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Dynamic Governance: A New System for Better Decisions

By Sarah Lozanova

Editor's Note: This is the first post in a three-part series on dynamic governance, a new operating system for both for-profit companies and nonprofit organizations.

During the financial crisis of 2008, Creative Urethanes, a plastics manufacturing company based in Virginia, saw business dry up overnight -- with sales down by 50 percent. CEO Richard Heitfield was shocked and immobilized by the situation, but the employees sprang into action, creating a plan that everyone could accept.

One of the company's product lines was wheels for skateboards and roller skates; they created an innovative design for them in the 1970s that helped the sports grow into multi-million dollar industries. Now they were reeling.

"All of a sudden, our business was way down," says Heitfield. "While that was going on, our management group was sitting down and making a plan. It was a very detailed and elaborate plan that happened spontaneously. Folks were comfortable enough with the process to put it on the table and get it into action. That's a direct result of using the sociocratic process. If these guys had not come to action and done the work, we would have folded."

Sociocracy -- also called dynamic governance -- is a non-authoritarian organizational operating system that empowers people to make policy within their established domains, fostering better and clearer decisions. The company culture that was built at Creative Urethanes through adoption of dynamic governance in the 1980s allowed leadership to spring up when it was most needed, enabling the business to stay afloat during a very difficult time.

In many organizations, decision makers under-utilize the knowledge, expertise and experience of lower-level employees when it's time to make decisions. Even in companies where the leadership wishes to create an open-door atmosphere, reality may be quite different. Policies get created with good intentions that breed ineffective results and even resentment. In dynamic governance, every voice is heard for creating policies -- and a management hierarchy exists for daily operations.

"In horizontal governance everyone has a voice in decisions; vertical governance is the traditional top-down hierarchy," explains Sheella Mierson, a consultant with the Sociocracy Consulting Group. "We usually think of those two as either-or, but the unique thing about dynamic governance is that it's both-and. Both the manager hierarchy stays in place and everybody has a voice that can't be ignored."

Dynamic governance often leads to higher morale, increased productivity and better decisions. "They were getting more good ideas for their decisions and people were really putting energy into carrying them out," explains Mierson about a school that implemented the method. "Adopting dynamic governance made for a very positive atmosphere. Some of the new teachers came from schools where their voices were not being heard, and they found having a voice tremendously validating and energizing."

In dynamic governance, authority is delegated to small groups called 'circles' with distinct aims and domains, so that responsibility and authority are clearly defined. Using a concept called 'double linking,' each circle is connected to the next higher circle by two people, an operational leader and a representative elected by the lower circle, who are full members of both circles. The circles choose people for roles using consent decision-making, which is different either from voting or from one person making an appointment; the result is to encourage leadership to sprout up throughout the organization.

Information, policies, and meeting agendas and minutes are accessible to all circle members and openly shared among circles. The circles use consent decision-making, meaning that a proposal passes when there are no paramount objections. Each new policy incorporates a feedback loop involving a plan-implement-measure cycle.

"If there was a policy and someone is having a problem with it wherever they are in the structure, they go to the leader of the meeting to add it to the agenda and revisit it," explains Heitfield. "No decisions are set in concrete."

It seems logical that if every voice were heard, meetings would take longer, but Mierson says this isn't the case, especially once an organization becomes skilled in applying dynamic governance. Meetings become more effective, thus saving time and money.

"One reason dynamic governance makes companies more profitable is that they have the information they need from all over the organization," explains Mierson. "They are getting people's best thinking and they are getting buy-in to the decisions. Lack of buy-in and lack of information in top-down decision-making can really cause meetings to drag on and on. When they put a decision into place without the needed information that is already available within the organization, they are more likely to have to go back and revisit the decision. They end up spinning their wheels."

Training is typically needed for dynamic governance to thrive because the method involves quite different structures, processes, skills and mindsets than what we are used to. The Sociocracy Consulting Group helps chart an implementation path specific for a particular organization; adjust the organizational structure to ensure clear roles and accountabilities; establish aims and domains for committees, teams and boards; train the employees, with additional training and support for circle facilitators and circle memory keepers; and generally guide the whole process.

"Dynamic governance creates a radical change in the way organizations are run," says Heitfield, who initially implemented the method without a consultant, but later hired the Sociocracy Consulting Group. "I would absolutely recommend [using a consultant for implementing dynamic governance] rather than charting new territory each day."

Image credit: Haworth (upper image) and Sheella Mierson (lower image)

Sarah Lozanova is a regular contributor to environmental and energy publications and websites, including Mother Earth Living, Green Building & Design, Triple Pundit, Urban Farm, and Solar Today. Her experience includes work with small-scale solar energy installations and utility-scale wind farms. She earned an MBA in sustainable management from the Presidio Graduate School and she resides in Belfast Cohousing & Ecovillage in Midcoast Maine with her husband and two children.

Sarah Lozanova headshot

Sarah Lozanova is an environmental journalist and copywriter and has worked as a consultant to help large corporations become more sustainable. She is the author of Humane Home: Easy Steps for Sustainable & Green Living, and her renewable energy experience includes residential and commercial solar energy installations. She teaches green business classes to graduate students at Unity College and holds an MBA in sustainable management from the Presidio Graduate School.

Read more stories by Sarah Lozanova