Steward Ownership [Makkonen]


Photo by Derek Thomson on Unsplash

Juho Makkonen is the founder and CEO of a Finnish company called Sharetribe and his unique perspective first came across my radar in a more recent post he’s written about shifting the licensing for Sharetribe’s product from “open-source” to “source available” (Specifically, from MIT to Sharetribe Community Public Licence), closing a big, exploitative loophole in the standard open-source license by preventing organizations that utilize their code to use it in a product that competes with the company who made the code available in the first place. For example, if you’ve built a web browser and made its source code available, under an “open source” license another company can just take that code and build a competing browser with it, while under a “source available” license, it can’t.

Smart. Thoughtful. Progressive. The kind of impression that often leads me to an “I wonder what else they’ve written about” inquiry. And I was up for a big, pleasant surprise.

You see, a year ago, Jujo wrote a profound piece called

Steward-ownership is capitalism 2.0

In the post, Juho outlines how he restructured the governance structure of Shaerscribe to ensure that the company stays true to its purpose and not succumb to the pervasive profit and shareholder value maximization paradigm.

The new structure consists of 4 key pieces:

1. For-purpose corporation 

In most countries, the default articles of incorporation require the management team of an organization to use the maximization of shareholders’ profit as the north star in corporate decision making. Failure to do so can make managers liable to a lawsuit for violating their fiduciary duty. Sharescibe made an explicit change to their corporate bylaws overriding the default with the following: “The purpose of the company is to democratize the sharing economy. The company aims to foster an economy where resources are utilized efficiently, created value is distributed fairly, and people have control over the conditions of their work.” So in cases where there’s a conflict between making a profit and pursuing this purpose, management is not legally bound to abandon the latter for the former.

Furthermore, acknowledging that the purpose, as it is defined today may evolve over time, Sharescribe created the option of changing the company’s official purpose as long as the people owning two-thirds of the company’s voting shares support it (with an important caveat we’ll cover in part 4).

This governance piece is not too novel in and of itself. It is very similar to other progressive governance structures like Public Benefit Corporations that also eliminate shareholder primacy. But it gets more interesting when tied with the other pieces.

2. Employee ownership (voting rights)

Sharetribe aims to be in control of the people who hold active roles in it. Namely, its employees. Therefore it is governed by the people working in it, guaranteeing that the management of the company will be in the best interests of employees and all other stakeholders. At Sharetribe this is done by issuing 4 types of shares:

  • Class A — voting rights shares (not entitled to a share of the profit) — available only to employees and people in a service relationship with the company. Must be sold back to the company at a nominal cost if the relationship is terminated.
  • Class B — a single veto vote share granted to a foundation (see part 4)
  • Class C — profit-sharing shares (no voting rights) — given to investors (see part 3)
  • Class D — profit-sharing shares (no voting rights) — given to employees (see part 3)

3. Reliable returns — Redeemable shares for investors and employees (no bonuses, no dividends)

To avoid the “go big or go home” financial returns pressure that’s inherent in the standard VC model, Sharetribe opted for a different funding model:

Sharetribe offered its investors to buy (Class C) shares at the company at 20 Euros a piece. In return, the company commits 40% of its annual profit to redeem these shares at 100 Euros a piece (x5 return) until they have been fully redeemed. If the shares are not redeemed within 10 years, 100% of the company’s annual profit will be directed towards redeeming the outstanding shares. Sharetribe currently estimates that they’ll be able to redeem all outstanding shares within 7–8 years.

Juho walks through the economic business case for investors in using such structure which essentially boils down to the lower per-company return being offset by the lower failure rate, yielding the same average returns as a high-returns high-failure-rate portfolio.

In many ways, this is similar to the funding and investment strategy pioneered by indie.vc in the US.

However, Sharetribe also opted to extend this model even further, and use the same vehicle with its employees as well, granting them Class D shares rather than the typical ISOs or RSUs since the liquidity event that such vehicles depend on (IPO, acquisition) is no longer possible. The Class D redemption schedule is designed in a way that most of it take place after the Class C shares have been fully redeemed. It’s not fully clear whether this mechanism is meant to be a permanent part of the compensation scheme, or just be a “one-time” fix to compensate the founders and early employees for accepting below-market wages in the early days of the company. If it’s the former, transitioning to a profit-sharing scheme like the one outlined here may be in order.

4. Safeguarding the structure — veto shares held by a foundation

The final piece in the puzzle is ensuring that the transition to steward ownership is permanent. History has shown that changes in management can pose a risk to maintaining the steward ownership governance structure and open the door for reverting back to a more conventional governance mode.

To address that risk, Sharetribe granted a (Class B) veto voting share to a foundation with no economic stake in the company. This veto share can only be used to veto any change in the company’s articles of association that would attempt to dismantle the steward-ownership structure. The foundation is bound by its rules to veto any such change, and whoever is on the board of the foundation must respect these unchangeable rules.


Stepping back, it’s easier to see how these four pieces fit together.

While no governance scheme offers full immunity to the “human condition” in addressing challenges such as negligence, illegal activity (corruption, bribery), etc. the steward-ownership implementation outlined above seems to masterfully address some of the more systemic issues with conventional capitalism governance structures.

Steward Ownership [Makkonen]

Getting Personal about Change [Keller & Schaninger]

Photo by Martin Sanchez on Unsplash

Every once in a while, I come across some good content from the folks at McKinsey. Last year it was Untangling Your Organization’s Decision-Making which informed “deciding how to decide”. This year, The Helix Organization almost made the cut, but eventually, I decided that while it refines and extends a typical matrix organization in a few important ways, the contribution is still mostly incremental. 

And then I came across Scott Keller and Bill Schaninger’s 

Getting personal about change

An adaptation from their new book Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change and a piece that was well worth my time. And hopefully yours.

I’ve been thinking about mindsets a lot in recent weeks, as last week’s post about culture may suggest. In the process, I re-read my Pfeffer piece about changing mental models, which rings true today as it did when I wrote it 2.5 years ago and most likely as when the original was written 14 years ago. 

Pfeffer wraps up with the following quote (emphasis mine): 

In addition to being concerned with the company culture, human resources must be concerned with the mental models and mind-sets of the people in the company, particularly its leaders. Because what we do comes from what and how we think, intervening to uncover and affect mental models may be the most important and high-leverage activity HR can perform.

But Pfeffer left a big question unanswered: how? 

Keller & Schaninger, first make a similar case in their own words: mindset is the root cause which causes smart, hard-working, and well-intentioned employees to continue to behave as before, despite the effort and intention to change their behavior. The only way to drive effective behavior change is by reframing the root cause: changing the underlying mindset. From “hoarding information is the best way to magnify power” to “sharing information is the best way to magnify power”, for example. 

Then, they pick up where Pfeffer left off, offering a 2-part approach: 

Changing mindsets using a U-process offsite

Keller & Schaninger argue that the most effective intervention to get leaders and employees to commit to changing themselves is a 2-day offsite for a small group of 20–30 employees at a time, facilitating a workshop-based learning journey for each of the participants. 

The methodology is based on Scharmer’s U-process consisting of three phases:

Sensing. This typically involves a senior leader who has already been through the workshop and shares the company’s change story, describes her or his own personal change journey, and answers questions from participants.

Presencing. This involves participants exploring their personal “iceberg” of behavior. It includes working through modular, discussion-based content and questions that equip leaders to achieve new levels of self-awareness and self-control. “Where and why do I act out of fear rather than hope? Scarcity rather than abundance? Victimhood rather than mastery? And what would be the result if I made different choices?”

Realizing. In this phase, participants make explicit, public choices about personal mind-sets and behavioral shifts; identify “sustaining practices” that will help them act on their insights; and reflect on how they will engage their personal networks for the challenges and support they will need during the rest of their personal change journey.

The offsite is followed-up by small team gatherings aimed at offering peer accountability and advice. And a facilitated session a few weeks out to take stock changes in behavior and determine next-actions. 

Reshaping the work environment using the “influence model” 

Keller & Schaninger observe a similar phenomenon to the one I outlined last week in which behavior is mutually shaped by both our internal mindsets and the external work environment. They offer McKinsey’s “Influence Model” as a roadmap for reshaping the work environment in a way that’s conducive to the desired behavior change: 

Changes in thinking and behaving will be significant and sustained if leaders and employees see clear communications and rituals (the understanding and conviction lever); if supporting incentives, structures, processes, and systems are in place (the formal-mechanisms lever); if training and development opportunities are combined with sound talent decisions (the confidence and skills lever); and if senior leaders and influence leaders allow others to take their cues from the leaders’ own behavior (the role-modeling lever)

Source: McKinsey

Super cool. And kind of looking forward to trying it out in real-life. 

Getting Personal about Change [Keller & Schaninger]

What is culture?

Photo by Francesco Gallarotti on Unsplash

It is rather surprising that I managed to get away with publishing this blog for more than 5 years now while never providing my own definition of culture. I’ve shared Laloux/Wilber’s definition of culture, Horowitz’s, and I’m sure I’ve touched upon it indirectly in countless other posts but never explicitly spelled out mine.  

I’ve formulated, or perhaps more accurately, synthesized, my own definition about three years ago. But only recently, when responding to a different post on this topic, I realized that I haven’t shared it outside of the organization I was part of at the time (AltSchool). 

So here goes. It is influenced mostly by the Laloux definition, and Schein’s (which likely influenced Horowitz’s as well) and consists of three interacting elements: 

“Culture is our shared set of beliefs and mindsets, reflected through our behaviors and supported by our organizational systems (processes, protocols, etc.)”

At the end of the day, culture is epitomized in the way we behave. However, our behavior is shaped by an internal source, our beliefs and mindsets, and an external source, the organizational systems in which we operate. It is important to note that the relationship between these elements is not as one-directional as I make it sound, and there are secondary effects through which organizational systems shape beliefs and mindsets, for example. 

There are no “good cultures” and “bad cultures”. Every culture has its use and may be optimal to a certain group of people aiming to accomplish a certain purpose together. What sets apart strong cultures from weak cultures is the degree to which these elements are honest, clear and in alignment/congruence with one another. 

One of the most common mistakes that organizations make is focusing on defining the first element, beliefs and mindsets, often referred to as values or principles and ignoring the other two. It’s definitely a mistake that I’ve made as well. I’ve written extensively about a process for formulating values or core principles, and I’ll be the first to admit that it muddies the water a bit in distinguishing between the elements, since it was written before I developed this definition. Yet if we look at the 10 core principles that most organizations tend to converge on a subset of, once you peel off the marketing-speak, it becomes a little easier to see why values or principles are not enough. 

Mission-orientation, customer focus, risk-taking/creativity, ownership, transparency, humility/learning, simplicity, excellence, tenacity/grit, and speed are not things that have a clear, descriptive and observable definition. This creates a lot of room for misinterpretation and as a result, misalignment, in both directions: when I’m taking these principles and translate them to the behaviors that I believe reflect them, and when others see my behaviors and translate them to the underlying principles that they believe I may hold. 

In addition, our formal and informal organizational systems, processes such as hiring, firing, promoting, etc. and practices such as the way we run meetings or make decisions, explicitly and implicitly define a set of behaviors that are encouraged/discouraged. Without careful design, those behaviors may or may not be aligned with the behaviors and, in turn, beliefs and mindsets that we want to encourage/discourage. So let’s put in the extra effort to make sure that they do. 

What is culture?

VCoLing: Learning to Learn [Lectica]

Photo by Ben White on Unsplash

Lectica’s overall approach to learning in a complex world deserves its own dedicated post, which I hope to write one day. Today, I want to focus on a smaller piece of their overall thesis — their framework for “how we learn?” because it stands on its own and is more broadly applicable, regardless of the learning goal that you’re applying it towards. 

I am mostly synthesizing content from two sources: 

Virtuous cycles of learning (VCoL) and the +7 skills

Learning in the moment: How to use micro-VCoLs to learn optimally on the fly

Lectica’s framework, called the “Virtuous Cycle of Learning” or VCoL for short consists of 4 key steps: setting a learning goal → gathering information → applying what you’ve learned → reflecting on the outcome. Sparing you my rant on the overall underappreciated importance of reflection in many other approaches to learning, this macro cycle is very similar to other progressive frameworks describing a learning process, with minor variations in the labeling of the different steps. 

When things start to get interesting, and have certainly expanded my knowledge of learning, is in the way Lectica decomposed this cycle further and in the way it is applied to real-world situations. 

The +7 skills

Lectica identified 7 key skills that support the practice of learning. Each, in turn, can be strengthened through a set of specific practices.

Source: Lectica
  1. Awareness of self, others, and the environment: observing and documenting thoughts, feelings, or behavior; self-evaluation; practicing non-judgmental openness to experience; meditation; mindfulness in everyday life; somatic practices, like yoga; coherence practices, like HeartMath
  2. Skills for making connections between ideas, information, emotions, perspectives, and evidence: brainstorming; Minto Pyramid problem solving; polarity thinking (or both / and thinking); mind mapping; causal loop diagramming (or other systems mapping approaches); building relational databases
  3. Skills for seeking and evaluating information, evidence, and perspectives: active listening; deep listening (Kramer); seeking clarification; “library” research; critical thinking; action inquiry (particularly second-person action inquiry); the scientific method
  4. Skills for applying what we know in real-world contexts: action learning; project-based learning; developing action plans or development plans; rehearsing — reducing risk by trying out new knowledge in hypothetical situations; writing or critical discourse — using new knowledge to improve an argument or message
  5. Reflectivity — a cultivated habit of reflecting on outcomes, information, emotions, or events: making sure that learning goals are “just right”; embedding learning in real life, as a part of everyday activities; not punishing learners for making mistakes — helping them see mistakes as a source of useful information; ensuring that every learning cycle, no matter how small, ends with goal setting
  6. Skills for seeking and making use of feedback: openness to feedback; awareness of your own defensiveness; feedback-seeking skills (like helping others feel comfortable providing you with feedback); skills for evaluating and incorporating feedback; second-person action inquiry; participation in focus groups; customer or employee surveys
  7. Awareness of cognitive and behavioral biases and skills for avoiding them: cultivating humility — recognizing the ubiquity of human fallibility; building critical thinking skills; regularly seeking feedback; tackling common cognitive biases, one at a time (e.g., conservation bias, bandwagon effect, stereotyping, or attribution bias)

The 7 skills are also very helpful in better triangulating where the learning cycle is weakest (or breaks down altogether) and then taking focused action to strengthen that particular skill. 

Micro-VCoLing

Often times we want to work on a macro skill that’s a bit too lofty, abstract or risky to pursue as a whole. Let’s say we want to improve our “collaborative capacity”, for example. It seems like a worthy goal, but where do we begin? 

We begin by decomposing the macro skill into something more tangible. For example: part of a strong collaborative capacity is having strong facilitation skills. Facilitation skills, in turn, include but are not limited to having strong active listening skills. Active listening skills can be decomposed to: identifying opportunities for listening, giving others opportunities to speak, etc. 

Now we have something in hand that we can more easily run a VCoL around and practice “in the real world” with one additional useful distinction. If we zoom back out to the crude VCoL loop: set, seek, apply, reflect — two stages in the loop, “reflect” and “seek”, are more internal, or done in consultation with a trusted coach or mentor. The other two, “seek” and “apply” is where we engage with the outside environment differently, with the learning goal in mind. And those too can be broken down into micro-VCoLs: an “awareness VCoL”, in which we either increase awareness of opportunities to practice a skill or identify individuals who are proficient in a given skill; and a “practice VCoL”, in which we build virtuosity in the particular learning goal. Examples of the two are shown below.

The next time you set a learning goal for yourself, consider using VCoL as your framework for learning. 

VCoLing: Learning to Learn [Lectica]

How we make decentralized decisions [Küblböck]

Another fantastic piece by Manuel Küblböck whose excellent work I’ve already showcased here. This time, the focus is on how decisions get made at Gini. While the majority of the post covers the mechanics of the various decision-making formats, that was the least interesting part to me, since I’ve already covered most of them, for the most part, in previous posts. What was most interesting, was how the system is structured and the following attributes in particular: 

Framing

Source: Manuel Küblböck

I’m not 100% sure where the 7-levels of delegations model originated from, but I first came across it a few years back on the Mgmt3.0 website so I will give them the credit for now. 

This fuller spectrum is being used to anchor the decision-making formats that are actually being used: 

Source: Manuel Küblböck

Again, while the mechanics of “safe-to-fail/mandate”, “group consent” and the “advice process” are outlined in the post, those are fairly standard formats of decision-making. 

Escalation

This was new and exciting for me. Thinking about the process of choosing the right decision-making format more like a simple, lightweight decision-tree/escalation path with increasing levels of severity: 

Is this safe-to-fail? → Do I have an explicit mandate as part of one of my roles to make this decision? → Can the group reach consent (not consensus) about this? → Advice process. 

Specifically, thinking about the “advice process”, which is the most lengthy process of the three, as an escalation lever when the group fails to reach consent is very clever and avoids over-using this heavy process. Another interesting aspect here is seeing the escalation arc moving from the individual, to the group and back to the individual, which seems a bit counter-intuitive at first but makes a tonne of sense once you think about it.

Distribution

This is another cool innovation. Defining a desired, healthy, usage distribution across the different decision-making formats. Heavily favoring and relying upon autonomous/distributed decision-making, using consent-based decision-making only when necessary, and thinking about the advice process as the exception rather than the rule. While the 90%/9%/1% should be thought of more as illustrative, order-of-magnitude guidelines rather than exact percentages, they create a healthy benchmark that can be used to trigger and support troubleshooting when the actual distribution looks significantly different. 

Speed

Not a new point but one worth emphasizing, since many, myself included, often make this mistake. When we compare the speed of various decision-making formats, we tend to compare the time it takes to reach a decision. But this is the wrong benchmark since decisions are just a means for informing a desired behavior change. So if we want to make a fair comparison on speed we need to look at “time to make a decision” + “time to change behavior” which is beautifully illustrated in this parting image: 

Source: Manuel Küblböck

Post Script: h/t Bruce Gant for pointing me to the true origin of the delegation ladder, a 1958(!) HBR piece by Robert Tannenbaum andWarren H. Schmidt called How to Choose a Leadership Pattern:

How we make decentralized decisions [Küblböck]

Skillshare’s operating rhythm [Cooper]

Continuing on a theme from a few weeks ago, a neat post by Matt Cooper, Skillshare’s CEO, on the company’s operating rhythm: 

How We Run Skillshare

I’ll be the first to admit that there’s nothing ground-breaking in this operating rhythm. Some may even say that it’s rather conservative/traditional. But I’ve seen almost identical rhythms, same “building blocks” slightly different cadences, emerge “the hard way” in multiple companies so hopefully, this can save up some and help avoid some “old mistakes” by serving as a starting point to iterate on. 

Matt’s post includes more detailed explanations on what each building block entails, as well as some of the nuances around using them that’s specific to Skillshare. 

The only thing that the post was really missing is a simple visual to see how all the different pieces of the puzzle fit together across the 4 cadences, so I went ahead and created one at the top of this post. 

Skillshare’s operating rhythm [Cooper]

On workplace psychometrics

In full disclosure, I’ve been a long-time hater of the MBTI. As a matter of fact, one of my favorite pastime activities is responding with this 2-min Adam Ruins Everything episode about the MBTI whenever someone asks for advice about an MBTI facilitator.

But this initial hate turned over time to curiosity around questions like: why do people find this assessment so compelling? why do workplaces keep using it? and are there better alternatives out there?

As I noodled on these questions I realized that they extend to a broader category of assessments that can best be grouped under the psychometrics label: “the science of measuring mental capacities and processes.” It’s a bit of a generous label for some of these assessments, as many don’t meet the “science” qualifier (MBTI, for example) but their intent aligns with the second part of that sentence.

The appeal of “clustering tests”

Most people don’t like to take tests. And not everyone views feedback as a gift. Yet a subset of psychometrics tests seems to be highly popular and some people even enjoy taking them. Why?

This subset of tests is part of a category I’d call “clustering tests” — their aim is to group human behavior into clusters and then figure out which cluster you belong to, often referred to as your “style” or “type”. Wilson and Walton’s theory provides one of the best explanations for the appeal of “clustering tests”: we are all meaning-making machines, and interpret a given situation in a way that serves three underlying needs:

  1. The need to understand — make sense of things around us in a way that allows us to predict behavior and guide our own action effectively.
  2. The need for self-integrity — view ourselves positively and believe that we are adequate, moral, competent and coherent.
  3. The need for belonging — feel connected to others, accepted, included and valued.

We find “clustering tests” appealing because they check all three boxes: they make it seem easier to understand ourselves and others, reducing our and their complex set of behaviors into a simpler, more predictable “type”. They strengthen self-integrity by highlighting all the positives in our “type”. And they foster our need for belonging by connecting us to a tribe: the INTJs, the ENTPs — a group of people who are “like us”.

But what do we find when we dig below simply satisfying our meaning-making cravings?

The bright side

The core benefit of psychometrics comes from acknowledging that other meaning-making strategies, such as self-reflection, or the feedback and perspectives of others are not without their shortcomings and limitations either. They too are often inaccurate, subjective and incomplete. Therefore, when used properly, psychometrics can be a valuable complement for other meaning-making strategies.

Furthermore, grappling with complexity is hard. And sometimes, but definitely not always, grappling with a simpler challenge helps us better understand the more complex challenge. The simpler can sometimes be used as a starting point, gradually layering on complexity in later stages. Therefore the simplicity that psychometrics offer, when held loosely, can be helpful.

The dark side

Picking up from where the bright side left off, holding on to simplicity too tightly creates problems. Especially when used for prediction, a simplistic model of complex phenomena will often yield false predictions.

Furthermore, the way “clustering tests” create a sense of belonging can also lead to othering: there’s us, the INTJs, and there’s them, the ENTPs…

Finally, coming full circle to the beginning of this post, many of the assessments do not sit on solid scientific foundations. While I’m not sure that this is intrinsically problematic, it is certainly a serious issue where psychometrics are meant to support fair and objective decision-making. More on this shortly.

How to best use (and not use) psychometrics

The inherent attributes of both the bright and dark sides of psychometrics: meaning-making power, reductionism, scientific credibility, belonging, etc. are often at odds with one another making this an optimization problem that is very situational. In different circumstances, some of these attributes matter more, or less, than others. 

This pithy advice from a Forbes piece captures this sentiment fairly well:

First distinguish between real tests and masquerading fortune cookies. Select an assessment that is psychometrically sound, situationally relevant and provides actionable insights.

Let’s unpack this a little further, given the different situations in which psychometrics are often used.

Personal/Professional Development

Perhaps the least contentious use-case of the three. The most dominant factor here is the assessment’s meaning-making ability as the value comes not just from highlighting the opportunity for growth but also from building the motivation to do so. 

Since scientific credibility has a positive impact on my personal motivation, I tend to prefer assessments such as Hogan and the Leadership Circle Profile, but I don’t think it’s a hard requirement. If you find the Enneagrams narrative more meaningful to you — use that. 

Organizational decision-making

Under this use-case, psychometrics are used as data to support organizational decision-making in the hiring or advancement/promotion processes. 

The key factor that outweighs all others in this situation is the scientific validity of the assessment. I’ll also repeat a somewhat controversial statement that I’ve made before: if the scientific basis is sound, evidence of systemic bias should not automatically lead to exclusion of the assessment. It is almost certainly the case that other data points used in the decision-making process (interview team scores, manager’s evaluation, etc.) are also biased, it’s just that the bias there is more erratic and difficult to quantify. The “upside” so to speak, of systemic bias, is that it can be systemically corrected for. 

Building on the research outlined here, the assessments that are worth considering center around evaluating general mental ability (O*NET Ability Profiler, Slosson Intelligence Test. Wonderlic Cognitive Ability Test) and integrity (Stanton Survey, Reid Report, PSI). 

Team dynamics and collaboration

Here, psychometrics are often used to validate/normalize the different work and communication styles of the different team members and serve as the basis for discussion on strategies that’ll allow the team to collaborate effectively despite those differences. 

However, I would argue that the dark side of psychometrics here is perhaps the most dominant. Both reducing people to their “type” and accomplishing a sense of belonging through tribalism have the most negative effects in this context. 

It’s the self-reflection and team dialogue that the assessment triggers that are most valuable. So instead of using an assessment, I’d advocate for using other self/team exercises that accomplish the same goal. The NY Times Kickoff Kit outlines three such exercises (“muppet analysis”, “how we work best”, ”hopes, dreams, and non-negotiables”) offering a much better alternative.  

On workplace psychometrics