Measuring the Impact of Dynamic Governance on Financial Sustainability

An Excerpt from a Paper Written by John Buck, Patapsco Friends Meeting, BYM

This paper is a synopsis of applicability of profit as a measure of dynamic governance. It also suggests options for measurement.

no straight line to successWe rely on quantitative measures to give us high reliability and validity to what we are studying. It is relatively easy to correlate different sets of data with statistical measures.

However, the challenge arises when trying to assess causation

If you did a study and found that companies using dynamic governance tend statistically to make higher profits, you couldn’t conclude that dynamic governance is the cause of higher profits. There are simply too many other possible variables such as the condition of the national and local economies.

Multiple Regression is a statistical method used to see how much, each of several factors in the equaitonfactors contributed to variances in profit. It would provide insight into how much of a factor dynamic governance might be, if it indeed contributed to profit.

Employee Commitment is one of these “profitability-contributing factors.” A study revealed that there is a statistically significant correlation between having a sociocratic company in the Netherlands and higher employee commitment. So, assuming that employee commitment contributes to profitability because of reducing employee turnover, there is indirect evidence that dynamic governance leads to greater profits. An analysis by a Shell Oil refinery in the Netherlands Studies contributed such evidence. It correlated lower sick leave and improved customer focus to sociocracy.

Measuring successAnother way to tease out the factors that contribute to profitability would be to use estimation methods pioneered by Douglas Hubbard, How to Measure Anything: Finding the Value of Intangibles in Business. He asserts that people can be trained to estimate accurately enough for business purposes. With his program one can learn to become a “calibrated estimator.” In principle, if an organization adopted dynamic governance, a calibrated estimator who knows the organization should be able to make a relatively accurate estimate of how much dynamic governance contributed to the income of the organization. This requires organizational interest in investing time and money to do so.

How well does dynamic governance meet the “increasing usage test”? Use of dynamic governance has “tipped” only in the intentional communities movement and in the Netherlands among obstetricians and midwives (after a big push by Dutch insurance companies to “get their act together”). (“Tipping” is a term used in Crossing the Chasm by Geoffrey Moore that talks about patterns in the adoption of innovation.) Interest is building in other sectors such as the co-op movement.

success compassDynamic governance is otherwise used in “early adopter” organizations in different countries from a few evangelical Christian churches to some private schools to a plastics manufacturer. E.g., a big agribusiness in Brazil called Terra Viva has used it for a number of years, and the large neighborhood parliament movement in India is using it.

Finally, there is the anecdotal way of measurement. You simply tell stories. There are many websites that describe “case studies.” While case studies don’t definitively prove anything, they can convey a sense of how some are using dynamic governance.

In summary, dynamic governance (sociocracy), was developed by Gerard Endenburg, a student of Quaker peacemaker Kees Boeke, in the Netherlands. Sociocracy means “rule by the socios” – people who know each other – “socios” in Spanish means partners. Everyone in an organization must be trained to use it. (Its biggest drawback.)

Once installed it seems to bring a certain energy into the organization and anecdotally brings a variety of benefits including product/service quality, innovation, expression of satisfaction due to feelings of equity, buy-in, loyalty, being valued, heard, and having influence. It typically supports triple bottom line operations and values. It integrates easily with and supports a number of other emerging methods such as nonviolent communication, appreciative inquiry, lean startup, cynefin, design thinking, human systems design, Theory U, advice process, beyond budgeting, open space, agile, etc. The only definitive proof that it “works” is likely to come over time – if/when it seeps into the mainstream.


Financial Implications of Implementing Dynamic Governance

CDPP’s point of departure in forming governance working groups was the knowledge that pruning FGC staff and programs to bare minimum scale-back levels will still not yield a financially sustainable organization. The DGWG is charged with investigating a governance process that: 1) establishes an infrastructure that is conducive to sustaining a fiscally sound organization and, 2) creates space for the emergence of an evolutionary culture which supports the structural transformation.

DGWG literature and case study review, as well a case study interviews conducted during the month of March, 2018 indicate that Dynamic Governance leads to the maximization of human gifts, talent and workplace satisfaction. Further, the process provides sustainable, accountable, adaptable governance that is effective regardless of the financial state of an organization or network.

Members of organizations implementing Dynamic Governance stated that the process has led to expedited decision-making, heightened productivity, greater system “flow,” expanded autonomy, higher levels of accountability, and more time for connectivity. The following examples treat these case studies in more detail.

Pioneer Valley Co-Housing Group

Pioneer Valley Co-Housing Group is an intentional, shared-resource community based in Amherst, MA established in 1994. According to Jennifer Rau, a sociocracy expert and resident, consensus-based decision-making was used in Pioneer Valley for 18 years. The primary motivation for transitioning to sociocratic organization was to address inefficient decision-making (all decisions would be made during a monthly meeting of up to 60 people, and measures could only move forward with the agreement of everyone) and more broadly, to expand democracy among the community. According to Jennifer, within the first six months of adopting sociocracy, decisions were made that “we hadn’t been able to make in many years.” Overall, the implementation of sociocracy led to the following things:

  • Decisions on highly-contested topics were made quickly and efficiently after years of dead-lock.
  • Though the overall Pioneer Valley budget is still made by the entire community, every circle has its own individual budget. Circles are fully aware of their budget and its limitations (transparency), and have total control over allocation (autonomy). Individual circle decisions need not be made with the consent of the entire community.
  • People are more empowered (work circles previously carried out delegated tasks rather than designing their own agendas), and are therefore more Jennifer shared that tasks do not fall off the radar because everyone is 100% responsible which is likely to have financial advantages.
  • Arguments about money have “faded into the background,” due to effective distribution of financial decision-making.
  • Increased time for connection (because decision-making is carried out efficiently, there is more time for residents to share stories and have conversations with one another).
  • Governance flows seamlessly, making it feel almost “absent.” Because there is little disagreement, more inclusion, and heightened efficiency, Jennifer says that the governance is “quiet,” making it feel more natural.

Alliance for Jewish Renewal (ALEPH)

The Alliance for Jewish Renewal (ALEPH) describes itself as offering a “trans-denominational approach to revitalizing Judaism.” The ALEPH Ordinations Program (AOP) has adopted a modified sociocratic model. The primary motivation for implementing sociocracy was to democratize the decision-making process. For example, Steven Silvern, the Associate Dean of AOP, shared that the dean of the school is no longer the decision-maker. Rather decisions are made by the circles according to their domains.

AOP discussed and determined that sociocracy was working well for the organization in May 2017, and agreed that it was a model the organization would continue to follow.