Dee Hock is the founder and former CEO of VISA International – the dominant player in the credit card industry. He created business that since 1970 has grown by 10 000%. It continues to expand at 20% per year, operates in some 200 countries worldwide, includes 22000 member banks and 750 million customers, and reaches $1.25 trillion in annual transactions. Hock has since become the founder and coordinating director of the Chaordic Alliance, the purpose of which is to develop, disseminate and implement new concepts of organization. He is also an author of the bestseller Birth of the Chaordic Age. Dee Hock was inducted into the Business Hall of Fame in 1991 and the Money magazine hall of fame in 1992.
It all started in the late 1960s, when the credit card industry was on the brink of catastrophe. The forerunner of the Visa system – BankAmericard – the very first credit card and a reasonably profitable statewide service of Bank of America faced a competing product of five Californian banks they called MasterCharge. Bank of America responded, franchising BankAmericard nationwide. Other large banks quickly responded with their own cards and franchise systems. By 1968, the industry had become self-destructive.
At the specially called meeting a certain Dee Hock, then a 38-year-old vice president at a licensee bank of Bank of America in Seattle, got up and suggested to find a method to study the issues more systematically. The thankful participants immediately formed a committee and named Hock chairman.
Turning back to the past, Dee Hock (born in 1929) was a self-educated mountain boy with a deeply ingrained respect for the individual and a hard-won sense of self-worth. Before he had come to the Seattle bank he had already left three financial companies because of his abhorrence to the hierarchical, control-everything organizations which stifling any creativity and initiative. And he also had decided to create once an absolutely different organization.
He took his chance. In June 1970 control of the BankAmericard system passed to a new entity National BankAmericard, Inc. (later Visa International). And its CEO was Dee W. Hock. The new organization was really different – a nonstock, for-profit membership corporation with ownership in the form of nontransferable rights of participation. Authority, initiative, decision making, wealth – everything possible was pushed out to the periphery – to the organization’s members. The banks participate in a common clearinghouse operation, the system that reconciles all the accounts and makes sure merchants get paid for each purchase, the transactions are cleared between banks, and customers get billed. Instead of trying to restrict what the members could do, Dee Hock encouraged them to compete and innovate as much as possible: “Members are free to create, price, market, and service their own products under the Visa name,” he said.
Visa has been called “a corporation whose product is coordination.” The company grew phenomenally during the 1970s – from a few hundred members to tens of thousands and had surpassed MasterCard as the largest in the world.
In May 1984, at 55, Hock resigned from Visa and became very active in developing new models of social and business organizations that are neither rigidly controlled nor anarchic – a mixed form he terms chaordic. “Chaordic” is a hybrid of two words: chaos and order. Hock uses the term to describe any organization, system or business that is “self-organizing, self-governing, adaptive, nonlinear, and complex, and which harmoniously combines the characteristics of both chaos and order.” VISA is chaordic: while other credit card companies are owned by one company or by a few banks, VISA is owned by the thousands of banks who are also its customers.
The idea of “chaordic organization” is inseparable from Hock’s belief that “any organization, no matter how well designed, is only as good as the people who live and work in it”. In that way the organization’s performance is determined by the approach to management its leaders choose. He suggests a “short course of PhD in leadership”, which sounds as “Make a careful list of all things done to you that you abhorred. Don’t do them to others, ever. Make another list of things done for you that you loved. Do them for others, always.”
His deep faith that all organizations as conceptual embodiments of the idea of community “can be no more or less than the sum of the beliefs of the people drawn to them”, lets him see the way to find people any company can succeed with. Hock says: “Hire and promote first on the basis of integrity; second, motivation; third, capacity; fourth, understanding; fifth, knowledge; and last and least, experience. Without integrity, motivation is dangerous; without motivation, capacity is impotent; without capacity, understanding is limited; without understanding, knowledge is meaningless; without knowledge, experience is blind. Experience is easy to provide and quickly put to good use by people with all the other qualities.”
Dee Hock used to say that “money motivates neither the best people, nor the best in people. It can move the body and influence the mind, but it cannot touch the heart or move the spirit…” One of the principles that has worked for Visa he formulated as “given the right circumstances from no more than dreams, determination, and the liberty to try, quite ordinary people consistently do extraordinary things.” He asserts that the main role of the primary leaders is to release the chaos of talent, drive, values, and passion that every person has inside and creates the conditions by which both individual and organization can evolve and succeed.
Hock’s concept of leaders in chaordic organizations reduces almost to zero the idea of management taught as methods for “reducing all diversity and complexity to uniform, controlled processes endlessly repeated with ever increasing efficiency – that is how to make subordinate people behave as cogs and wheels in a mechanistic, predictable, mathematically measurable manner.” So the old idea of leaders as superior people dominating inferior people turns into the belief that everyone has to simultaneously lead and follow. In his book Birth of the Chaordic Age Dee Hock writes about the necessity for all people to lead themselves, then lead their superiors, then lead their peers, then hire, teach and motivate their people to do the same. This is what he calls “managing in, up, around, then down”. And this is what makes the word management meaningless because “you cannot command yourself, your superiors or your peers, you only can lead them.”
The extracts from Dee Hock’s own article “The Art of Chaordic Leadership”:
…Leader presumes follower. Follower presumes choice. One who is coerced to the purposes, objectives, or preferences of another is not a follower in any true sense of the word, but an object of manipulation. Nor is the relationship materially altered if both parties voluntarily accept the dominance of one by the other. A true leader cannot be bound to lead. A true follower cannot be bound to follow. The moment they are bound they are no longer leader or follower. If the behavior of either is compelled, whether by force, economic necessity, or contractual arrangement, the relationship is altered to one of superior/subordinate, manager/employee, master/servant, or owner/slave. All such relationships are materially different from leader/follower…
…A vital question is how to insure that those who lead are constructive, ethical, open, and honest. The answer is to follow those who behave in that manner. It comes down to both individual and collective sense of where and how people choose to be led. In a very real sense, followers lead by choosing where to be led. Where an organizational community will be led is inseparable from the shared values and beliefs of its members. True leaders are those who epitomize the general sense of the community – who symbolize, legitimize and strengthen behavior in accordance with the sense of the community… A true leader’s behavior is induced by the behavior of every individual choosing where to be led.
… Over the years, I always ask each person to describe the single most important responsibility of any manager… Management inevitably is viewed as exercise of authority – with selecting employees, motivating them, training them, appraising them, organizing them, directing them, and controlling them. That perception is mistaken.
… The first and paramount responsibility of anyone who purports to manage is to manage self: one’s own integrity, character, ethics, knowledge, wisdom, temperament, words, and acts. Without management of self no one is fit for authority no matter how much they acquire, for the more authority they acquire the more dangerous they become. It is the management of self that should occupy 50 percent of our time and the best of our ability. And when we do that, the ethical, moral and spiritual elements of management are inescapable.
…The second responsibility is to manage those who have authority over us: bosses, supervisors, directors, regulators, ad infinitum. Without their consent and support, how can we follow conviction, exercise judgment, use creative ability, achieve constructive results or create conditions by which others can do the same? Devoting 25 percent of our time and ability to that effort is not too much.
…The third responsibility is to manage one’s peers – those over whom we have no authority and who have no authority over us – associates, competitors, suppliers, customers… Without their respect and confidence little or nothing can be accomplished. Is it not wise to devote at least 20 percent of our time, energy, and ingenuity to managing them?
… Obviously, the fourth responsibility is to manage those over whom we have authority. The common response is that all one’s time will be consumed managing self, superiors and peers. There will be no time to manage subordinates. Exactly! One need only select decent people, introduce them to the concept, induce them to practice it, and enjoy the process… It is not making better people of others that leadership is about. In today’s world effective leadership is chaordic. It’s about making a better person of self.
The obvious question then always erupts. How do you manage superiors, bosses, regulators, associates, customers? The answer is equally obvious. You cannot. But can you understand them? Can you persuade them? Can you motivate them? Can you disturb them, influence them, forgive them? Can you set them an example? Eventually the proper word emerges. Can you lead them? Of course you can, provided only that you have properly led yourself. There are no rules and regulations so rigorous, no organization so hierarchical, no bosses so abusive that they can prevent us from behaving this way. No individual and no organization, short of killing us, can prevent such use of our energy, ability, and ingenuity…
…In the deepest sense, distinction between leaders and followers is meaningless. In every moment of life, we are simultaneously leading and following. There is never a time when our knowledge, judgment and wisdom are not more useful and applicable than that of another. There is never a time when the knowledge, judgment and wisdom of another are not more useful and applicable than ours. At any time that “other” may be superior, subordinate, or peer. People are not “things” to be manipulated, labeled, boxed, bought, and sold. Above all else, they are not “human resources.” We are entire human beings, containing the whole of the evolving universe, limitless until we are limited, whether by self or others.