Taking a sledgehammer to hierarchy


Taking a sledgehammer to hierarchy

Payfort is implementing a radical new company structure, one where CEO Omar Soudodi is no longer CEO, call center staff have voted to outsource the call center, and staff have become evangelists for what they’re calling Payfort Circles.

The structure is lightly based on Holacracy, an ‘operating system’ for self-managing companies that has been roundly criticised in the US and Europe, after very public shortcomings at Zappos and Medium’s decision to drop it in March.

Yet experts say the system, which hands responsibility for all decision making to individual employees at any level, is better suited to the way this generation’s workforce - millennials - want to work.

Forget the title, embrace your role

Most large organisations, especially in the traditional business world of the Middle East, use a ‘command and control’ hierarchical management structure.

Your boss tells you what to do, and you do it. If you have a problem you tell your boss, who talks to his or her counterpart, who talks to their underling and the issue is resolved.

There are problems with this kind of chain of command system though. One is that it's a series of choke points - it could take weeks to resolve your problem as individual managers field queries from their staff and try to resolve those from other departments. Another is that it doesn’t allow employees much autonomy over their jobs.

When Brian Robertson designed Holacracy in 2007 he envisioned a workplace where people have multiple roles rather than strict job descriptions; authority is distributed across groups, or ‘circles’; and office politics, or ‘tensions’, are dealt with openly and regularly in highly targeted meetings.

Traditional management structures are a system that worked in the 18th century, but perhaps are less suited to today. (Image via Holacracy One)

London Business School professor of strategy and entrepreneurship, Julian Birkinshaw, says Holacracy replaces a vertical bureaucracy with a horizontal one.

“Technology enables [flatter organizational structures],” he told Wamda. “And of course there’s also a generational shift.”

That shift, as millennials make up a greater proportion of the workforce, is pushing companies to offer a more collaborative, technology-friendly workplaces that reward results over hours clocked.

However, the pure form of Holacracy (Payfort borrowed elements rather than try to implement it wholesale) is also an intense system that doesn’t work for everyone.

“In its full form, Holacracy is a complex and sophisticated set of rules guiding organizational conduct. Adopting it requires companies to change their meeting practices very profoundly,” said e-book platform Blinkist’s guide to their version of Holacracy-lite.

Birkinshaw says it’s a system best suited to startups and companies with up to a few hundred people, a leadership prepared to give it a go for several years, and with a culture where people feel able to challenge authority figures.

“[Payfort] have a shot at making it work,” he said. “If anyone can make it work in the UAE, those guys will be able to.”

Circles are the new black

Soudodi realised Payfort needed a shake up last year, after he got stuck into the book Reinventing Organisations.

“I knew something was off. I knew there had to be a better way,” he told Wamda. “Every day in organizations we have office politics, you have companies making large reorganisations when the world is changing so quickly.”

Payfort was almost there already: it had a reasonably flat corporate structure, as its 85 staff work remotely from six MENA countries, and they'd retired email in favour of the Glip collaboration software over a year ago.

The guinea pig was the operations team, which started a six month trial in mid-2015. Payfort Circles was rolled out company-wide in March.

The Payfort relationship team uses Playstation Fifa battles and Jenga to weed out those who won’t fit into the company’s flat, collaborative culture. Here Maarid Fazili (left) 'interviews' Mohammed Shibly. (Image via Ankit Shoukry)

The initial reaction, when the operations manager announced he was giving everyone his title, was, “I’m getting a raise?”

Potentially, as now all employees set their own pay based on public self-assessments.

But Soudodi says there’s more to it than that.

The company structure is broken down into circles, rather than departments, which pursue a certain goal.

Employees own roles and handle different accountabilities, otherwise known as tasks. Soudodi says he’s a bank hunter, merchant nurturer, and motivator among other things, although for appearance’s sake outside the company he’s still CEO.

Each circle holds its own regular tactical meetings in which problems - tensions - are thrashed out, decisions taken and tasks appointed. Monthly feedback allows everyone in the company to see what’s working and what isn’t.

“It’s not consensus, you’re not trying to convince someone, you make the decision. But if you make the decision then you’re accountable for that decision. And if you keep making shitty decisions then eventually you’ll be out,” Soudodi said.

“I want to, for example, increase prices on a certain product segment. So I ask marketing and customer service for their take. They may both be negative but I am still empowered to make the decision if I think it’s right, even after receiving the advice.”

Finally, they added an incentive structure: a prize of 50,000 Payfort coins when a major project is completed equal to $50,000. The people in the circle divvy up the coins among themselves, with the people who put the most effort in theoretically receiving the largest share.

The idea is to make work about getting the job done, rather than a side note to climbing the greasy corporate pole. (Image via Blinkist)

An evolution, not a revolution

As Birkinshaw says, Holacracy may be the most radical way of doing things but it’s an idea whose time has come.

Self-management gained currency in the 1970s and 1980s, according to the Harvard Business Review.

“Moving to self-managed teams yielded breakthroughs in many companies, mainly in manufacturing and service operation contexts. The Volvo plant in Kalmar, Sweden, reduced defects by 90 percent in 1987. FedEx cut service errors by 13 percent in 1989,” the magazine said.

Today the competitors to Holacracy are the better known Agile and Scrum methodologies - Soudodi himself said the fact the Payfort tech team already used Scrum made the transition easier.

The Agile movement is starting to move beyond software, Birkinshaw says, giving an example of a company in Holland which has restructured its 3000-strong head office along Agile methods. It’s not anti-hierarchical, but power is in the hands of teams. “In many ways it’s an easier model [than Holacracy].”

Other companies, such as Reddit, don’t even have a name for what they’re doing, they just work on more ‘modular’ lines.

Reddit co-VPs of product Alex Le and Kavin Stewart told First Round Review last week that once startups found their product-market-fit they needed to empower teams to do the work and CEOs had to cede control.

“I’ve seen a lot of startups get to this point and it’s the CEO or their newly-hired head of product bundling and parcelling out tasks,” Stewart said. “That’s not what you want either. You want people assigned to thematic areas that they get to own and invent and test within. They develop subject matter expertise. They become the best mind in your company on user growth, experience, conversion funnels, or whatever it is.”

Traditional command-and-control ways of managing companies are holding on, but gradually being dismantled by methods that prize individual or team responsibility for tasks. (Image via Sound-Art-Text)

It's not a bed of roses

There’s a reason only a couple of hundred companies around the world have tried Holacracy. It’s complicated and the full version is considerably more radical than the system Payfort is using.

Brandon Croke was a marketer at Dev Bootcamp when it implemented Holacracy. He told Wamda that, as with any organizational system, there were elements that didn’t work.

“Our company leaders disregarded it at times when it served them, but other times they'd avoid making any decisions and then just outsource blame or responsibility to ‘the holacratic process’,” he said.

In a Quora post he listed the biggest issues as increased training costs, and difficulties in managing circles and setting employee salaries.

“The biggest pain I saw in Holacracy was that everyone had a voice in meetings to share their grievances A.K.A. tensions. Some issues brought up by employees were completely insignificant, but would take up everyone's time in a meeting,” Croke wrote.

Payfort relationship manager Ankit Shukla told Wamda that the majority of problems arose from people’s aversion to change, but initially also an influx of “weird” ideas as people explored their new freedom to propose and take decisions. He said this was and still is being sorted out through the advice mechanism.

On the other hand, Croke says, there are two key benefits: it forces companies to clearly identify what employees’ roles and responsibilities are, and the tactical meetings are an excellent tool to get people’s issues on the table.

“If anyone wants to try out Holacracy, they should try running a tactical meeting which forces the manager or leader to give up control of their meeting agenda and allows everyone to create the meeting agenda organically. If a leader or team can't handle that, then they should probably go back to however they were managing people in the first place,” he told Wamda.

Pay rises for all?

Shukla, online marketing manager Amira Abou Shousha and underwriting specialist Nancy Shoukry, are fervent converts.

Shukla was in the initial testing group of eight people and said it sounded like a “magic wonderland” when first proposed. So fantastical, in fact, they didn’t think it was actually possible.

When they lifted their revenue by 5 percent, the conversions started.

But encouraging third parties, especially banks, to participate in the new way hadn’t been too successful: “The process is just too foreign for them.”

Some key merchants had been enthusiastic but when it came to the crunch they’d not been keen to adopt it. “They said, ‘we don’t want people who have no knowledge to have authority’,” Shukla said.

Abou Shousha initiated a circle for this year’s State of Payments report, a process that allowed them to this year “produce a piece of art”.

“After introducing the light version of Holacracy I discovered that we were applying this concept by default specially inside our department," she told Wamda.

“That doesn’t mean everyone experiences it equally positively. For some people it is the miracle while others struggle with it, but I believe with any change there will obviously be difficult times.”

Shoukry was part of the call center team in Egypt who outsourced their jobs. Today, she’s handling underwriting in Egypt for onboarding merchants.

“The first thing came to my mind was wait, if there are no bosses, how does any work get done?” she said. “I was part of the customer service team and it is well known that there is always a manager who is making sure things are being done in a certain way.”

In the five months they started using Payfort Circles, Soudodi said the big wins had been the creation and launch of a company-wide data analytics system by a six-person self-taught team in just four months, and a 150 percent increase in new merchants after the business development circle came up with a better onboarding process.

There is no doubt Holacracy, and the lite version implemented by Payfort, are radical. Cultish on first glance, it requires a years-long commitment and a fundamental change in thinking.

But if you read this article a couple of times, maybe you’ll convert too.

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