> This extended to decisions that involved spending money, not just should you pick language X or language Y for your next software project.

Just want to point out, the choice to pick language X or language Y is very much about money. Training, triage, getting into production, scaling, testing, etc. Most bigger picture technical decisions are in fact, economic ones.

For sure. I was just pointing this out because I've worked in organizations where there was no problem with delegating language choice to engineers but the minute any actual money had to be spent it was treated very differently.

You are absolutely right that technical decisions are economic ones.

[Edit: apologies for the wall of text. A lot of pent up emotion around Creo.]

Best place I ever worked.

This was “the Creo Philosophy”:

Our priority is to provide unique and sustainable value to our customers.

1. All decisions must be based on sound economics.

2. Key decisions are made in consensus, with full team agreement to accept and implement the decision.

3. We believe that people are most effective when self-managed.

4. Compensation is based on contribution, gauged largely by an annual peer review.

5. All employees share the wealth created by their hard work and innovation.

Creo was extremely proud of how “flat” the organization was but my primary take-away from there as an ex-employee is actually how important management is.

First and foremost, management created a shared vision of the future. Not silly posters to laugh at but a real shared mission. It was exciting and motivating. Every Creoite knew how the world would be changed when we were successful. Decisions could be distributed because it was obvious which outcomes were aligned with the companies goals. Trying to push outcomes not aligned with the goals was hard ( as it should be ).

Second, there was a strong framework for how decisions were made and how to identify good decisions from bad ones. Economic thinking and consensus were two important principles that you were expected to follow unless you could demonstrate very good reasons not to.

Third, management provided a great deal of mentorship, both through direct education and through calling re-enforcing the primacy of the principles. One of the reason Creo could be so “flat” is because everybody knew how the executives would behave if they were in the room and they could insist that others act accordingly. It was easy to assume executive sponsorship without having to resort to politics. “We do not tolerate politics” was an important mantra through the best parts of the company history.

Most importantly, I got to experience the everyday effectiveness of the organization under three different CEO’s: Ken Spencer, Amos Michelson, and Mark Dance. The “culture” was only as good as the man at the helm.

At Creo, we made the claim all the time that we basically did not have hierarchal management. It was true we did not always have “supervisors” but we had the best management I have ever worked for.

As said above, Creo stopped working when it acquired a rival that had more employees than it had. The politics exploded. The effectiveness disappeared. Financial performance followed. The company was sold to avoid a shareholder revolt. A sad end for a spectacular organization.

The original Creo employees stuck to the principles. Well, except management. Hierarchical authority was suddenly more important. Decisions did not have to make economic sense. What mattered was who was doing the deciding. Consensus stopped being a requirement. Speaking truth to power stopped being a path to better decisions and started becoming a career mistake. Executive sponsorship became real and aligning with people in position became the most important criteria for individual success. Empire building replaced shared vision. The lack of alignment between making the company successful and being successful as an employee completely broke. The company failed.

Managers and employees looked at Creo folks and their “philosophy” like naive children. Sure “the philosophy” worked well enough for Creo to beat them to begin with but, once merged, the acquired were right. Creo was idealistic and naive. But this was not inevitable.

Why did Creo fail? Did “the philosophy” not scale as the final CEO I think believed? I do not think so. I see it purely as a failure of management.

The final CEO provided little vision. Other than a focus on the bottom line, there was no insistence on economic decision making ( eg. instead of breaking up meetings because they had too many people in them - too expensive - he held meetings with dozens of people in them ). Instead of coming down on politics and insisting on consensus, executive authority became sacred. In fact, the term “consensus” became most often used when an executive used it as an excuse for their own lack of leadership by claiming the team should have to solve its own problems.

If strong management had provided the leadership, the mentorship, the vision, and support for the culture ( most importantly the principles of good vs bad decision making ), Creo would still be with us. If I was lucky, I would still be working there.

Creo ruined me in a way. I have never been able to accept why things cannot be as good anywhere else. Such simple ideas. So dramatically effective. Unfortunately, good management ( executive level ) is an absolute requirement. Even hundreds or thousands of well trained employees was not enough to make these principles work without strong management behind them. Management matters.

I got to experience some amazing leadership for a while. All I can do is try to emulate those role models as best I can. And everywhere I go, I try to make economic thinking an important part of how decisions get made.

RIP Creo. You left us too soon.

Unnecessary hierarchy is a cancer. CEO's aren't geniuses or rockstars, and if executives can't convince their employees- the actual technical people who will implement whatever plan is- that a given plan is the right one, 99% of the time that means it's not.

Good management is about leading people (i.e. who follow voluntarily), not dragging people along.

A good summary of what I was trying to say is that most companies could do with more leadership and less management.

It sounds like we agree.

A very important distinction, in my "Creo" example above, our company specifically used the word "leadership" for the founders and other "leads" of the company.

Nobody used the word manager or boss annd anyone could be in a leadership role, it was based on meritocracy.

Spooky parallels to the Boeing and McDonnell Douglas merger. Thanks so much for sharing the history, great ideas and suggestions, and a lasting question to answer around how to defend the model from the barbarians.

It almost looks like the culture is the competitive advantage, and everything else follows. No market and technology synergies are important enough to risk the destruction of that culture in a merger. (Alternatively, all the upper and middle management of the acquired company has to be honorably discharged, and the remaining employees are to spend several months training in the new culture. A pretty hard sell for most mergers.)

I would strongly agree with this thesis.

Thanks for sharing, you're post really resonated with me and I want to learn more about Creo now.

While I don't have the shared experience, I think I've also landed on economic thinking as part of my primary model of how I think an eng team should function and been trying to push the concept with limited successes (although I've termed it differently). And I've never observed a team that I think has executed on it really well.

I think business decisions should be up to the support divisions. Has anyone tried that?

That sounds like a different sort of toxic culture, just one where “no politics” is given lip service more than at the usual company and different sort of people make it to the top. An ivory tower at the top of the food chain exists even if you close your eyes and believe what you want to believe. A game is played regardless - this is the psychology of humans and exists outside of whatever nonsensical things you convince yourself of as part of a company, and only the useful idiot ranking is unaware of it. The company had thousands of employees for fucks sake this wasn’t some scrappy 20 person shop where anyone could pick up the phone and play CEO for the day talking to customers.

So yes, the new management made 100% right call in how they responded - they have money to make not deal with LARPers. And people who do M&A have a sweet fuck-you side and the brutal “your ass is mine” realist side. You saw both I’m sure. I assume they stopped short of calling you (doe eyed wet behind the ears kool aid drinking employees to be) gullible. In public that is.

Do you have any first hand experience or writing from those who did have such experience to this being the case?

I facilitate M&A work across companies so first-hand experience for the most part, and a few stories here and there from the colleagues - think death threats for one. That’s what the job is. People in this line of business are fast tracked to C-suite positions for obvious reasons.

Also someone is going through all of my comments downvoting and flagging. @dang I know my comments hit a nerve with the young players but can you do us a solid mate and throttle the rabid down voters?

Throttle because of your arrogance and poor assumptions based on thinking your reality is everyone else's? Boo fucking hoo. Stay in your sad world and we'll stay in ours.

So the answer is "no."

This isn't reddit. People will downvote and flag far reaching toxically negative comments about a company the poster has no actual experience with. As they should.

I am sorry you have never worked anywhere like it. For over 10 years, the company grew like gangbusters. It transformed a whole industry. It grew from under 50 people to 5000. It made hundreds of millionaires.

It is a massively self-evident fact that a lot more money was made during the “principles” period than after. And the company outperformed its rivals to the point that it was able to acquire competitors with twice as many employees. If “money to be made” is your core objective, you should strive to be more like Creo in the decade that ended a year before its demise.

Decades after the company disappeared, it has a very active LinkedIn Group and people are singing its praises online. If you are right that it was so “toxic”, this is a strange legacy. Interestingly, the core technologies developed by Creo are also still very much alive and, as a very rare example in technology, have not been surpassed technically nor replaced in the market. Technology moved very fast at Creo but their tech has stayed virtually unchanged under Kodak. Amazing.

Where I work now, we do at least three M&A deals a year ( as the acquirer ). I have many ideas about M&A. My ideas about leadership are still very firmly planted and aligned with what I experienced at Creo.

We’ll agree to disagree. As a founder I often have to draw the line between how founders think and how the rank-and-file employees, including management and even VP suite think. So I tend to sympathize when Musk asks the interviewer, “you didn’t really think I was going to be normal, did you?” (me paraphrasing). For anyone who excels in such an environment it’s a paradise - and founders often do. For everyone else it’s a living crushing nightmare. And the acquiring company called it as they saw it. They may have gone through a similar phase or have had previous M&A experience that left them thinking “yeah we are not playing that fiddle again.”

If we are talking “founders”, the two Creo founders made hundreds of millions of dollars when the company sold. Long before that though, they gave away a third of the company to a guy they named as second CEO. Then the original CEO biked around China for a year while that guy made him that fortune. The two founders pooled their shares and then split it three ways with the new guy ( second CEO ). Many rank-and-file employees made millions as well. It was a different set of folks.

I am not sure how many hundreds of millions you have made but their way seemed to work.

I've run many teams like this and have generally received good feedback from my teams. It's pretty simple in my experience. Don't punish people for making generally sound decisions that end in failure. Reward them for decisions that end in success. The issue is that managers need to eat some of the risk of those failures although it is offset by the benefit of the team's successes. Few managers are actually able to do this versus trying to dump all the risk somewhere else (usually onto their teams). But if you can maintain a management layer like that then it's amazing.

> how founders think

The fact you literally believe your method of thinking is any different than other employees is exactly why 90% of startups fail.

No problem. I am not sure what we are disagreeing about.

The company was amazing. No offense but it is not important to convince you of that. And you are certainly not going to convince me that my experience or the stories told by hundreds of others are false.

You could be trying to convince me that management does not matter, as my core claim is that it does. If that is what we are disagreeing about, I would like to know more. Great ideas can come from anywhere but I want to stay evidence driven. It is the only way I know how after working at Creo.

You keep explaining imagined features of an alternate reality where the people who worked there actually hated it.

This isn't an abstract thought exercise. You're talking to someone who worked there, so it comes across as irrelevant to imagine people who hated the politics.

I agree with you generally that abstractly one should discount claims of lack of politics. founder soul, founder, sold it, Google for 7 years, then founding again.

> And the acquiring company […]

The happy lovey-dovey kumbaya-chanting rainbow bunnies that made piles of cash (aka Creo) were the acquiring company. Not the other way around.

> It is a massively self-evident fact that a lot more money was made during the “principles” period than after.

Is it though? I've seen a lot of claims about this or that management style or company structure to be responsible for huge profits and growth. It's usually a more simple explanation, such as market timing + smart people. Ultimately it's survivor bias. It could be argued that if this were really the case, all top companies would be using it by now.

But that last sentence is the Creo supporters whole argument - self interested management get much more out of rent seeking in a nice profitable company while seeing their hierarchy position reinforcing their social Status- in short as long as everyone keeps being “performative hierarchical management” and looking like they do a good job, there is no incentive to actually do a better job

I’m really curious to learn more. Do you have a way I could contact you?

Could you give us an example how this worked practically on a project basis?

Author here - I'm simultaneously quite pessimistic about, and very interested in heterodox organizational structures and especially real-world stories about them. I feel that failure or regression to the mean are quite likely and scaling or replicating success stories is very hard, but I am almost certain things will evolve beyond the current status quo eventually, just really not sure when and how.

So thank you very much for sharing and recommendations for further reading will be much appreciated!

I have a theory that organizations that grow fast and scale well all have this “cellular model” at their core.

Investment bank trading desks in the pre-2008 era, partnership at the big strategy consulting firms and even “multi-strategy hedge funds” now are actually all collections of very incentive aligned businesses. They share the Creo quality of making lots of millionaires and people looking back on their time there as one of great freedom and achievement.

In all these places, employees are paid according to the revenue they generate, with seemingly no ceiling to what you can take home. It is true that the size of any one cell doesn’t scale beyond a small number of people. But all the organisations I mentioned above scale by having units tackling small pieces of vast markets.

The main lesson I took away from reading “Barbarians at the Gate” is that big companies hugely suffer from the principal agent problem, where management is mostly out to enrich themselves at the expense of shareholders and employees (sometimes). This looting is however only possible at a company that was established by a founder with a deep vision and passion for the product and has set up systems and culture that generates sufficient cash for the professional management to leech off.

What I have not read yet is a systematic study of these “cellular organizations” and what the common features are that make them successful. My guess is that the key is that each “unit” or “cell” has measurable economics that makes it possible to share the economic value over a sustained period of time. A bit like why sales people get paid a lot.

Agreed on cellular, but life is not a picture, rather a movie… what works at a stage starts attracting people, and eventually you let the wrong people in. A bit like the hype curve. These wrong people start poisoning internal processes and culture, seeking to cash out. And then the model blows up.

The migration of shitheads from Wall Street 80s 90s to Silicon Valley - technobros is for me a solid example of this.

Indeed, an organism can only survive long enough if it can resist infection. For this, an organization should be openly hostile to certain forms of conduct, and should have a way to expel people who bring in wrong values, especially in management.

This is a really hard problem, due to its influence on the morale, and the danger of weaponization of these mechanisms by bad actors.

And don’t forget, people change too, sometimes becoming misaligned over time. Maybe that’s a little like cancer. Org resilience is hard to model.

> I feel that failure or regression to the mean are quite likely

i suspect that these failures are a failure for humans to adapt to a larger herd than the traditional tribal size - anything beyond a couple hundred people max.

Have you ever read the book "Loonshots" There's an entire chapter about how primitive human societies probably maxed out at about 150 individuals. Companies that exceed this headcount basically need to change themselves into highly hierarchical organizations, and many companies die in this transition.

I went through this stage with a smaller company and there's definitely this point where you no longer know everyone and things change. Creo however did manage to scale this well beyond 150 people. You don't necessarily need a lot of hierarchy but you do need to figure out a structure. Creo always had a hierarchy, it wasn't like Valve or something. It's just how things worked within that hierarchy.

I experienced this as two phases of growth in the path from ~100 people to ~15000 people: the first phase where you don’t know everyone and the second one where you don’t even know every department/major project.

Note that Dunbar's number (150) is quite controversial:

https://www.nytimes.com/2021/05/11/science/dunbars-number-de...

The observation that there is a (very) strong statistical correlation between cranium and social size is an interesting and correct observation.

That much is true and uncontroversial.

What the article takes issue with is the exact number of 150, which can vary from person to person. But really, the criticism entirely misses the point. The number is just a rule of thumb derived from extrapolation. It's not a hard and fast rule like "You can only have 150 friends". Obviously.

Perhaps it should be something like cranial volume / body volume, or else we'd expect whales and dolphins to have massive tribe sizes, yet they typically hang with something like 20 peers.

150 is Dunbar's number, made by extrapolating a monkey species tribe size / brain size correlation to human brain size. Something interesting to think about, but not exactly hard science.

The book Loonshots says as much. Extrapolating from monkey brain sizes to human social interactions is a bit reminiscent of phrenology IMO, but it is an interesting observation. Anecdotally, I've found it to hold true, particularly in startup land when companies transition into blitzscaling hypergrowth.

At Meta, we collected tons of real world data to pretty definitively prove this is true. Humans can only really relate to about that many others a time. And most people have about 5 others that they are actually close with.

Oh my god, this number lines up so perfectly with my experience at various companies.

I also worked at a company that was similar to the Creo story above.

This was a High Frequency Market making company, total employees ~ 250. "Flat" management, nobody had titles, just responsibilities. Everyone understood the mission and goals. Everyone was highly compensated and empowered to make important decisions without explicit approval.

The whole thing fell apart when the company grew and finally failed when merged with another larger competitor.

These great orgs only last when they are kept small.

Perhaps total size isn't as important as ratio of onboarding.

It’s definitely size.

It’s much harder to maintain a shared vision among 20 people than it is for 10.

It get exponentially harder as you add more people.

Since a shared vision becomes hard to maintain, only those with the vision (read: managers and leadership) can make decisions.

I put together a "High Performance Organizations Reading List" which includes a reference to "Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness" by Frédéric Laloux. You and "LeFantome" who wrote about Creo might find that book and other resources there of interest. Laloux's book provides examples of various companies with better management. https://github.com/pdfernhout/High-Performance-Organizations...

Better and healthier organizations are possible, as Laloux writes about. They are rare though -- and difficult to sustain in our current Western society. As with Creo, you definitely need enlightened management or enlightened major shareholders to "hold the space" as Laloux writes.

What did Creo do when team could not reach "full team agreement"? (And isn't that the other side of "Disagree & Commit"?)

It's important to note is agreement being everyone can live with the decision. I.e. it's not really a bike shedding thing. Just that nobody has strong objections (the reason being is that if there are strong objections there are probably good reasons for that and ideally those are understood before taking the decision).

At the end of the day, if there was a time critical decision and there was no consensus someone like a project manager would make the call. I haven't actually seen that happen, a well functioning team/project generally is able to make decisions.

Yeah. Creo was a great place to be and had some very good people. The focus on culture really permeated the company.

I would say though that it wasn't simply the dilution of the culture, there were also some real business challenges that led to external pressures and eventually the sale of the company. A takeaway from that is that business is an important part of, ya know, being a business. A financially successful business has more room to be a great place. Creo did well and grew well but operated in an area where making money isn't easy (the printing industry).

Reminds me a bit of Boeing aquiring McDonnell Douglas.

I’ve enjoyed the aphorism "McDonnell Douglas bought Boeing with Boeing's money"

It honestly reads as both CEO fault, but more importantly - override of culture by sudden big influx people.

It seems that Creo bought out their competitor, but in fact they got absorbed by them and paid for the privilege.

I think what's interesting here is that you must have had access to the raw financials (eg. sales numbers, P&L by department). These are very tightly controlled at all companies I've worked at, making it hard to know if a particular product is important to the bottom line or not.

This is also a great point. Teams should have detailed knowledge of the performance of the company or groups. It helps with the shared ownership, pride and responsibilities.

Yeah, I'm in a company that has transitioned to an ESOP. Management haven't figured out that financials have to be open, yet.

They are begging people to engage but I have no idea what projects are paying the bills, which ones are drags, and various other missing information.

If you keep all that a secret people have no choice but to tune out and just expect management to handle everything.

I don't think the current CEO wants anyone else loudly expressing concerns over the future of the busieness as we are trying to shift away from contracting to SaaS. This is an 80yr old company, mind you.

Now we are trying to grow and bring in employees (for a contract), promising them stock and supposedly stable employment but in the end most of the dozens of employees who are brought in will be let go before they vest. The long term base employees (there is a cache of 20+ yr employees) will have their stock price increase after these people (they will let go) put in years of work to deliver on record-breaking contracts. None of this is the stated intention but it's going to go down like this. About that time the CEO will retire and cash out.

Very interesting. After reading this, I looked up the Wikipedia page for Creo [1], but could not find anything about this unique type of management.

Would you mind adding something there for posteriority?

https://en.wikipedia.org/wiki/Creo_(company)

Yeah, the Wikipedia page is a bit disappointing. Maybe I'll have a go at updating it. Some references:

https://whattheythink.com/articles/101480-amazing-balance-wa...

https://www.encyclopedia.com/books/politics-and-business-mag...

(https://www.youtube.com/watch?v=mXTWMlRK0LE linked from the above - I remember this video but couldn't find it directly on YouTube :( )

Have you tried out being the executive yet?

> Creo stopped working when it acquired a rival that had more employees than it had

Huh. That'd make sense. From the outside, Creo Scitex looked like an unstoppable dreadnaught.

Creo acquired ScenicSoft in 2002. Alas, I saw no evidence of economic thinking.

Whoever was in charge of software was proud of having never canceling one of their ~dozen products. Me asking if there was a P&L for any of them was among my top 20 most brave/stupid work related selfowns.

They did cancel Color Central in short order. (Payback?) Basically CUPS with features for print manufacturing and a purdy UI. Super boring, but a necessary product. Although no longer affectionately known as Cash Cow (the internal code name Illumious had given it), it still had a huge installed base, had steady revenue (upgrades), and maintenance was on auto-pilot.

About a year later, Creo licensed Color Central's biggest competitor. (Sorry, forget that company and product name. I remember that they were a great team though.)

Rowan's UpFront was part of the ScenicSoft acquisition. Advanced print manufacturing planner. Pretty much unparalleled. A true diamond in the rough.

Further, I had invented a novel imposition engine for bookwork. Specify all the sizes and (crucially) the desired binding -- voilá, out comes a Preps template production plan. (Preps was ScenicSoft's flagship product, the gold standard for print imposition.)

Automating bookwork planning was the holy grail. The long sought replacement for Preps' very complicated, very necessary template editor.

I don't think the Creo people understood what they had. They were so focused on their (awesome) digital plate stuff and adjacent. Like most, they probably treated the bindery as an afterthought.

I forget how Creo managed to let Rowan slip thru their fingers. But don't worry, he did it all again and earned a pretty good exit the second time around.

--

Whatever Creo's shortcomings, the president and owner of ScenicSoft totally failed. After many rounds, he managed to negotiate Creo's initial $70m offer down to $9.5m. So saavy.

Interesting. I worked on output devices (and some very specialized ones at that) so I didn't really see a lot of the "software" side of the business. But I have seen some "not invented here" and rivalry between the Creo and Scitex teams. Part of the problem there was actually maintaining parallel products and teams that targeted the same markets.

Acquisitions are just tough. There were good people with good intentions and teams did try to work together. I spent some of my time trying to bridge the teams, with some success. What was missing is a good idea of how to restructure things to eliminate the duplicate efforts which is super tough when you're also dealing with large install bases. There were a few technical attempts to bridge the architectures and bit and pieces from "Creo" machines found their way into "Scitex" machines.

> Each employee was empowered, expected, and trained, to make decisions as if they are the president of the company.

And compensated at a president’s salary for the new insurmountable levels of responsibilities right?

You would be surprised. I know of Creo people that worked in the call center that bought million dollar homes with their compensation from Creo.

What is Creo?

Not everyone is afraid of responsibility simply because it's responsibility.

It's not about being afraid, but about being compensated for.

If so, great, if not, I’ll still take it because otherwise someone else will have it, and they very rarely live up to my standards.

Why does responsibility require or deserve more compensation? You're stating something as if it was a law of the universe but provide no reasoning.

They made decisions relevant to their work. i.e. it's not that a random employee would go our and acquire a competitor or buy a business jet for themselves (though in theory they could but that theory never got put to a test). So the CEO still made CEO-level decisions and employees made decisions in their area while needing to ask themselves what's best for the company, economically, just like the president should. Trust people to do their job kind of thing really, trust teams to work together etc.

Is ‘responsibility’ really something that deserves outsized compensation compared with, say, actually creating the product being sold? In this context, it doesn’t seem to come worth outsized personal consequences for failure, indeed quite the opposite. I agree there should be some consideration for the additional stress, but not multiple extra figures on the salary.

> for the new insurmountable levels of responsibilities right?

As it turns out, companies that don't concentrate all of the power and decision-making in one person tend to avoid ending up with "insurmountable levels of responsibilities".

> Another requirement for this to work well is that management (e.g. the CEO or other leaders) are able to lay down a broad strategy for the people of the company to execute on. If the leadership has no strategy then tactical decisions can not be made properly. They also need to make sure there's coordination and structure.

In my experience this isn't a core requirement so much as the ability to discern if a proposed strategy is good or not based on first hand experience. In other words, the ability to spot very well written bullshit yourself without relying on anyone else's perception of it being bullshit or not. If you need to rely on other people's opinions or the way a proposal is written or something else then it will not work. It's very rare for this to be the case at a larger or public company. Even if the CEO has this ability if the board doesn't then it will be the same.

Trouble is most middle/upper-management is so technically incompetent, that not only can they not do technical work that their moronic decisions entail, but they can't even distinguish b/w arguments for how something is to be accomplished.

As a metaphor: for problems in NP, verifiability is in P. So you have some super-duper savant alg. that outputs some answer, but even a dumb-system should be able to quickly verify. Our managers are typically dumber than this.

I'd argue the opposite: it's the technically-savvy people who got promoted to management/leadership positions, while lacking the people skills, the strategy chops, and the basic understanding of business realities - these are the truly incompetent managers.

But you need to be able to promote good technical people or they will finally leave and you ll be left with gif managers an no one good technically to manage.

Gif managers?

Sorry bad spellchecker. Good managers.

Where do these clueless managers come from?

Somewhere amongst the 90% of emloyees that do not have a strong opinion one way or the other?

Many times, they were technical people/engineers who weren't that great at the technical stuff, but were really good at networking and self-promotion, and talked their way up in the organization.

A boss doesn’t need to be technically competent to a degree that they make important technical decisions. They just need to understand things to a degree so they can trust and delegate.

And tust is a two way street. It requires effort from both sides.

I'm not sure what "empowered" means relative to the parent article.

Aligning each employee's incentives with ROI seems extremely difficult.

The former Yugoslavia had a system of self-managed enterprises where large firms shared profits equally among employees and employees ran the enterprise democratically (usually electing a manager). The problem is that profitable enterprises would democratically decide not to hire any more people since doing so would dilute their profits.

I did not attempt to cover heterodox organizations such as what Creo appears to have been in the article. I think these are extremely interesting, though quite likely to fail, regress to the mean, and be hard or impossible to scale or replicate.

But, I'm sure the first multicellular organisms were no picnic, either. Eventually humans will learn to work together way better than today and anyone trying already now has my attention and sympathy, especially if there are positive testimonials by employees (there's no shortage of managers who claim to run a different kind of org / culture when it's either false or true in a bad sense, meaning, their org is much worse than the standard system; in fact I like managers who apply zero lipstick to the pig that is their org and do the standard ugly thing in an openly ugly way - teaches you how to operate in this environment more quickly vs trying to get people to remain naive to their detriment)

Your analysis could be applied to Creo without much change because you're looking at implicit incentives in any place managers (or resource-controllers) are expected to accomplish goals.

That said, I think your analysis is a bit weakened by a moral elements (good managers vs bad managers). And even more, it's not necessarily bad for an organization to have locally controlled resources. One can posit an omniscient central controller that would manage resources better than local managers but it's likely that there are limits to both central controllers and local managers. What's "best" depends on the task, the organization and who's judging the result.

> The problem is that profitable enterprises would democratically decide not to hire any more people since doing so would dilute their profits.

which is fine, because if hiring someone would dilute their profits, it means the new hire is decreasing the efficiency of the organization. Normally, you would hire if you find that the existing employees cannot complete all of the work required, as there's too much - aka, leaving business/profits on the table due to lack of room.

If gov incentivised creating new companies that would not be a problem, I guess ?

This is bad for the economy, however, because it limits overall production.

No, it doesn't: if there's that much demand for the company's products, someone else can start a competing company making the same products, presumably for less because with a monopoly supplier, prices will usually be very high. Of course, this doesn't work for cases where supply is artificially constrained (like products with IP protection), or if the communist government doesn't allow competing companies to start.

Interesting! A few questions:

1. Could you expand more on the practical details of how decision making by consensus worked? Eg if I want to buy a $1m machine, how many people and which people do I convince that this makes economic sense? Who can actually sign off on the purchase?

2. How did incentive based compensation work for employees whose work could not directly be tied to the bottom line? For example, legal and compliance staff sometimes prevent profit making activity that is deemed as risky - making these functions prime candidates for internal monopolies that drag down the performance of other groups. Or recruiters whose natural incentives revolve around number of people hired rather than efficiency.

3. How is economic decision making enforced? What stops a middle manager from acting out of self-interest and expanding his own headcount or project scope to increase his own importance at the expense of company economics? Even if there is some consensus required, it’s probably not hard to convince a few friends with fanciful projections. Is this mostly a camaraderie / honor system thing?

If you feel like these are the wrong questions and are somehow missing the point - let me know! Sounds like Creo pulled off something special and I’m sure there is lots to learn.

1. You were supposed to identify who the stakeholders were. Let's say you're a mechanical engineer and you need some $1m lathe. The economic decision making basically says you need to consider options like contracting the work to someone that has that machine and show some reasonable ROI period on actually buying that lathe vs. contracting it out or renting it or whatever other reasonable alternatives. People involved in this decision could be your team lead, if you're a mechanical engineer, and the project manager. If the amount is so large that it impacts the entire company maybe the CEO is also involved. You get everyone in the same room and talk about it. Anyone can sign off on the purchase. The project I was on built some large very expensive machines (multi-million dollar per machine) and we've done things like build clean rooms and buy pretty expensive equipment without a lot of friction. I worked on software so I wasn't personally in the loop for those purchases.

2. I guess it's no different than RSUs, stock options or a bonus plan or any other form of profit sharing. At the end of the day people are trusted to do their job. At least during my time with Creo it didn't seem to create a barrier to experimenting, if anything there were some projects that were maybe were too experimental.

3. Not enforced in any formal way. Peer review and just culture/peer pressure would do the job. I am aware of one case where someone abused the system and someone found out and they were fired. In terms of your example, the power was fundamentally less with the middle manager and more with the engineers in the first place, so there wasn't a lot to gain personally from empire building as in traditional companies. For the most part managers did not manage people, they managed projects. For example, as a software team lead I was under a project manager but I didn't report to him in the traditional sense of the word and they did not control my compensation (which would be mostly the outcome of the peer review process). The project manager's success was also measured by peer review.

I think the interesting thing about Creo, and what made it tick, was that the founders were in it not just to make money. They wanted to create a place they would want to work in, were passionate about this, and tried to hire people that fit into this vision. They have seen the things they didn't like and thought they can do better. It sort of happened in the right time and place where it managed to gain momentum.

EDIT: I managed to re-find this old video of Amos Michelson explaining how this works better than me: https://www.youtube.com/watch?v=mXTWMlRK0LE

These are great questions and match my conclusion after many years of big5 management consulting: (A) Organizations are not optimized towards efficiency or value, they are optimized to align power between the executives and their self interest. Any heterodox organization with virtuous claims of egalitarianism will quickly reset to the default (A).

The problem is finding people that have those traits, it is far from common even when you try to empower people to take decisions. It is also good to take into account the different cultures regarding this.

A way to not be extreme is to do that with x% of people (beyond their hierarchical level in the organization).

I had a similar experience thought not quite as outstanding.

The best manager I had was:

- focused on organizational efficiency. She’d tell you “you three, make a decision” instead of groups of 10+, which seemed to be the default

- wouldn’t sugar coat things, but was never mean (many leaders miss this). If she disagreed you knew it but it was done in a respectful way.

- the best part of her management was goal setting. I was 3 goals, and even 10 years later I still rattle them off. Short, actionable. Her attitude was “if your work doesn’t move towards these goals, stop doing it”

Like you, it’s hard to work in jobs later when management isn’t up to snuff.

It is possible to have efficient, well managed large organizations.

It’s just that the vast majority of managers don’t have the skills and as you said, without someone at the top setting the rules it never works.

How did the consensus bit work? Like, how much consensus would you need from people before making a decision? How much time did everyone spend voting on consensus?

Presumably you'd have moments of contact and separation where strategy and policy are communicated. I don't see any impression this is a replacement for executives.