Open Allocation

Description

Chris Dannen: "At GitHub, people work on an open allocation basis. Unlike traditional companies where projects are assigned top-down, GitHubbers tackle whatever projects they want, without any formal requests or managerial interference. Sure, GitHub is only 175 employees, so there are limitations to this experiment, but Valve Software (400 employees) has grown to be a $2.5B company with a very similar open allocation structure." (http://www.fastcolabs.com/3020181/open-company/inside-githubs-super-lean-management-strategy-and-how-it-drives-innovation)

Discussion

Chris Dannen:

"Open allocation is one theory that answers one of the most crucial questions for any company: how to innovate and make that innovation repeatable.

There are four essential problems with systematized innovation, and in most businesses, structure can be a solution. McKinsey says that 62% of corporate executives report manipulating company structure to drive innovation efforts. But structure is particularly fun to talk about for startups; the same McKinsey paper says that people experiment more with structure when they’re trying to make something new.

Traditional companies often have small units that are responsible for “innovating” while the rest of the company toils away under a more hierarchical system. What’s fascinating about GitHub’s approach is that it applies a single innovation-centric model across the entire organization. In most extant companies, the people who move up the chain are selected by a competitive grading process--Google’s internal 4.0 grading system and Microsoft’s stack ranking are two examples.

But surely those companies would never have implemented such rigid structures if they didn’t work, would they? And what’s so hard about innovating, anyway? Why aren’t there more Apples and less RIMs? Why do most corporations peak and collapse inside 50 years, not (say) 250 years?

Let’s say you’re a startup founder. You had a great idea and a pool of interested users, and through vigorous iteration, you managed to achieve product market fit. With money in the bank, you start hiring. With all your new resources, you want to keep reproducing the process that got you success in the first place. This is called “innovating,” a word that has begun to lose meaning, we hear it so often. I like this definition I found in an academic paper from 1986, back in the golden age of management theory:

The process of innovation is defined as the development and implementation of new ideas by people who over time engage in transactions with others within an institu- tional context.

In other words: How do you get the same old people in the same old company to keep cranking our novel, valuable things?

As soon as you try to reproduce your successes, you run into four problems, which are succinctly outlined in that same paper I linked above.

I’ll paraphrase them here.

Managing Attention: People and their organizations are largely designed to focus on, harvest, and protect existing practices rather than pay attention to developing new ideas. The more successful an organization is, the harder it is for them to pay attention to new ideas, needs, and opportunities.

Creating Currency: While the invention or conception of innovative ideas may be an individual activity, it takes a whole company to execute--and it’s hard to get a big group behind a new idea because of social and political dynamics.

Getting Units To Work Together: As a new product or service comes to fruition, ideas, people, and transactions proliferate quickly, which means you need more people to pitch in and help. The more individuals get involved, the easier it is for them to individually lose sight of the whole innovation effort.

Institutionalized Leadership: Some innovations are so vital that they rightfully require the structure and practices of management to change radically. Most companies’ infrastructure isn't flexible this way, making it hard for structure to keep up with innovation.

...

There are a few logical leaps between company structure and innovative products. After poking around GitHub, I realized that once you have an “open allocation” management structure, you still need something else: open, easy-to-use internal platforms and stellar communication.

If anyone can join any project, then workers need readily accessible training materials and documentation--otherwise, switching projects comes with too much friction as the new person struggles to get oriented.

In some ways, the structure of a company like GitHub is just a distribution network for information about the purpose of this company and how it works--and subsequently what it should be making.

As you’ll see in the interviews below, the “mission” comes from the people at the top, and it’s up to the rest of the self-organizing masses to figure out how to execute their part.

Keeping everyone on the same page about the incremental adjustments in direction is really important--otherwise, word about these small corrections doesn’t make it to certain units of the business, which don’t adjust, eventually leading to huge gulfs in purpose between teams. That’s how you end up like Apple in the 1980s: one team building a revolutionary product like the Macintosh and another team slogging away at an overpriced failure like the Apple III.

Good communication also makes it easier to start new, adjacent businesses. When word of a cool new project reaches the top of the company, the leaders can use it to make a course correction, which is then redistributed throughout the network so that everyone is made aware that “New Initiative X” is now part of the business." (http://www.fastcolabs.com/3020181/open-company/inside-githubs-super-lean-management-strategy-and-how-it-drives-innovation)