Project Update: Building culture in decentralized organizations, intentionally and systematically

I’m Prof. Seth Frey at UC Davis and I’m running SCRF-supported project on a major off-chain dimension of decentralized organizations: culture (here is post #1 introducing the project). We are starting by looking at culture building practices in traditional organizations. This is the domain that has shown the most explicit and enduring interest in the practice of culture, enduring enough that it has created culture building professionals: people who have done enough work in enough organizations to develop a general, systematic, intentional approach to culture building and culture change. I’m an academic, and I love academic theories of culture, but it is my suspicion that the most important insights about how to build culture are going to come from the mouths of the people who do it.

At this point we have run several interviews and we are already starting to learn some things. Before diving into any of that, I want to motivate the question.

I’ve gone in with a “real question”: something I genuinely don’t know. Is culture building an art that only specially trained individuals can perform successfully? Or is there a general approach to culture building that anyone in any org can learn? At glance, the answer is clearly: we need specialists. In practice, there are lots of culture building systems, and around all of them there is the sense of “secret sauce”. Building strong culture is hard, and only by following the guidance of one special consultant or consultancy will you experience the transformative potential of a team whose values, practices, and mental models are widely aligned and deeply internalized.

These qualities that consultants have, variety and inscrutability, are easy to build around something as goopy as culture. But are they real? Consultancies might be incentivized to support the mystery, and any story of the value that they alone can bring a client. I actually haven’t seen that too badly: all of our interviewees seem to resist that kind of narrative. However their clients seem susceptible to it. Perhaps a client doesn’t have to be responsible for its org’s sick culture if that sickness is a mystery, and if the mystic they hire to fix it can’t.

So is culture building a magic art that only specially gifted intuitive individuals can perform in their own special way? Or, lying under all the special approaches and paradigms and exercises, is there a set of activities that any organization can make their own with the right commitment, resources, and buy-in?

Our very early impression, from just five interviews so far, is that … Wow.
If you ask five people their philosophy, background, inspiration, or anything about the high level of their approach, you’ll get five very different answers. One practitioner’s approach comes from the person who mentored them into culture building, another from French sociologist Pierre Bourdieu, and a third from their yogi.
But if you ask them what they actually do once they’re on the ground, it seems they all do the same thing

In every case the work of corporate culture building/change is fundamentally about having lots of private->group->private->group conversations with as many members as possible. Our informants are all pragmatic, talking to everyone in small orgs and intentionally diverse samples in large orgs, often about 20 people total. They’ll start with a sense-making process to determine how participants see their org and their place in it. Then they’ll convene a group meeting to surface that sense, toward a common-knowledge delta between where the organization’s values and culture are, and where participants said they want it. With this common knowledge established the same group can talk about solutions. This is where expertise, secret sauce, and specializations come in, as consultants chime in with practices and solutions of their own, but at the end of the day, it seems that there are many kinds of solutions to the same small number of culture-building challenges. At this same point, a plan is developed to delegate these tasks. Then, less often, but seemingly crucially, the consultant returns monthly or quarterly, ideally for years, to check in with the implementers for updates, advice, accountability, and troubleshooting.

Again, this is a very early impression from a very small group of practitioners, however diverse. We’re likely to evolve in our own description of it. But from their very early peek at the data, our answer seems to be that, yes, there is a relatively standard system that organizations, decentralized or not, can follow in order to be intentional and systematic about building a strong organizational culture. It’s a lot of work. It takes a lot of resources. It requires a sensitivity that encourages honest input from participants. It may be that some people are better at it than others. But at the end of the day, we are hopeful that we’ll distill from many very different practitioners a general approach that any decentralized organization can follow.

One exciting takeaway was how consistent our informants were, even within traditional hierarchical organizations, about seeking and surfacing the values and hopes of the lowest employees that they talked to. While we expected to hear that consultants would focus on onboarding employees into the leadership’s desired culture, what we saw more of was consultants focusing on tough talk with leaders about how the organization must change to align with what drives its employees. This bottom-up interest focus of our informants is an encouraging sign for us as we work to translate these insights for decentralized organizations.

And one takeaway we’re unsure about is, well … is it obvious? Of course if you want to drive real social change you should talk to everyone and get them to talk to each other. Of course it’s not a magical dark art. But is it obvious? I don’t know. All I can say is that I really didn’t know when I started. But now I’m being pulled in a clear direction: it may be that decentralized organizations can take a distilled version of culture-building consulting practice and help an org through that process from the inside.

Seth Frey (Home , Twitter )

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I understand that you’re talking about “culture” as a kind of emergent property of organizations, not the “culture” that hangs on the walls of museums and galleries.

Still, you emphasize the “goopy” and “secret sauce” aspects of the creation of culture, and this leads to me to share the March 18, 2022 episode of Laura Chin’s “Unchained Podcast” where Punk6529 (writer of legendary NFT-oriented Twitter threads) makes his first podcast appearance: Punk6529 on the Significance of Bored Ape Yacht Club and CryptoPunks - Ep.331 - YouTube

Given your “suspicion that the most important insights about how to build culture are going to come from the mouths of the people who do it,” 6529’s erudite observations about “NFT culture” might spur some interesting conclusions.

In particular, 6529 talks at length about the radical innovation (new in the entire history of art) of conceding the underlying IP rights to the token holder with the sale of the image itself.

This obviously has many implications for the future world of the metaverse, and may even be a philosophical barometer of how genuinely different web3 culture might be from everything that came before it. And that may bear on your idea of investigating culture as “a major off-chain dimension of decentralized organizations.”

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Hi Prof. Frey @enfascination , thanks for posting this!

I am a change management professional (Prosci Certified; working towards a full CCMP) who’s worked on large-scale culture transformations for the last several years. It’s funny for me to read what you observed about the consulting process of change, because yes that is what we do! Change consultants have lots of different terminologies to coin the process. Prosci calls it ADKAR. The basic idea being build awareness of the change (how consultants do that can be different based on uniqueness factors of the org and people inside it), create desire for the change, give people making the change knowledge of what they need to do differently, give them the ability to do that differently (this can include upskilling them or new technology tools), and then reinforcing the cycle! That’s the basics of a culture change process. I came from politics before, and you see a really similar approach, with a different language. Of course, there are different stakeholders and very different stakes, but similar large-scale transformations.

I say yes and no. I think people that are really tapped into a culture, organizing work, politics, and who may have personal strengths in being socially oriented/socially intelligent (people organizing work) know and learn how to create a culture to get work done. I find it a bit more intuitive for those people. A lot of people change work is working directly with people who are having a hard time making change. Whether the people with intuition are aware of a replicable process they are performing is debatable. On the other hand, change and culture consultants are well aware of the process. It’s all process at the end of the day, especially when the goal is to teach organizations to do this (and leave them in a better place than you started).

To bring this to web3 work: I actually think all of the Layer 1’s need a significant culture, change, and transformation approach. They’re very literally asking people to change significant values, skills, behaviors, and ways of working. This is a large-scale transformation. There is a process that should be applied here rather than the approach I see now which is hype without coordination. That will only get you so far (and in my mind looks more like the lifecycle of the fidget spinner than a culture change). Uniquely too, 70% of transformations fail (McKinsey) and are almost fully dependent on leadership. I think this is an important problem to solve for some of these L1s…and probably a compounding reason why Ethereum has done well.

Hope that adds some color!

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Thank you for this connection. It helps me realize that I haven’t made all of my assumptions explicit. A major assumption behind my working definition of culture, and the whole overall approach, is that we’ve scoped to “organizations”—more decentralized org (DAO) less decentralized market (NFT). So we’re imagining a group of people who have inserted themselves into a machine that aligns their incentives around a common goal—whether through mechanism or not. In my eyes that’s pretty different from the speculation/exchange context of the art trading setting. Still: totally agree that your other sense of culture is valuable in the exchange context: probably absolutely central for creating value out of nothing.

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Wonderful, thanks for this! There’s a funny thing if we’re right that culture change is equally important and just the same in chain-based orgs. It would mean that the technological advances behind decentralized organizations are revolutionizing the wrong thing.

If we allow the idea that there’s an “easy” part of org building (structure/mechanism/process) and a “hard” part (whichever working definition of culture), DAOs are making the easy part easier and the hard part equally hard.

What do you think? Am I being too cynical?

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I do not think you are being too cynical, but I’ll offer a bit of nuance from my perspective. There are significant parallels between what you talk about and the work I did in my PhD (looking at governance in disaster resilience contexts).

Rather than saying that DAOs are revolutionising the wrong thing, I’d say (as you do) that they are currently revolutionising the easy thing (structure, mechanisms, process). Revolutions are needed here, but they’re just the first step. Culture is the hard nut to crack. The problem is both obvious, but also not obvious.

I’d generalise the two parts you talk about as objective (tangible, measurable) and subjective (intangible, not easily measured). The key problem here can be illustrated using Kahneman’s “what you see is all there is” heuristic - basically we’re wired to only consider what we ‘see/observe’ when making decisions. It is much easier to see tangible factors like structures, mechanisms, processes, and outcomes, than intangible factors such as culture.

As Stiglitz (2018, p.13) says: “What we measure affects what we do. If we measure the wrong thing, we will do the wrong thing. If we don’t measure something, it becomes neglected, as if the problem didn’t exist.”

Governance processes that deliver good outcomes require a strong understanding of both the tangible and intangible factors in play. A common pattern of deficiency in almost all governance processes (especially public facing ones) is that the measurements we use to determine success rarely account for the intangible factors that help drive success, leading to systematic errors that undermine intentions and deliver poor outcomes.

So when you ask if it is obvious that people need to get together and talk… yes and no. The problems are really obvious to anyone who experiences it. Especially to people on the ground - at the coal face. But it’s almost entirely invisible/ignored at the top, the decision-making level, because the intangible determinants of success are not captured/accounted for. This dissonance can have a toxic effect on institutions.

The role you describe culture consultants playing seems to be a structured approach to ensuring that those making decisions at the top adequately understand the values and drives off those at the bottom. This ‘intangible’ connection is a strong driver of resilience and institutional success.

Intentionally and systematically building this capacity in decentralised organisations would make a big difference imo. However, my experience is with hierarchical institutions, so I expect things will be different in decentralised land. Instead of just having to convince the leadership of what needs to happen, you’ll need to convince everyone who holds influence over decision-making. This changes the problem, though I’m not sure if it makes it easier or harder. Probably both in different ways.

I wish you all the best on your project!

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It sounds like we have pretty similar backgrounds, and that those are bringing us to the same kinds of conclusion. I’m a behavioral scientist by training, creeping into increasingly “meso-” and “macro”- level domains.

I guess the big question for me coming out of your response is this:
What is the potential for decentralized/web3 structures to revolutionize how we build for the intangibles?

  1. Are these technologies agnostic to the intangibles, leaving them just as mysterious and important and elusive as they are in traditional orgs?
  2. Do they bring attention even further away from the intangibles and their importance? This would be the lamppost effect story: the joy of focusing on pushing tangibles as far as it’ll go because that’s what DAOs give us to push.
  3. Or does web3, by “solving” the tangible side with ever greater rigor, lead to some kind of renewed focus/clarity/creativity around the importance of getting the intangibles right as well? This would be maybe an R^2 story: org variety is due to a tangible and intangible component, web3 succeeds at explaining all the variance in the tangible component, bringing focus onto the component that still has unexplained variance.
  4. I guess there’s a fourth option that many of us here reject, but that others believe and that ought to be stated, which is that web3 makes it possible to replace all goopy intangibles with mechanisms/tangibles, revolutionizing org design by making all dimensions of it rigorous/trustless/secure.
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