Proposal: Leadership in decentralized organizations: Principles and practices

In stark contrast to traditional command-and-control hierarchies where a few people exercise top-down power over the majority, decentralized autonomous organizations (DAOs) are emerging as new organizational structures that can radically reshape organizational dynamics. Put simply, a DAO is a blockchain-enabled organization with shared community, purpose and capital. While there are many differences between DAOs and legacy organizations, here we focus on one core aspect: leadership.

Claims about DAO leadership abound: they are leaderless, there are no bosses, software rules aka ‘code is law’. Even though these claims may be accurate if you refer to governance, whereby any member can put forth proposals that other members vote for or against in a democratic process, the ground starts shaking if we talk about operations. How can DAOs coordinate without leadership? Who gets responsibility to execute proposals? How to distribute tasks to make efficient use of skills? If anyone can pick up anything, who can solve conflicts that possibly arise? Ultimately, what is leadership in DAOs? These are some of the questions that so-called leaderless organizations need answering.

The central argument against the concept of leaderlessness came in the 70’s from an essay by Jo Freeman: ‘there is no such thing as a structureless group’. To bring an idea to reality any group, whatever the idea, needs structure. This ‘may be flexible; it may vary over time; it may evenly or unevenly distribute tasks, power and resources over the members of the group’. In his talk ‘The case for hierarchy in DAOs’ at ETH Denver, former SushiSwap CTO Joseph Delong echoed this idea: ‘structurelessness isn’t really a viable methodology’. The underlying assumption is that leaderless organizations don’t exist or hardly survive. In fact, the solution for DAOs may be more structure, not less. DAOs need to deliberately create organizational structures to optimize for desired outcomes: autonomy, agency, accountability, ownership, stewardship, cohesion, collaboration, recognition, wellbeing, you have it. Preventing the dysfunctional behaviors typical of legacy organizations means making explicit choices over organizational structure and dynamics. After all, the structure you have, the culture you get. Nothing must be left to chance.

For many inhabitants of web3 hierarchy is an outrageous term. Reminiscent of how it motivates individuals to climb up the ranks, lead members at different ranks to have opposing interests and perspectives, and ultimately lead to conflict, DAOers oppose the idea of hierarchy. In organizational science there is a line of thought, the so-called functional perspective, asserting that by giving a structure to guide roles and contributions, hierarchy may benefit team effectiveness as it facilitates and coordinates member interactions. However, pulling data from over 14,000 teams in a meta-analysis, Greer et al. (2018) found little support for this claim: hierarchy is a double edge sword, it harms coordination more than it helps it. Hierarchy tends to provoke contests and conflicts over the rank order in a team. These conflicts can harm team outcomes, distracting members from task accomplishment and harming interpersonal relationships.

Hence, paradoxically, DAOs promise to create a new work culture in discontinuity with traditional organizations, where one element of disruption is hierarchy. Yet, structureless organizations seem to be a short-sighted mirage. So, how to reconcile these seemingly opposing forces?

At talentDAO we aim to resolve this conflict to empower the DAO ecosystem. We are a community of organizational scientists, strategists, and researchers with the shared mission to unlock human potential in the decentralized, digital economy. We set out to study leadership and organization design in the decentralized world of work. Our goal is to provide DAOs with evidence-based practices to create new organizational cultures. We anticipate there will not be a single recipe that works across the board, rather a blueprint, a process, a composable set of practices for DAOs to design an organizational structure to optimize for desired outcomes at the individual, team, and organizational levels. Want to foster performance? Do this. Want to strengthen relationships? Do that. Outcomes first, drivers second, and contextual judgment in between; all based on evidence and logic rather than hunches. This is our philosophy.

Our research proposition
Step 1

As the first step of our research we will conduct rapid reviews of the available leadership literature (secondary research). A rapid review aims to answer clearly defined questions with the best available evidence defined through explicit criteria. These include:

  • Scholarly journals, peer-reviewed
  • Available through ​​ABI/INFORM Global, Business Source Premier, PsycINFO databases
  • Limited to meta-analyses and systematic reviews
  • Published in the past 25 years
  • Articles published in English

Meta-analyses and systematic reviews synthesize the whole body of research on a topic up to a specific date. Starting from this type of publication ensures we leverage available valid knowledge on the topic of leadership to inform (primary) quali-quantitative field research within DAOs. The questions we aim to answer are the following:

  • What are the most relevant theories about leadership emergence/effectiveness?
  • What do we know about their predictive validity over individual, team, organizational outcomes?
  • How can we measure different leadership dimensions/constructs?
  • How do leadership principles, practices and behaviors apply in the context of decentralized work?

Step 2

The second step of the research will investigate leadership and organizational structure in DAOs using mixed methods research designs (quali-quantitative). The aim is to understand different DAOs structures, uncover emergent leadership practices, and identify which leadership principles, practices, and behavior emerged through the rapid review apply in the context of decentralized work. The research will involve both interviews with people holding leadership roles in DAOs, surveys with targeted organizations, and analysis of public organizational handbooks, datasets, and thought leadership coming from the ecosystem.

Ultimately, the overall goal of talentDAO’s line of research on decentralized leadership is to give DAOs the means to build effective collaborative communities that can bring about positive social change. We will be sharing summaries of our research findings as we go, in the meantime, looking forward to your questions and comments!

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References

Freeman, J. (1972). The tyranny of structurelessness. Berkeley Journal of Sociology, 151-164.

Greer, L. L., de Jong, B. A., Schouten, M. E., & Dannals, J. E. (2018). Why and when hierarchy impacts team effectiveness: A meta-analytic integration. Journal of Applied Psychology, 103(6), 591.


About us: we are Pietro Marenco and Lisa Wocken. Lisa holds a PhD in organizational leadership, is a founding member of talentDAO and an educator in the DAO ecosystem. She has 15 years experience in leadership, specialized in crafting leader development pathways for mid-large organizations, and is an experienced qualitative researcher. Pietro is an organizational psychologist, member of talentDAO and former Deloitte consultant, with 7 years experience conducting rapid reviews in the field of leadership, management, and organization and translating research findings for practitioners, gained as Co-Founder and Head of Content of the no-profit ScienceForWork.


About talentDAO: talentDAO is a community of organizational scientists, strategists, and researchers with the shared mission to unlock human potential in the decentralized, digital economy. We conduct scientific research that helps DAOs thrive while educating the public on the greater decency and agency offered from the decentralized future of work.

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Thank you so much for contributing a fascinating proposal. I’m curious about the following:

Any guesses for what this might look like?

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Thanks for your question @jmcgirk. We are not there yet to a final decision, so please take this as best guess, but, there are several examples of resources made available online under creative common licenses that we could mimic, for instance:

We aim to uncover several practices DAOs can use to achieve specific outcomes. So ideally a user should be able to find the content through active search based on the outcomes they are interested in.

For example, say you have a problem with community engagement, and we find out an intervention that is effective, then you should be able to learn about the intervention: what is it, when it works, how/why does it work, and what you can do. This speaks to the ‘composable set of practices’.

On the other hand, we may develop a process through which DAOs can go through to design an organizational structure that is conductive to the culture they aim to create. This may include steps of diagnosis, design, deployment with ‘how to’ guidance.

Did I answer your question? If you were looking for specific examples about practices4outcomes then please hold on, we will be posting summaries on SCRF too.

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Hi @Mr.Nobody
I’m interested in knowing more and potentially getting involved. I have a decade of experience in crypto. Reply here or contact me: Contact 1 — Alumni Labs

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Hi @quinndupont glad to have you interested. Please check out your Discord where I shared some of the next appointments in which will be planning this study.

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Hi @Mr.Nobody

I am also interested in getting involved in this project - looks fascinating. I am currently a blockchain research scholar in a management school so hopefully can help!

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Hi @kellyann great this catches your interest. Head over to talentDAO on Discord which is where the magic happens: talentDAO

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I love what talentDAO is doing! Super interesting and very much needed.

I keep wondering how many of the problems that DAO’s face can fall into one of these buckets:

  1. Is an old co-op problem. We already have answers.
  2. Is the same problem in traditional organizations. We already have answers.
  3. Is a new problem needing new solutions

I’m not convinced that DAO’s are necessarily doing anything new or that current knowledge and wisdom can’t solve. I am already seeing how a lack of leadership within a DAO creates chaos. Leadership is part of our evolutionary orgins, and I am concerned that the ideologies of DAO’s to throw out a lot of leadership, first misunderstand the impacts and necessities of leadership, and secondly fully devalues it. Ultimately, leadership is a tool to be used. If DAO’s decide they don’t like the shape of the tool, then they’re not going to be able to build a house.

There is a very big difference between good and bad leadership and I wonder where the DAO is really looking to solve for leaders that are ‘good’ and defined by the same principles they are building the organization with: transparency; accountability; community involvement; etc. I say this because I think DAO’s will find you can’t get work done or have healthy communities without leadership.

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Valerie, I agree with pretty much everything you stated concerning the continuous framing of “leaderless communities” as being one that is disconnected from the way that humans function in almost every example of a society. I wrote the “Decentralized Conglomerate” theory years ago as a direct counterpoint to the DAO framing. When the DAO was being originally proposed, many of the supporters had never led an organization or understood the implications of what was needed to coordinate capital and labor. Institutional memory and leadership play a dramatic role in moving organizations forward, and that is the crux of Decentralized Conglomerate theory. It was not well received when I put it out because the consensus was that the “DAO” was superior because it was “more well-known”.

The conflict between leadership and the needs of the community was a common occurrence that I called the “Mandate of Heaven Dilemma”. It is as follows:

"The MoHD is an issue of having a law, mandate, code, or agreed upon terms from which a “worthy” leader can usurp the current power structure. The fallout then becomes whether the population wants to recognize the mandate, and acknowledge that by taking over a power structure, the new leader proves herself worthy by default. If the population recognizes the MoH, the edicts and rules of the new leader become law. If the population does not recognize the MoH and decides to revolt against the new leader, the power struggle for leadership ignores the MoH and by proxy the new leader that emerges will ultimately have to give an explanation for ignoring the MoH, or in an attempt to reunify the territories, claim that the MoH was proven by the tertiary leader emerging.

In the context of blockchain technology, the recent failure of the DAO and the resulting identification of a problem with the code of Solidity has established a real world example of the MoHD. What was initially misdiagnosed as a “hack” that drained the DAO fund of around $60 million USD, was later shown to be a poorly written contract on top of code that had a fundamentally flawed approach to its voting and capital distribution mechanisms. In attempting to solve the “Byzantine General’s Problem”, the coders and system architects were either unaware of the MoHD, or did not give it the proper diligence in researching how it could affect the digital structure.

Effectively, the Ethereum coders created a Mandate of Heaven for their blockchain, meaning if a coder or arbiter could effectively make use of the code or terms, whatever actions they took would be legally binding and technically in line with the protocol. In the DAO “attack”, there was no “attack”; effectively an arbiter realized that there was a Mandate of Heaven written into the code and in tandem the DAO “smart contract”. In moving $60 million into a “child DAO” following terms and conditions, the “Emperor” effectively took whatever she could and following the MoH to the letter, forcibly removed $60 million from the collective funds.

The resulting fallout has been a mixed combination of applications of theory. While the community has not had a unified voice, inevitably it has fallen on the shoulders of the Ethereum founders and architects to make the decisions necessary to attempt a resolution that will appease the community without compromising the integrity of the protocol. Effectively, the MoH is an agnostic principle that forces the leadership to be efficient with capital, beware of despotism causing revolutions, and painfully aware for the potential of his own removal. The last two aspects of the way the MoH affect leadership are seemingly contradictory, and may explain the common implosion of empires at the hands of draconian and brutal regimes that lose track of effective application of capital."

In highlighting this conflict, it shows that the motivations of the community can sometimes be at odds with the leader of the community, and what is “best” for the community may include installing a new form of leadership or removing the former leadership. This was a reaction to the “code is law” mantra suddenly being shirked to recover funds stolen from the Slock.it DAO hack which eventually led to the Ethereum chain splitting into two communities. One could argue the difference between Ethereum and Ethereum classic is the element of leadership and institutional memory that the Ethereum community has utilized to continue progressing.

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@valeriespina if you haven’t checked it already, here’s the output of Step 1 of our research plan: DAO Leadership: Building on the shoulders of giants Curious to hear your take :)

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