Speaker 1: When I was 12 years old, I ran a mouse empire in my parents' basement. It all started with a drive to PJ's Pet Center in the family station wagon. We all piled in, drove out to the pet store. I got to pick out a mouse, found a nice orange one, brought it home, set up the cage, put shavings in, food, water. As a 12-year-old, this was one of the most exciting moments of my life. And over the next couple of weeks, I fed this mouse, and I watched it get rounder and rounder and rounder. And one morning I woke up, and there wasn't one mouse anymore. There were eight. And I ran downstairs all excited, told my parents, I have eight pet mice. This is the greatest thing ever. But they weren't so excited about this. They had agreed to have one pet mouse in the house, but weren't so happy about eight. But we agreed that we should let these mice grow up a little bit, but we were going to take them back to PJ's Pet Center. So after a few weeks, these mice had grown to a certain size. We piled back in the family station wagon, and we drive out to PJ's Pet Center. We go in, and we say, here, we have these extra mice. And they say, thank you very much. We're going to give you 50 cents for every white mouse, and we'll give you a dollar for all the brown mice. So I'm 12 years old, and I'm thinking, this is unbelievable. I just made $5. So I go home, and immediately I start working on my first business plan. And a couple days later, I come down to the kitchen table, say, Mom, Dad, I have this business plan. Instead of making $5 once, I'm going to make literally dozens of dollars a month. So to this day, I'm not sure why they agreed, but they let me go get another mouse, a male mouse. And we went from having two mice in the house, to five, to 10. And ultimately, I was producing 40 mice a month and selling them to PJ's Pet Center. At this point, my landlords, aka my parents, said, 40 mice is a little bit stinky. That's really awkward when our friends come over. So how about this? We'll give you an allowance, but you got to go and get rid of all these mice. And so ended my first business with my first successful exit. Fast forward now, I graduate from university, decide, having gone through co-op, decide I don't want to go and work for someone else, I'm going to start my own business. Go out and buy a book like Good to Great, which talks about how you build a really strong nucleus for your company by bringing the right people in. We grow the company a little bit, we start to have to figure out products. We buy books like Crossing the Chasm, or The Lean Startup, that help you find product market fit and get your first customers. And that allows us to continue to grow the business. We're now approaching 70 people, and something starts to happen. This teamwork, this engagement level, this culture we had starts to waffle. So we do what we've always done, we go to chapters and we buy a book, this time on hierarchy. And it talks about the CEO needs to hire VPs, you need to hire directors, you hire managers, and this will fix your problem. So we set it out and we implement the structure. And we nearly destroyed the company. And having gone through this, we sort of realized like hierarchy is not for us. This was not, for us at least, was not the solution. And we start having a conversation internally about what made us so unique and so effective when we were smaller. And we come to this conclusion that it's this idea that individual engagement is what drives businesses forward. So today I'm going to talk to you guys about an alternative way to think about organizational structure. We believe that if you focus organizational structure on the individual experience as opposed to hierarchy and the rigid structure that comes with it, you'll get higher engagement from individuals and ultimately higher engagement from your company. I'm going to talk today about where did hierarchy come from, how did we find ourselves in the situation where that book was even on the shelf in the first place. I'm going to talk about why we believe that hierarchy is fundamentally broken. And we're going to talk about how we've gone about implementing a different structure that's worked well for us. So first let's look at where did hierarchy come from? Why do so many companies operate this? If you go back to the 20th century, a lot of the large companies of the day, they made things. The jobs people did were highly mechanical. Material would come in one end of a building, you'd stamp some metal, you'd pop some rivets, and you'd ship it out the other end. And the tasks were largely repeatable. The other thing that was true about the 20th century organization was the communication had a very high cost to it. If I wanted to communicate out to 1,000 people who worked for me, I needed a way to cascade that communication through various levels of management to get it down to the people who actually did the work. But now if we fast forward to the 21st century, through automation, through outsourcing, the types of jobs that we do in large organizations are largely creative, not mechanical. The other thing that's changed is communication, the cost of communication has gone virtually to zero. We have tools like email, like Slack, like video broadcast that allow people in organizations to en masse communicate with thousands of people really efficiently. So the environment in which we all work in the 21st century has evolved, but yet we're still stuck in the 20th century in terms of how we think about organizational structure. So when we talk about the individual experience, let's unpack that a little bit. Let's figure out what we mean. And I'll go back to the conversations we started having internally around the time we decided hierarchy just wasn't for us. And one of the things that we started to hear as we had these conversations was that to get people to a point where they were most engaged, they wanted to work on a business need that was best aligned to something they were passionate about and something they were good at. So passion, skill, and need, in all the different conversations we were having, that was the common theme that was coming up. And the more we researched it, this wasn't necessarily an idea that was unique to us. There's a guy named Dan Pink who gives a great talk about autonomy, mastery, and purpose, which we believe are just different words for passion, skill, and need. And there's a real science around getting people to that sweet spot where they can work on the things that link to their passion, skill, and need and their engagement level. So that was great. You know, that told us a little bit about the individual. But in order to think about organizational structure, we had to look at leadership. So let's take this. The business need of leadership. Well, we start having these same conversations. What do you guys expect from your leaders? You know, hey, leaders, what do you think your jobs are? And the three things that come up in these conversations is this idea that we expect our leaders to turn vision into strategy. We expect our leaders to execute a plan. And we expect our leaders to coach and mentor and have empathy. So that's great. Now we can say, okay, well, the business need of leadership are those three things. But now let's apply this idea of the individual and their skills and their passions. And what we found was, and I'll take myself as an example. What we found was that on these three dimensions that we expect all leaders to do, everyone who's a leader has one of these that they were just born with. So in my case, turning vision into strategy, I love doing it. I'm super passionate about it. It's been my life purpose since I was 12 years old, trying to build a mouse empire. Leaders generally have learned a second one. You know, they got into leadership. They're passionate about being leaders. They want to get better at it. So in my case, coaching, mentoring, empathy. I've learned to say good morning to people, learned to say thank you. But I have to think about that, and it's a skill I've developed over time. On the third one, usually leaders have one of these dimensions that they have a blind spot for, that they are not passionate about, that they've never been good at. For me, it's execution. You don't trust me to execute a plan. So I want to just kind of stop and really drive this point home, because these two concepts drive the rest of my talk, right? So we have this individual model, passion, skill, need. That's what drives people to be the most engaged and the most productive. Then we have this leader model, where we expect leaders to drive strategy, execute plans, and have empathy for the people that they work with. So let's watch what happens when we put these two concepts into a hierarchy. So there's me, driving vision, saying thank you, being horrible at execution. So what do I do? Well, I do something logical. I hire people around me who are good at execution. But the problem is, by the very nature of this model, they're good at execution, but they're not good at something else. Maybe they're not good at saying thank you. Maybe they're not good at communicating strategy. And as you build out this hierarchy, what happens is this dilution of those three things. By the time you get to the bottom of the pyramid, no one knows what the strategy is. There's execution going in all different directions, and no one feels valued. And these are the leaders of the organization. So now the people that work for those leaders are confused, they don't feel valued, and they ultimately are disengaged, they don't want to work there. And this was what we had experienced. So we went through this exercise, we sort of unpacked being engineers, we did our root cause analysis, and we figured out that this was what was going on in an organization. So the insight that we took away from this was this idea of functionalizing a leader. So we don't have managers anymore, we have three functions that do the things that a manager used to be responsible for doing. We still have this individual, but now each individual has these three functions of leadership that they interact with that's supposed to push and pull and help them get to that sweet spot where they can be most engaged and most productive. So let's look at what that does to the hierarchy. So these are now individuals, right? We said before we're going to focus on the individual experience as opposed to the tyranny of structure. So these are the individuals. We invert the pyramid. So now we have these leaders, and their job is to support the individual, not to be their boss. Each of the individuals in a team has a relationship with each of those three types of leaders that give them each of the three things. And those leaders go and work on the type of leadership that they want to work on based on their passions and their skills. You get a way more engaged leadership sphere, and as a result, you get a way more engaged individual and team. Now one of the problems with this model is it looks a bit chaotic. There's lines going everywhere. How does an individual actually experience this in their average day? One of the things that we've done is we've organized people. We kind of stole a page from Agile. We organized people around business need as opposed to function. So instead of having a marketing team and a sales team, we have a sales team, or sorry, a territory team, focused on all of the things that you need to do inside a territory. Customer support, sales, marketing, and that's what we interface with the leaders. The other critique of this model is that what happens if there's a tie? What happens if someone's career path and the strategy are in conflict? Or what happens if someone's strategy and the need to execute in the short term are in conflict? So what we've done is at any given time, one of those three functions of leadership is in charge, and they can break the tie. But it's not always the same group. If we're trying to make culture better one year, we might make it the coaching and empathy side of the leadership team. If we're trying to drive strategy forward, we might make the strategy team in charge. And we found that this allows us to move quickly, not get stuck in little quagmires, while still maintaining this idea that leaders can support individuals using what they're good at and what they're passionate about. Now as I was putting this talk together, I was imagining being in the audience. And I know what you guys are all thinking. Here's this guy up here talking like a professor, showing lots of diagrams about organizational structure. So the next part of this talk, I actually want to give you guys some practical experiences that we've had in terms of how you apply this, so that you don't think this is all just theory, and that you know that it can actually be effective. So the first lesson is you have to hire the right types of people. Not everyone can thrive in this type of environment. People have to want to what we call flow, have to want to go find that intersection of their passion, skill, and need. If they're complacent, it doesn't work. So we spend a lot of time trying to find the right types of people. We've gone as far as codifying using what we call core values, what those right types of people are. And what we find is if you fill the organization up with the right kinds of people, you can build all of your business processes around this idea of trusting your employees, which I know sounds obvious, but it's not how most organizations run. We design for the 99% of people we can trust, given that we've hired the right people, as opposed to designing business processes around the 1% that you can't trust, which is how most hierarchical organizations run. So what happens if I bring someone in who's got a passion for a business need, they have the skills to do it, over time, let's say they finish the project or the business grows, something changes, that business need I brought them in for is no longer needed, because they finished their project. So the second concept, and this is, I think, the most important part of this whole thing, is this idea of the bench. And by bench, what we mean is that if you don't provide people with a safe place to go when they've finished the business need, doing the thing they're passionate about, using their skill, then they crave security. They don't want to move off of that role, right? And then they get stuck in this area where now they're not passionate anymore, or their skill isn't being useful, isn't being used, where they're working on a business need that doesn't matter anymore. So if you have someone, let's say, for example, who's great at building teams, but doesn't love operating the team, at some point the team's built. And that person needs to be able to move to the side without feeling like they've failed. So for us, the bench is something we actually celebrate. If someone finishes executing on a business need and they move to the bench, that's awesome, because now they can go and they can take some time and they can find the next thing where they can find that intersection of their passion, skill, need. One of the types of transitions that we see people make is they go from being contributors to being leaders. And that brings me to our third lesson. In a hierarchical organization, you know, I imagine that they hire a leader, leader comes in, they get down on one knee, some guy takes a sword, anoints them, you are now a leader. You're the boss, right? You have this power now. You can go and do boss things. In our environment, we don't do that ever. Leaders emerge in our organization, and I always say leaders are people who lead. You know, if someone comes up to me and says, hey, I want to be a leader, great, lead, go do it. And we find that that approach makes it so that when you do bring in a leader, because sometimes we do hire people, we have a need, business need for a leader, we have someone who's passionate about leading, we have someone with the skills to lead, we bring them in, but we don't give them the title, we don't give them the reports, we just say, welcome to the team. And what happens every time is those people will rally the people who crave leadership, who want to learn, who want to know where to go, they'll rally around that person. But if they don't, well, then that person wasn't a good leader in the first place, and you're better off to not have put them into that environment and said, hey, this is your boss, because then I lose credibility. So to conclude on this, there's a new way to build organizational structure. It's centered around the individual experience. At the core of that idea is two truths. One, you have to build your organization in a way that allows people to find the intersection of their passion, their skill, and a business need. And two, if you want to be faithful to that idea for contributors, you have to functionalize leadership. You have to break leadership into three pieces to allow the individuals who are leaders to apply their passions and skills in each of those three areas, execution, strategy, and empathy. And if you do that, you will have way more engagement inside your company, your company will perform better, your turnover will go down, and you'll win in your markets. And I'll leave you with one final thought. There is a revolution happening in the way that organizational design is done. We hear it in terms of terms like holacracy and agile and nodal organizations. These are all words that we're trying to use as a society to find our voice, our common voice on this new type of organizational structure. And I would say to you all, as you go out into the workforce, as you build startup companies, as you want to build your own mouse empires, don't accept that hierarchy is the way that this has always been done, because it fundamentally will make your organization slower and it will result in disengaged people who work for you. Embrace some of these new ideas, find your voice on it, and we will all build great organizations together. Thank you very much. Thank you very much.