut reaction to the billing change was that it was simplistic. But he accepted it, saying, "We can try it and see how it works."

That's a common refrain at Ternary. Managers don't look for an ideal solution, merely a workable plan that looks like progress. Employees who don't like the results can seek a seat at the next strategy meeting or ask a member of the policy group to revisit the issue.

(emphasis mine)

Funny when you read it that way, it sounds like it should be a whole lot less interesting to the owners or managers of a company. In effect, it eliminates the value of any management role, including that of the CEO:

"It takes getting beyond your ego," says Mr. Robertson, who, as one of the founders of the company, has the CEO title but little typical CEO authority.

And it brings into question why you'd even have the title, let alone give it to someone.

The story goes on to explain how the company has benefited, in tough times, from having the flexibility to get all employees to agreement on issues like pay cuts. Quite uplifting, if you're exceptionally light and aren't running a for-profit business.

Left unsaid, in the story itself or the comments from the professors, a couple of things.

• Ternary isn't Google, and whatever else you might say of Google, you won't say they're managerially incompetent or have created a company incapable of growth.
• Not only does the typical company have conflicts of interest between managers and employees, the typical company, particularly one larger than 19 employees, has conflicts between employees and employees, as well as between managers and managers.
• It might be horrible to contemplate, and even more horrible to enunciate, but not all employees have as much to add to any given decision-making process as the others.
• In any event, the dynamics of watering down decisions by making sure they're universally approved results in watery decisions, catering to the lowest and loudest common denominator.

No offence to managers, employees, or Ternary Software, Inc. itself, but I'll be anxiously awaiting the future WSJ story about how Ternary grew and found the limits of what is essentially an intellectually lazy, confrontation-free, feel-good management style that doesn't strive for excellence, instead only for "a workable plan that looks like progress", and then jettisoned it as laughably unworkable.

Unfortunately, though I think you can already see where I'm going here, Ternary seems quite unlikely to ever grow too awful much, constrained as they are by a system that enforces crushing mediocrity, even in a small company like theirs.

As Professors Katz and Quinn intimated, unorthodox isn't bad, but there are a lot of things that can work in small companies which would be impossible at scale. Paying for everything on the owner's personal credit card is an excellent example. Keeping all your invoices and receipts in a shoebox is another. And, with all due respect to the admirable goal of "giving workers a voice", so is the practice of pretending they've each got something crucial and important to say about the company's direction, or that, in the event of failure, your fallback position is that "at least we all agreed on the strategy".

Sorry, but not all opinions matter equally, and without accountability for failure, there cannot be success in any non-trivial enterprise, including Ternary's. The time spent in search of universal approval of all decisions, and of making sure that every last person is happy and contented, is time wasted. And yes, this metaphor can be extended to the broader social and political realm, but I'll spare you that for now.

(all ellipsis above, mine)

(also posted at issuesblog.com)