When Pioneering Companies Fail
Finding progressive organizations with truly radical management practices is hard. There seem to be so few of them around. To make matters worse, some with radically new approaches only survive briefly. Why do some poster boys of the future revert to traditional models?
We think it’s important to share the less-than-successful stories as well—because we can learn from troubles in paradise, just as we can from paradise itself.
Once upon a time
Over the past few years we learned heaps by visiting progressive firms all around the world. Most of our visits were (and still are) extremely inspiring.
But every now and then we visit firms that, while being portrayed as progressive by the media, are not, in reality, anymore.
Why did once-radical firms revert to traditional modes? That’s what we asked ourselves. We found three reasons.
- A change in leadership.
- The threat of imminent crisis.
- A combination of both these factors.
Here are five examples that make our point:
This Danish hearing aid manufacture was praised in popular and academic management literature for adopting it’s ‘spaghetti organization’.
The spaghetti model was notable because there were no job titles, assigned bosses, offices, desks or work! Employees were free to select a project to work on from a list on the bulletin board.
However, after the iconic CEO, Lars Kolind, left the organization—around 1990—a new leadership team arrived. Most of the spaghetti model was quietly abandoned over the next few years.
FAVI is the French manufacturing company famous for an organization built as a collection of ‘mini-factories’—as pioneered by former CEO Jean-Francois Zobrist.
It was a poster-boy example in the book Freedom Inc. (by Isaac Getz). Then it earned fame as a case study in Frederic Laloux’s bestseller, Reinventing Organizations.
But by the time Laloux’s landmark book was published, Zobrist had left, and the organization returned to traditional modes of management.
BSO (also cited by Laloux) was a Dutch software services firm famous for a radically decentralized organizational model based on the “cell division” concept. Eckart Wintzen founded the company in 1973 and managed to build a global staff of thousands in two decades.
In 1995, Wintzen merged his brainchild with a division of Philips, the Dutch electronics giant. Soon after, Wintzen left, and the “cell division” model was quietly abandoned.
AES is an American-based company that became the world’s largest independent power producer. Its ‘honeycomb’ model, advocated by CEO Dennis Bakke, rejected many traditional practices.
Instead, AES (another Laloux case study) embraced progressive features like radical decentralization, self-management and a commitment to ethics and fun.
However, after the Enron drama, and the imminent regulatory crisis of 2003, AES reverted to a more traditional model at breakneck speed.
Semco is a Brazilian manufacturing company founded by Antonio Curt Semler in 1953. For 20+ years the company focused on manufactured pumps and axles for the shipping industry.
In 1980, Antonio’s son, Ricardo Semler, took over the reins at age 21. That kicked off one of the most unusual transformation stories ever. It was brilliantly described in Ricardo’s bestseller, Maverick.
At Semco’s peak it had ~5,000 employees. But, around 2000, South America faced an economic crisis and Semler started selling his shares. Last year - when we visited Semco and Semler - the company had around 50 employees.
The lasting ones
Luckily, some progressive firms survive these kinds of challenges. Moreover, they will probably survive. Two stand out.
The first is W.L. Gore & Associates, the American company famous for Gore-Tex, and their radical organization model. Among many radical practices, Gore works without any kind of manager. They do this with ~10,000 people around the globe. Gore has worked with this model since 1958—when it was founded by Bill and Vieve Gore. It’s notable Gore has had only 5 CEOs in 60 years, and not much has changed in this time. There are still no managers to be found.
The second is Swedish bank Handelsbanken. They operate a radically decentralized organization model introduced in 1978 by former CEO Jan Wallander. They have used this now for >30 years, and with ~14.000 staff in northern Europe. Since Wallander turned the bank upside down, their decentralized model has survived many CEOs. And despite crises in banking, they still use their progressive model today.
So, some fold, some last.
Beware leadership change, crises, and especially the combination.