What does the term “teal organization” mean?

Frederic Laloux, the author of the Reinventing Organizations bestseller and the person responsible for making the term “teal” mean something else than it did before has described (and assigned colors to) five models of management, starting with the most authoritative one — red, and ending with teal — the most decentralized. In the simplest words, a teal organization is a self-managed organization. In this concept you don’t really need managers, reporting, evaluation or control. The employee ceases to be the boss’ subordinate, he shares his position with everyone else who works in the company, as the hierarchy doesn’t exist. People divide their tasks according to their competencies and make decisions with the firm’s best interest at heart.


Laloux's book became a staple in our company's library.

There are three pillars on which teal organizations are built:

  1. Self-management
  2. Wholeness
  3. Evolutionary purpose.

Let’s take a closer look at each of these.

Self-management describes the team members’ ability to take control of their work. It involves a great deal of responsibility and proactiveness. This pillar shifts the decision-making power from people who have it in the traditional model (CEOs, managers, team leaders) to every employee.

Wholeness speaks to the recognition of each person — not only as an employee, but also as a human being. It means dropping the “professional masks” a lot of people tend to put on once the clock strikes 9AM and staying true to oneself also in the workplace. Wholeness emphasises the importance of mutually respecting our emotional, spiritual and intuitive sides.

Evolutionary purpose talks about a deeper reason as to why organizations exist. It describes the company’s purpose in the same way you might describe your life’s purpose — as an evolution that also relates to the difference the organization wants to make in its marketplace and community.

What are the advantages that come with being a teal organization?

Going teal means a complete mindset shift. Notice that the change goes in a positive direction in all aspects: you turn from control to trust, from indifference to responsibility, from passiveness to proactiveness. The benefits concern not only the teal company, but also all entities that enter into relations with it, including its clients.

One of the biggest advantages of being teal is the transparency that comes with it. Everyone in the organization has the same level of knowledge and involvement as the boss does. That translates directly not only to better decision-making, but also to a feeling of responsibility for the business and all the people who make it a success. It assures the clients that there is nothing wrong going on in the organization, because if it were, it would take a lot of people to keep this secret.

With transparency comes, inevitably, trust. When you have all the facts at your disposal, including rates, salaries (also that of the owner) and cashflow you can make better judgement of other people’s decisions. The motivation people get from seeing that everything in the company is fair (because it couldn’t be otherwise when there’s full transparency) cannot be compared to, say, another employee benefit or even a promotion.

With trust, the need for hierarchy and managers vanishes. You don’t have to evaluate people according to a stiff schedule and set of parameters. Budgets cease to exist — it’s been long proved that when someone has to make an actual decision to buy something, they’ll be way more money-conscious than if they were to just spend a certain budget. 

And what about the decisions — without the managers who usually make them? Same thing that happens in our private lives: we make the best possible decisions with the knowledge we have (and either enjoy good results or work hard on fixing any mistakes). Isn’t it kind of crazy to assume that the same people who take out mortgages or plan to start families can’t be trusted with making business decisions? After all, they went through an extensive screening process during recruitation, proved themselves to be great specialists, collected all the facts and made a decision in their area of expertise after consulting it with people whom it might affect… Doesn’t sound so weird when you think about it that way, does it?

The lists of advantages, as we’ve been able to experience ourselves, goes on. It all falls under one umbrella though: a complete mindset (and even lifestyle) change. Working at a teal organization tends to shift your whole perspective: from the hustle mentality (work hard even if the environment doesn’t serve you, bite your tongue and rip the benefits — usually only monetary — later, to good life mentality (work on something that excites and develops you and the success will have to follow organically).

Are there any threats to going teal?

The first thing that usually comes to mind for people who are just familiarizing themselves with the concept of teal organizations is… a complete anarchy. After all, if everyone can make a decision, isn’t there going to be a mess and won’t the company lose its direction and focus?

It’s a legitimate concern, but experience has proved it to be unnecessary. Firstly, at teal organizations the initial problem usually isn’t a decision overload but quite the opposite: decision paralysis. People simply don’t know what to do with the newfound freedom — they haven’t been training themselves in decision making at their workplace. It takes some time before everybody gains confidence in their abilities to steer the company in the right direction. That doesn’t mean that they start doing whatever they please though; each decision needs to be consulted with anyone whom it might affect and can later be doubted, tweaked or dropped altogether.

The second doubt which might be sprouting in your head right now probably goes something like this: it all sounds well and good when everything is going right, but what if something unexpected (and potentially catastrophic) happens? A recent example might be the 2020 Covid-19 pandemic, which caused an obvious and often tragic stir in all aspects of life, including business. Teal organizations do have processes for such instances, such as – surprisingly – temporary “dictatorship” run by a chosen person (not necessarily the CEO or owner). Oftentimes this allows for quicker and more effective reactions than the traditional hierarchy could ever provide.

Finally, there is the issue of rebellion: while it’s socially acceptable (still) for a boss to give orders that must be followed, how would you feel, if it was your colleague who gave them instead? It’s easy to assume that without proper authority, no one in the company will agree to do what was decided. But that’s not the case. Why? First of all, when everybody is the boss, the authority comes from your track record and skills, not from a plate on your office doors. Secondly, the decisions made don’t just fall on your shoulders out of the blue — they’ve been discussed, consulted, often tweaked with your help and went through an acceptance process, before they entered the implementation phase.

Why a software house works so well as a teal organization

It’s not a coincidence that more and more software houses and other companies that operate in the tech industry have been looking at teal organizations and adopting some or the majority of practices. The natural affinity is easy to see: both software houses and teal organizations are of a very innovative nature. They take into account the speed with which markets (and the world) change, are flexible and able to adapt to new requirements. 

IT specialists, on top of being extremely intelligent, are also very self-reliant. They like the responsibility and additional space for their own initiatives that come with teal. A broad spectrum of interests, competencies and the ease of gaining new skills on a need-to-know basis helps them in making the right decisions. 

If you run a software house and think about adopting the teal mindset, remember that you don’t need a complete revolution — it goes best as a step-by-step process. The nature of teal organizations is such that the precise rules and processes are up to you, which is why it’s a really good idea to introduce the new ideas slowly, so that all members have time to adjust their thinking and test them out.

That’s also been our experience (more about that in the next article of this series). We’d love to chat more about it with you. Feel free to schedule a call with Adrian, our CEO, and bounce around some ideas!