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You’ve probably heard of Decentralized Autonomous Organizations (DAOs), which have become a dominant force in the news and have sprung up in various industries. They have emerged in the blockchain, sports, politics and entertainment industries.
DAOs bring people together around a common goal or interest. Looked at in more detail, DAOs show how large groups of people can be organized as a decision-making entity, something that will ultimately disrupt the way companies work.
DAOs will have an impact on how companies are structured and how people lead and are recognized within companies. Ultimately, DAOs will provide a happier and healthier work environment for everyone involved.
Related: How DAOS are Changing Leadership
What are DAOs?
DAOs are decentralized entities that govern projects or companies. The DAO community makes decisions instead of an individual having all the responsibility and power. This creates distributed and transparent governance and allows all stakeholders to participate directly.
In the United States, Wyoming, Vermont and Tennessee have already passed legislation recognizing DAOs as legal entities. At API3 DAO where I lead the marketing team, we strive to operate as a flat community that is radically transparent, efficient, productive, and empowering for team members.
DAOs create fair and transparent decision-making processes
Because DAOs allow members to vote on changes that are made, the decision-making process is decentralized and democratized. This creates more transparency around decisions, giving everyone more visibility and without anyone feeling like they’re in the dark about why changes are being implemented.
Another important implication is that the fair and democratic voting process creates a healthier and happier work environment. Decisions made by leaders that do not consider employee feedback can lead to resentment and anger, especially when perceived as unfair. By giving members more say in the changes that are made, companies can foster more welcoming and sustainable environments for everyone.
Decentralization of the decision-making process can also be considered safer because there is no longer a central point of failure in a central authority figure. Because a single person is no longer held in high esteem, the impact of one person leaving the company is not as dramatic as that of a CEO leaving a standard business.
Related: The Strengths and Weaknesses of 4 Different Leadership Strategies
DAO votes move slower, but efficiency is not always better
Implementing a decentralized governance structure means you’re giving many people a voice in the future of the business, all with different perspectives. Making sure things move forward can feel like herding cats and feel less efficient than a centralized authority structure.
Efficiency comes with costs. Business leaders don’t always make the right decisions. As mentioned above, when a leader leaves a position, the company is greatly affected, while the DAO structure allows for more resilience and flexibility.
DAOs create a change in internal leadership
A traditional business structure appoints managers to take control of teams and, as the title suggests, manage people. Within the DAO structure, there is less people management. Since they can no longer lead others by force, individuals must educate, influence and motivate others. This ensures that everyone feels informed enough to make decisions and builds support around a particular proposal being voted on.
This means that strong leadership skills will be critical to gaining support and influence in the community, similar to what we see in other democratically run organizations.
Related: 3 Ways to Decentralize Management and Increase Productivity
DAOs recognize contributions to the workplace that are often overlooked
In the DAO structure, things tend to be more visible, meaning all individual contributions are seen and acknowledged. People who do great work but are modest and quiet often go unrecognized in the traditional company structure, as many of their efforts go unnoticed.
Everything is visible in a DAO organization, meaning that people are not overlooked and that they receive well-deserved recognition for bringing value to all other team members.
Imagine a workplace where employees are a community of people, where individuals are more self-directed and are openly recognized for the work they do. The result is a happier and more productive workforce. If workers have a vested interest in the company’s success, they will produce better quality work. This work culture of fairness and transparency is facilitated by DAOs.