How to choose a governance system for your organization

Is your nonprofit, small business, or volunteer group looking for a new way to make decisions?

Many groups are questioning our mainstream systems — and that includes the systems by which we make decisions. Governance used to be one of the things we’d all take for granted, and now it’s one of the choices to make. I welcome that!

I think organizational governance is a huge leverage point for our systems — we spend a lot of time at work, and organizations have a huge impact on what happens (and doesn’t happen) in the world.

Governance is a key choice to make. How we make decisions shapes what we will decide, whose perspective will be heard, and what the impact will be. It also changes how we relate to each other and what kind of culture we co-create.

Who this article is for

This article is intended to give some orientation to those who are “shopping around” for a governance system. If you feel like googling “better governance systems” and feel lost, then this article is for you.

In writing, I kept in mind small and middle-sized nonprofits, purpose-driven and human-centered businesses, faith communities, volunteer or activist groups, affinity groups, bioregional organizing, and collaboratives.

Disclaimers

Let’s start with a disclaimer. I, Ted, am very closely associated with one of the governance systems in the mix, a system called sociocracy. I make a part of my income training and implementing sociocracy. I co-founded a nonprofit that promotes sociocracy, and many other writings are related to that. I’ve published two books on the topic and one on governance in general.

I certainly have a perspective on the topic, and also a stake in it. But, a little defensively, I am in this work because I am driven by my frustration with power-over systems and what I see as naive alternatives. I’ve been around the block, working with a hundred groups that were in the same situation as you — searching for alternatives in their governance because they have the belief that it could — and should! — be done better.

I’m also doing my own share of thinking about and sensing into alternatives and how the existing systems aren’t perfect yet and could be improved.

Another acknowledgment is that this article is very much embedded in Western, industrialized culture. While I have a commitment to more collective and egalitarian systems with a higher emphasis on relationships, I’m fully aware that this conditioning doesn’t “just” go away.

What is Organizational Governance?

Organizational governance is the system we use to steer information flow and decisions in and for an organization.

Imagine 100 people excited to work on the same idea. They show up in the morning and want to do things! What will happen?

Very likely, there will be a mix of things: some people will start with random tasks, others will start talking about where to start, yet again others will start talking about ground rules or start arguing about what’s most important.

Without governance, there is no way to funnel the energy and motivation to coordinated action. Governance is the missing piece between 100 motivated people with an idea and the hum of everyone engaged in meaningful activity.

To be complete, a governance system needs two parts:

• a way to decide who decides what
• a way to make decisions

Ideally, it also comes with guidance on how to guide information flow, manage resource allocation, and establish conflict resolution and accountability mechanisms. (For a relatable and scientifically proven list of what a group needs to run effectively and sustainably, see the Ostrom principles.)

Even more ideally, a governance system comes with a way to improve the governance system — but that’s for another day.

Incomplete Governance Systems

Most things that are talked about as “governance” aren’t complete. They are parts of an organizational governance system.

Governance Is More Than a Decision-Making Method

The most common misconception is that a decision-making method is a governance system. But it’s only a part of a system. If you decide to make decisions by Roberts Rules (parliamentary procedure), then you have a decision-making method but you haven’t determined who gets to decide what. The same is true for consensus. Those are decision-making methods. We need them, but it’s not all we need.

The same is true for a DAO (decentralized autonomous organization) or any special form of voting like ranked choice or quadratic voting. It’s also true for apps that aid decision-making. Those are refined decision-making methods, but they don’t help in any way with clarity on who gets to say yes (or no) on which topic. They often don’t even specify who gets to make a formal proposal.

Governance Is More Than A Feedback or Conversation Modality

I recently saw that someone suggested forming a world government running entirely on World Cafés — a modality where people talk in small groups and their insights are shared with each other.

I understand the sentiment. But it conceals that few sticky notes and ideas on a flipchart do not make governance choices for us. We still need to pick concrete things and do them. Governance is more than bouncing ideas around.

Don’t get me wrong. I highly recommend combining these modalities with governance — more information and conversation certainly make for better decisions! The more variety in thinking and sensing we get to inform our governance, the better. But we still need to have an actual system to combine them with.

Imagine your computer is running slow and becoming sluggish. Someone might tell you it’s your operating system that needs to be replaced. But you don’t want that because it’s too much work. So instead, you install an app that makes things a little prettier and a little faster. That’s what adding Open Space Technology, Dragon Dreaming sessions, Nonviolent Communication, or a presencing process do — they add a modality and ideas or input, but they still run on top of a governance system.

Or let’s go back to the 100 people showing up for a project. We can — and should — communicate and listen compassionately, open ourselves to possible futures, and so on, but then what do we build and who will do it? It’s the combination of it all that creates the culture.

When Good Intentions Conceal The Situation

I will own that this is one of the topics that frustrates me the most— when wonderful modalities get co-opted into concealing and therefore upholding the status quo.

For example, sometimes people get so obsessed with finding the perfect decision-making method that they might put all their hopes on decision-making — but it’s only a part of governance and often assumes that someone decides what can even be put out for a vote. Or who gets to vote. And what happens next. My concern is that the obsession with perfect voting mechanisms conceals the power dynamics that lead up to the moment of voting.

Sometimes, it seems like we’re talking interior design because talking about the master’s house (an Audre Lorde reference) seems too much. I want to talk about how houses are built!

Governance Systems

So if we want to talk about complete systems that include architecture and interior design, what are our options?

I’m aware of two basic systems: centralized decision-making (aka hierarchy) and forms of defined decentralized decision-making. But there’s a lot of nuance here.

• In hierarchical systems, decision-making power is top-down.
  In a simple way, we could say there’s one person at the top — the boss — and that boss can decide basically everything.
  There will still be delegation but only because no boss is able to make all the decisions. But the point is that any decision could be overridden by the higher-ups. So while the boss doesn’t make all the decisions in daily life, their word is final on potentially everything. That’s why I say that the underlying structure is centralized.
• In decentralized systems, decision-making power is distributed. There is no overall boss that can override my decision.
  The idea is that decision-making power is like a pizza that is shared. Everyone has a slice and makes decisions about that. Once I hold a slice, no one can tell me what to do on that slice. I can eat it, share it, or do whatever. But the idea is that the system helps us distribute pizza.

In organizational terms, distributed systems are protocols for distributing domains. And in centralized/power-over systems, no distribution protocol is needed.

The how-to of distributed decision-making

Once we decide to distribute decision-making, there’s a lot we need to do: (a) we need to define how authority is divided up and (b) who gets to decide that.

It’s basically like saying, let’s own the pizza together — but then we still need to say who is going to have which slice of pizza. We need to define how to share it.

Within distributed decision-making, there are two basic ways to approach it:

• In a distribute-down approach, the pizza is divided into parts that then get passed down and the rule is that if you have a slice, you get to pass a part of it on to someone else.
  >> Sociocracy and Holacracy work that way. Every (policy) decision is part of an area of authority (a domain) and there’s a protocol by which a group that holds a domain can pass it to a new group.
• In a define-as-you-go approach, everyone can simply claim a slice of a pizza, or we take a bite from this slice and that slice as we see fit.
  >> Some “teal” systems work that way. (Named after the highly influential book Reinventing Organizations by Frederic Laloux.) They often emphasize autonomy and self-empowerment as well as the need to communicate transparently. You see a need to act and do something about it, possibly after asking for feedback.

The advantage of distributed decision-making is that instead of separating the deciding and the doing (into management and workers), those doing work are also those who make decisions, keeping doing and deciding closer together. This is impossible in a centralized system where deciding and doing drift apart.

Static versus dynamically distributed power

If you want to distribute authority, one way is to define which team or role decides what and then operate that way.

But what if things change? What if you want to start a new project or department, or want to shrink? Who decides whether that new project gets done? In other words, who decides who decides what? A static, distributed system can easily get outdated, which then reveals who has the power to distribute authority.

I’ve seen plenty of situations where, yes, decision-making was distributed but that original system was statically put in place by the founder or board. But then we always have to go back to that founder to change it, and we effectively stay at the mercy of that founder. It’s commonly a way to covertly hold on to power. And just as often a way to maneuver ourselves into tricky situations, for example, if the founder dies or leaves and we are left with no one to decide and no process by which to decide who decides now if our static systems fail. (This is a bigger problem than you might expect!)

In a dynamic system, instead of defining who decides what, we decide the rule set of how that’s done, ideally recursively. For example, a rule set in sociocracy is: a team that owns a domain can give a part of that to a sub-team if no one on the team or the subteam has an objection. That simple rule makes it possible to build complex organizations via local mini-agreements.

In the pizza example, a static system would be to say that Person A always gets the first slice, and Person B always gets the one with the least cheese or something like that. In a dynamic system, you define the rule set of how you will decide who will get which slice — so if the situation changes or the group or the pizza grows or shrinks, you can simply adapt, following the same protocol but distributing it according to new needs.

It’s like a static system can only print complete sentences, while a dynamic system gives us an alphabet where you can write whatever you want to express, following simple rules.

This concludes the section on (who decides) who decides what. Next, we will look at how we decide.

Decision-Making Methods

First, let’s ask ourselves why we even need decision-making methods. Why not just do work?

• There are situations where we need a decision because several people need to change their behavior in the same way; for example, let’s say we have an issue that people come very late to meetings and we lose precious time. This is not a dynamic that’s easy to break as one person: no individual has an incentive to come on time because we’d arrive early to twiddle our thumbs. To break the pattern, we’d need a decision that from now on, meetings begin on time. If everyone sticks to it, we all win. It’s important to understand that an organization with interdependent behavior is different from the sum of the individuals in it.
• Secondly, a decision-making method is basically a way to turn individual opinions into a group decision. In hierarchies, that’s necessary less often because bosses decide alone. If I decide alone, I don’t need a method, I “just” decide. But if we’re deciding as a group of 5, we need a method.
• Can we just talk informally? Why don’t we “just talk until we figure it out”? The problem is that not having a formal system can easily play into all biases and power dynamics, or simply take a long time and lack the clarity that a decision is supposed to bring.
  Or let’s put it like this: not having a method is just as much a choice as any other method, with its own pros and cons.

There are basic decision-making methods. (More details in this article.)

• “Informal decision making”: absence of a formal method. People talk until someone says we seem to be on the same page.
  The advantage is that it aligns with the existing culture — and that is at the same time its bigger disadvantage. Culture doesn’t change without intention, and the biases that come with the absence of intention typically play right into the established biases and perpetuate them.
• Majority vote: voters cast a vote and a defined (super/simple) majority of votes determines the winner.
  The biggest advantage is ease, and it’s even possible with huge numbers of people. The disadvantage is that it is prone to polarizing (“if you’re not with us, you’re against us”). Even with less polarizing ranked-choice voting, the disadvantage is that the quality of the decision still depends on the level of informedness of the voters — which can be biased and distorted. Not everyone can be informed on everything, so within organizations, voting can easily turn into a tyranny of the uninformed or tyranny of those who have time to show up.
• Consensus: everyone needs to agree.
  This is often considered the most inclusive decision-making method. We talk until we’re all on the same page, and anyone can say no to anything. The disadvantages are that it can take a long time and wear out groups, and can still play into power dynamics because some will have a higher threshold for blocking a decision than others.
• Consent: no decision-maker has an objection.
  This works best in small groups where a proposal passes when no other member objects. An objection is typically defined against the aim of the group. Consent can be active (“tell me if you consent or object”) or more passive (“if I don’t hear any objections, we will move forward…”).
  The disadvantage is that consent comes with assumptions: (a) that the group members are defined and we therefore know who to ask for objections, and (b) that there is a defined aim which proposals are measured against.

A subtle difference is that all decision-making methods but consent are focused on the individual opinion/preference. The question we’re asked each time is: what do you want?, and then we tally it up in a defined way, turning a number of individual decisions into one group decision. Consent, on the contrary, doesn’t ask what individuals want, but what they think is good for the group purpose (as expressed in the group aim), so it’s the only method that doesn’t technically tally up individual votes but begins with the needs of the group, turning consent/objections more into a focus on perspectives in the system than one-member-one-vote.

“Off-the-shelf” Governance Systems

Now we have some context to understand what governance systems need to provide and what some of the choices are. We looked at who decides what and how we decide. Now we just combine them and have a system, right?

Not quite. The tricky thing is that it seems like governance is like a modular machine where all you need to do is find the pieces you like and plug them together. But every choice creates an interface that then limits the other choices — for example, having one boss but making all decisions together by consensus would be awkward. It doesn’t fit.

In my experience, it’s more like cooking a meal. Sure, you can dumb it down into “choose your carbs, pick your protein, add veggies and sauce” but there are so many interactions and nuances, you’ll never quite know whether it tastes good. The magic is in the pieces but also in how it’s all coming together. A governance system is not just a set of pieces but more a living system. They have ingredients but they comes as one system that we experience, just like a cooked meal blends flavors together.

Hierarchical systems

The most common system is a classic hierarchical situation with a board, leadership, and some delegation of responsibilities. It’s almost impossible not to be familiar with that so I’ll keep it brief.
The flavor can change a lot, and the culture is often hit-or-miss based on personalities. For example, a participatory leadership style can almost feel like making decisions together, but of course, the underlying structure is unchanged. There are good leaders and colleagues, but the system itself is not set up to reward that.

In my perspective, hierarchical systems have their place. They are useful when there is a lot of fluctuation or imbalance of expertise — for example, working with changing interns, volunteers/staff mix or very big educational differentials— where decision-making is hard to share or distribute.

It can also be useful when, for whatever reason, we do not have the capacity to train ourselves and each other on alternative ways of functioning. For example, when an organization is about to go bankrupt, don’t tinker with the governance system.

It’s similar when things are working just fine. If there is no problem, don’t fix it. If hierarchy works for everyone involved, great.

Sociocracy and Holacracy

Sociocracy is a governance system that comes as a packaged, “complete” system. It provides a protocol to distribute domains (via local consent and linking) and a decision-making method (consent for policy decisions and individual decisions for carrying out the work). It also comes with a meeting format, ways to define and select people into roles, a step-by-step process for making consent decisions and ways to integrate objections, and additional processes like peer performance reviews.

Holacracy is a variation based on very similar principles, and also a complete system with parallel processes. (I’ve written about the similarities and differences here.) This is a bit snarky but you can think about the difference between sociocracy and Holacracy like pizza and a calzone. You can (sort of) turn a pizza into a calzone but it’s harder to turn a calzone into a pizza. Holacracy is more specific whereas sociocracy leaves more choices. If you want a just-tell-me-how-to-do-it system and you like its flavor, use Holacracy. If you want more choice (and you’re willing to put in the effort to familiarize yourself and make the choices), have a look at sociocracy.

[Note that these systems are ways to package and distribute domains, so you can centralize and decentralize as much as you want to. For example, it’s possible (albeit maybe not the intended way) to define a sociocratic system where 80% of all decisions are made by one person. That means that sociocracy can do what hierarchy does, but hierarchy can’t do what sociocracy does.]

The disadvantage of these systems is that they need to be learned and implemented. They’re tried and tested but still newish. There are training costs and costs associated with implementation. Depending on your culture and sector, there might be mindsets or convictions that don’t work with sociocracy — for example the assumption that workers can’t think for themselves. Sociocracy assumes a high level of self-responsibility and openness to (un)learning.

Some people worry about speed and self-management. I don’t find that self-managed systems are slower than hierarchies — quite the opposite. But how to use them in a swift way needs to be learned, especially if people lack experience. Maybe it’s a bit like learning how to rollerskate — at first it’s wiggly and slower than walking. But with more practice, it’s at least the same, and likely much faster.

DIY self-management

You can also have a look at building your system and build your own. Some organizations start with the idea of a distributed, define-as-you-go approach where people just do things in a self-empowered way and then you define what you need beyond that.

It’s very empowering to do that, and building your own system also means that you will know your system inside out and customize it.

Then again, how unique is our organization really? How much time do we want to spend on putting together an operating system? After all, most of us don’t want to invent recipes, but just eat a good meal.

Well, there are two words of warning with this approach:

1. These approaches can easily lack accountability. When push comes to shove (for example when you are losing money and need to let go of people), it’s often unclear what system to resort to. Often, these systems are built for good weather, and that’s a major vulnerability.
2. This approach easily leaves gaps— after all, we only cherry-pick and implement what we want and leave out what seems uncomfortable or not as fun. That’s why it’s not uncommon for DIY approaches to either have blindspots or to, over time, reinvent the wheel. What’s worse is when it leaves no one in charge or empowered to fill the gaps.

I’d say this way of organizing is advanced, ideally after having practiced several modalities of governance first.

In summary, the advantages of a DIY self-management approach are the possibility of customizing and owning the system. The disadvantages are that this takes time and might not always be better than off-the-shelf systems.

Final thoughts

Finding a governance system for your group is not an easy task! This is in particular true because to really understand them, you would need to “try them on” for a while. But switching governance as a group is a huge effort, not something you’d change every few months just to try it out. And you’d give it your own flavor, a unique way of living into the system. No one can predict that.

So you basically need to trust without fully knowing for sure how it will turn out. That’s a risk. I wish it were easier.

In this article, I tried to describe how governance systems work in general so that you can get a better sense of what to look for. You need a way to decide who decides and a way to decide.

Whenever you take shortcuts, it’s safe to assume that power dynamics will creep in. But on the other hand, you don’t want to overbuild the system and make it heavy. It’s a tricky balance.

My advice is to make a basic choice between the three main systems: hierarchy, sociocracy/Holacracy, and DIY — and then get started.

Not having a system is probably the worst option — it’s like trying to talk about what language to have a conversation in (Spanish? English? Tagalog?) without having a shared language to have that very conversation. It becomes a frustrating chicken-egg problem. (Learn more about my frustration about organizations that don’t have a governance system in this presentation; it was for intentional communities but it applies to all sectors.)

Talk to others, read around, see how people use models. Then pick the basic — and complete — operating system that speaks to you and tweak itover time. No matter your system, you can still add flavor with how you have meetings, how you give feedback, how information flows. You can supplement with other modalities and systems.

Image by Gerd Altmann from Pixabay

Resources related to sociocracy

• Read about the roadmap of implementing sociocracy. The roadmap applies more or less true for implementing any governance system.
• If you want to talk to a human and see if your case is good for sociocracy, me and my team offer coaching. (I’ll give you my honest opinion whether sociocracy is a good fit.)
• If you want to read more and you enjoy the nerdiness, you might enjoy my book Collective Power.
• If you want to just start somewhere and your group is small (under 12 people), have a look at Who Decides Who Decides.