The economics, structure, and behavior of platform ecosystems and organizations

The Gore theory of emergent leadership: One becomes a leader by attracting followers

In The short life of enlightened leadership (and how to extend it), James O’Toole distills five decades of research on ‘enlightened leadership’. First of all, there are very few examples of companies founded ‘with unusually admirable organizational practices benefiting both their shareholders and society’, and secondly, they seldom continue on with their experiment:

Yet these virtuous practices seldom survived through one, or at most two, successions of company leadership. At some point — often just after a socially pioneering CEO retired, died, or was forced out of office, or the company was acquired — the CEO’s successors abandoned the very practices that had made the company both financially successful and publicly admired. In particular, investors at publicly traded companies have looked askance at such practices whenever earnings have dipped.

O’Toole mentions high-flying exemplars — Herman Miller, Hershey, J.C. Penney, and Marks & Spencer — whose earlier attempts to improve society through business practices, not philanthropy, have degraded into just another batch of Anglo-American capitalist businesses, devoted to making money for shareholders.

But there is a shortlist of companies that have held on to their early zeal [emphasis mine]:

I have found only a few notable exceptions among companies that are not family-owned: the John Lewis Partnership (a giant U.K. retailer), the American Cast Iron Pipe Company (ACIPCO, in Birmingham, Ala.), Lincoln Electric (a Cleveland-based manufacturer of arc welding machines), and W.L. Gore and Associates (the Maryland-headquartered producer of Gore-Tex). These “virtuous four” companies have thrived financially for decades — the Lewis Partnership was formed by John Spedan Lewis in 1929, John Joseph Eagan started ACIPCO in 1905, James Lincoln assumed the leadership of Lincoln Electric in the early 1920s, and Bill and Vieve Gore founded W.L. Gore and Associates in 1958 — in ways that reflect their enlightened practices, and that continue despite numerous changes in leadership. Three interrelated factors appear to be critical for their long-term success: the carefully articulated business philosophies of their founders, their unusual governance structures, and their nontraditional forms of ownership.Leaders who are trying to build their own enlightened, successful businesses probably need to consider all three of these factors, or their vision seems far less likely to survive after they exit.

I am fascinated by W.L. Gore and Associates — see the recent On Emergent Leadership, for example — and O’Toole offers these insights about the founding of the firm by Bill Gore and his wife Vieve, who

set out to create a new company where innovative, self-starting employees would be treated more encouragingly — a business devoid of the barriers, structures, and bureaucratic nonsense that can hamper the free play of imagination, creativity, and initiative.

The organization system developed since is known as ‘un-management’, and involves no top-down management structure, no title, no ranks, or rules. Un-management relies on self-organization to an astonishing degree:

Through constant discussions, Bill Gore’s “associates” came to understand fully why the company was structured as it was, and what they should do to make it succeed — without the need for constant supervision or time-wasting approvals from higher-ups. Gore believed that when his people understood what he was trying to achieve, he could trust them to act as he himself would act in any given situation.

Gore is perhaps the source of the idea of emergent leadership, as O’Toole points out:

Along the way, Gore developed a theory of emergent leadership: One becomes a leader by attracting followers. For example, when an associate had an idea for a new product or project, the first step was to enlist others to work on it with him or her. Once a team was assembled and a project proposal written, the effort would be funded. If, after a time, the project didn’t work out, there would be a small celebration, the team would disband, and the former leader might join a new team headed by another emergent and temporary leader. Each team was self-managing, and each set its own work schedule. Moreover, to make the time needed for creativity, each associate was given 10 percent “free time” to work on new projects.

Reading that description, I am reminded of the entrepreneurial leaders in Haier’s microenterprises that I wrote about most recently in On Emergent Leadership and in a preceding article, Lee Bryant on Digital Leadership. These microenterprises are similarly created by associates who have a new idea for a product or project — generally growing from direct interactions with customers or ecosystem partners — and that leads to the individual or individuals with the idea attracting followers, partners, and internal and external investors eager to see the product or project move forward. And just as in the case of Gore, the teams are self-managed.

Here we see, again, convergent evolution toward emergent leadership in the organizational cultures at Gore and Haier. Haier CEO Zhang Ruimin’s Rendanheyi is a philosophy that shares features with Gore’s emergent management and self-organization as central to an innovative culture, and both companies are obsessive in their focus on the customer. And I also believe that Zhang Ruimin, the visionary leader at Haier, shares the sentiment that O’Toole attributes to Bill Gore: that once associates understand the philosophy behind Haier’s operations, they can be trusted to take appropriate action in any given situation.

Finally, O’Toole provides great detail on the specifics of governance in these closely-held organizations, and how they are structured to resist efforts to reform them into something less protective of the interests of the shareholders and employees, far too much to expand on here. He believes that the recent appearance of ‘benefit corporations’ (or B Corps) may provide an easier mechanism for companies to be set up to benefit society rather than strictly to make decisions in the interest of short-term financial gains. He states,

Twenty-seven U.S. states now offer benefit corporation status to 860 companies (the best known is sports clothier Patagonia), thus shielding them from the dictates of “shareholder primacy.” As more national and state governments pass legislation enabling the formation of benefit corporations, the sustainability of enlightened practices just might become the norm rather than the rare exception.
In the meantime, we have the example of enlightened leaders such as Lewis, Eagan, Lincoln, and Gore — and current first-generation leaders such as Yvon Chouinard of Patagonia and Jack Stack of Springfield Manufacturing. And we have our ability to learn from history.

I am always on the lookout for more examples of emergent leadership, and the organizational evolution that accompanies it. O’Toole’s experience over the past four decades gives us a great deal to learn from, but the days ahead — and the rise of platform ecosystems — are likely to lead to new lessons to learn, while emergent leadership is here to stay.