One from Many: VISA and the Rise of Chaordic Organization

Dee Hock

4 ideas

1. BankAmericard collapse becomes member-owned VISA

   By 1968 Bank of America's franchised BankAmericard system was in crisis: licensee banks faced fraud and mounting losses, and the system's rules could not settle their disputes. At a meeting of licensees in Columbus, Ohio, Dee Hock, a banker from Seattle, proposed a committee to rethink the whole arrangement. That work produced National BankAmericard Inc. in 1970, renamed VISA in 1976, which transferred control from one owning bank to a cooperative jointly owned by thousands of competing member banks.

2. Purpose-first sequence for designing organizations

   Hock says an organization should be designed in a fixed order: purpose, principles, participants, organizational concept, constitution, and only then practice. Each step must be agreed before the next one starts. Most institutions fail because they start with structure and practice and never settle on a shared purpose and principles that would make the structure legitimate.

3. Chaordic ownership: cooperate on system, compete on product

   In a chaordic organization, members hold ownership as irrevocable, non-transferable rights of participation, not as shares that can be sold. That means nobody can buy the whole. Power and function are pushed down to the most local level able to exercise them, and no part may dominate the whole. Members cooperate only on the shared infrastructure, such as VISA's clearing, brand and rules, and compete fiercely on everything built on top of it, such as pricing, customers and card features.

4. Simple principles beat complex rules

   Hock argues that simple, clear purpose and principles produce complex, intelligent behavior, while complex rules and regulations produce simple, stupid behavior. Detailed rules replace judgment with compliance, so people stop thinking and exploit or obey the letter of the rules. Shared principles let people adapt to situations no rulebook could anticipate.

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