New Energy for a Power-Shifted World

“You know, Grandpa,” said his nine-year-old granddaughter from the backseat to Robert Annaars while they were driving, “Electric cars are actually worse for the climate than cars with petrol, because of the production of batteries.”

Robert works in the valve industry sourcing all kinds of highly specialized valves that are used by the “super-villain” — if there is any — as portrayed by the likes of Extinction Rebellion or Greta Thunberg: the rich and powerful oil and gas industry.

Yet, it is high time for drastic changes, as evidenced by the rapidly growing number of news stories documenting the devastating effects of global warming — from melting pole-caps, torrential rainfalls, devastating killer heatwaves to ravaging wildfires tinting the sky in apocalyptic orange hues.

Despite the warning lights blinking like crazy, and despite the fact that we individually have a clear sense of what would have to be done, more often than not, on a collective level we seem to be unable to take what we sense and express it in the form of decisive organizational action.

Instead of sensing into a higher purpose and acting on it, most organizations still seem to be under the sway of the shallow pseudo-purpose of “maximizing profits”, while gradually turning our only planetary home into an uninhabitable hellscape and — how ironic — thereby ultimately destroying the only environment where any of these wonderful profits could be enjoyed. Collectively, we’re on a path of self-destruction.

“If we can transform this industry, we can transform any industry” — Robert Annaars

From “Oliver Valves Nederland” to “NRG Flow”

As popular wisdom goes, “be the change you want to see in the world” and — to throw in another feel-good truism — “every journey of a thousand miles starts with the first step”.

In 2000, the Dutch company “Oliver Valves Nederland” started out as a supplier of valves for the oil and gas industry.

In 2016 the company was acquired by Raëma de Lange and Robert Annaars through a management buy-out from NRG Circles.

The operating company Oliver Valves Nederland is currently undergoing a brand transformation from “Oliver Valves Nederland” to “NRG Flow” as it intends to make a greater impact in the transformation of the oil and gas industry, sourcing their needs through collaboration with an eye for the greater benefit for all.

From traditional management to self-organization powered by Holacracy

The new owners strongly felt that the traditional management hierarchy was not working for them. Reading the book by Tony Hsieh, “Delivering Happiness”, they were inspired to find out about the online shoe retailer Zappos.

In January 2014, Zappos had drawn the attention of the press by abandoning their traditional management hierarchy and instead adopting the self-organization practice Holacracy across their 1500 employees.

Subsequently, for their first “Workation” — short for “work-vacation” — in spring 2018, Raëma and Robert together with the majority of the team, spent time in Las Vegas at Zappos and learned about the importance of personal development.

Holacracy is a wholesale replacement of the traditional management hierarchy. It comes with an explicit rule set that encodes how work is to be done in a peer-to-peer self-organized way, aligned with the overall purpose of the organization.

This purpose gets broken down into circles and roles that express a smaller part of the overall purpose. Each role comes with clear and explicit accountabilities. But the biggest shift is the baked-in empowerment that is being granted to each role-filler by virtue of the rules which are enshrined in the “Holacracy Constitution’’.

As a role filler, you have the authority to use your best judgment to interpret the purpose and the accountabilities of your role and express them as you see fit best.

Holacracy’s inverse authority structure means that you are allowed to do anything in service of your role that is not explicitly forbidden by the rules of the game or the rules that the company created as internal restrictions on their roles via governance.

From a conventional point of view, this inversion of authority is mind-blowing.

Instead of you having to ask for permission to act, others will have to act to create new rules to limit you from acting as you see fit. It’s on the others to try to stop you from serving your roles according to your best judgment.

Even if you think you understand your new freedom, in early practice you really don’t. But once you do and it sinks in, you get the opportunity to experience true autonomy, deep engagement, and real mastery at work.

The larger degree of freedom within such a structure necessitates a higher degree of discipline while working together.

Every circle holds two types of meetings: “Tactical” and “Governance” meetings which are led by an elected facilitator. The Tactical meeting helps to synchronize the daily operations, while a Governance meeting is an opportunity to fine-tune general expectations such as the structure of circles, roles, and accountabilities on a recurring basis.

This way the self-imposed structures stay dynamic, flexible and relevant in the light of recent needs and developments. People usually fill several roles for the organization, sometimes in several circles.

Overall, Holacracy practice helps to disentangle and clarify what belongs to the work of the organization and what are personal or interpersonal preferences. In that way, it helps to differentiate “role” and “soul”.

Going beyond just self-organizing the work

This felt like a liberation, so NRG Circles implemented Holacracy in 2016 with the support of an external Holacracy Coach. Key people received training and spread the practice throughout the organization. But at some point, they encountered an irritation of sorts as Robert Annaars remembers:

“During the subsequent years, we improved our skills and got to a point where we were missing the people side of the organization since Holacracy is just about organizing the work.

Time and time again we found that roles were created that didn’t really have anything to do with actual work according to the purpose, but rather with the people side of an organization. If we honestly asked and answered the question, ‘Does the company care?’, we would have to say ‘no’ and yet the people did care of course.”

Another tension arose in relation to the question of what constitutes fair compensation in a model that strongly bases the work on peer-to-peer relationships of equals.

“Having been in the position of being employed before and seeing the perceived unfair advantage of income between a shareholder (providing equity) and the people doing the actual work and creating the success, made us think about alternatives to create more fairness”, says Robert.

At first, they experimented with trying different payroll schemes. In one of these experiments, they even used age as an overall indicator of experience and seniority, yet found it much too crude and inappropriate in practice.

Despite self-organizing the work in a peer-to-peer way and getting rid of classical managers, NRG Circles was still stuck with the legal distinction of owners/employers vs. employees effectively but unintentionally creating two classes of people.

The For-Purpose Enterprise to the rescue…

In their quest of solving these problems, Raëma and Robert encountered the work of encode.org and its model of the “For-Purpose Enterprise”. Not unlike Holacracy, a For-Purpose Enterprise (FPE), puts purpose front and center.

Yet its scope is broader than merely self-organizing the context of work, which is the great strength of Holacracy practice. An FPE therefore happily incorporates the Holacracy Constitution (or any comparable self-organization ruleset) as the agreement for its work context.

Since this is still an incomplete picture, an FPE extends its key principles of purpose, structure, awareness, agency, and transparency to the people context and the legal context as well and provides companies with concrete templates of how to do so.

For the people context, it provides the template for an agreement that regulates what members can expect from each other as members, how interpersonal disputes are settled, what values should be expressed, how mentorship and personal development are organized, and anything else that helps a group of individual people, attracted by individual resonance to a shared purpose, associate with each other effectively.

The legal context comprises the ownership and investment container of a For-Purpose Enterprise and connects to the local legal code of a given jurisdiction. The operating agreement of an FPE modifies the legal container (e.g., an American LLC, a Dutch cooperative, a German GmbH & Co KG, etc. …) making it literally “for-purpose”.

It integrates and encodes new Holacracy-style governance mechanisms at the Board or Anchor Circle as it’s known in Holacracy.

The Anchor Circle encompasses all three contexts, the work, the people, and the ownership, and aligns them with the overall purpose. What is unique is that in the Anchor Circle of an FPE the people show up in their various roles as workers, as investors, and as …well, people, and integrate and harmonize all of these crucial perspectives at the top level by using integrative decision-making processes (as in Holacracy practice).

This is especially relevant for determining a fair compensation model while incorporating all relevant perspectives of investors, the people, and the organization, without one being able to simply overrule or outvote the others.

As Robert remembers, “The light bulb lit up, realizing that putting purpose central and finding the reason for the existence of the company was the driver for success. With the FPE structure, we saw that the People also had their place in an organization again. To complete the picture, it would become much easier for people to also connect in other contexts, such as an investor context, building an even stronger connection between people and company purpose.”

Taking a leap of faith and becoming fit for purpose

After a journey of discovery, in fall 2019 NRG Circles formulated their purpose as “Transforming the Oil and Gas Industry”.

They completed an FPE readiness assessment with Tom Thomison of encode.org and in spring 2020 NRG Circles decided to become the first For-Purpose Enterprise in the oil and gas industry (and at that time the 8th company in the world).

Currently, they are in a transitional phase in which the employees get an opportunity to become co-investors in the business until February 2022.

A collaborative supply-chain model in the oil & gas industry

On the business side of things, NRG Flow as the operating entity of NRG Circles, — developed a Collaborative Relationship Framework (CRF) to supply its valves to its customers. That means that NRG Flow representatives focus on the relationship over the transaction. This relationship is built on trust and the desire for both parties to be better off than before they met each other.

“The lowest price is never the lowest total cost” explains Robert. Since the customer doesn’t know the specialized products, as well as NRG Flow, does, they closely collaborate on projects and offer advice on the highly specialized kinds of valves the customer needs in order to reduce energy and operational expenditures. This often helps the customer to considerably lower the total cost of ownership. The full implementation of a CRF relationship also means that both sides decide on the earnings together. So far, the first steps of this process have been really successful with customers testifying “It’s a joy to deal with you.”

The endgame

But the endgame is — as the purpose of NRG Circles indicates — to transform the oil and gas industry. Fossil fuels have been instrumental in catapulting humanity to unprecedented levels of complexity and wealth — so there is a lot to be grateful for. But as an industry, its peak is behind it. Since fossil fuels are no longer a viable path forward for humanity, it is clear that we will need to wean off of them soon.

So, in that sense, Robert is certain that NRG Flow will move into the consultancy business direction in the future. Without the need to demonize a whole industry and having established a trust-based relationship, NRG Flow will be instrumental in helping customers reduce their inefficiencies and assist the industry in finding its new purpose moving away from the use of fossil fuels.

By aligning people, investment, and the work with an evolving purpose, For-Purpose Enterprises like NRG Circles will inspire and guide the way for others to follow.

“If we can transform this industry, we can transform any industry”, says Robert.

Are you curious to learn more about the For-Purpose Enterprise (FPE) model?

Consider taking an FPE readiness assessment, which will help you determine if this is the right option for your organization. Contact encode.org and take your first step toward transforming your organization.