Want To Improve Your Culture? Look To DAOs, The Web3 Model That Could Disrupt Everything

In late 2021, a DAO—a decentralized autonomous organization—paid $4 million for the only existing copy of a Wu-Tang Clan album. This new type of organization has been percolating on the cryptocurrency corner of the internet for a few years, but this was perhaps the first time the concept broke into the mainstream.  

There are other hints that the DAO world is gaining traction. For instance, Andreesen Horowitz, a venture capital firm cofounded by visionary technologist Marc Andreessen, has led major fundraising rounds for DAOs and firms that back DAO creation. Some theorize that DAOs will disrupt the Y Combinator startup model, gaining an edge through an ability to rapidly scale.  

While DAOs do not yet represent a disruptive threat to traditional corporations, there are still some valuable lessons leaders can learn from how DAOs operate and approach culture.  

OK, So What’s a DAO? 

Think of a DAO like a business without a C-suite. They’ve also been called an “internet community with a shared bank account.” 

This is a high-level explanation, but typically, they are run through anonymous voting and participation. To earn the right to participate and vote in a DAO, you must buy governance tokens, a form of cryptocurrency, not unlike buying shares in a publicly traded company.  

Blockchain technology, a decentralized, digital ledger, powers most DAOs. The blockchain is where the rules and governance of the DAO lives; this can only be changed by majority vote of DAO participants. Every decision is collectively and publicly discussed, voted on and documented. In other words, DAOs run on a radically democratized and transparent way of decision making.  

DAOs offer increased data security, privacy, flexibility and transparency, explains Kenny Au, founder of Elevate Ventures, which invests in and advises DAOs and other Web3 companies. “By nature, DAOs have aligned incentives and performance-based cultures, which allows for deeper collaboration.” 

4 Lessons on Culture To Learn From DAOs 

While DAOs are still a long way off from disrupting the business world, they offer some valuable lessons in improving culture in 2022, as leaders continue struggling with the shift to remote work and the Great Resignation:  

1. Make Culture Clear And Codified.  

In a DAO, everything is codified, nothing is done by default. There is tremendous care and debate in setting up how things work. 

“DAOs only succeed when the culture and governance frameworks are clear, but this doesn’t happen overnight,” Au says. “This initially slows down the decision-making, but once you have the framework, the voting mechanism becomes clear and transparent, and DAOs are able to move more quickly.” 

Leaders of traditional corporations should take a page out of the DAO playbook. The speed of the market is ever increasing; businesses need to learn to excel at asynchronous work and pivot when the market shifts. To keep pace, organizations must have strong culture and clear frameworks for making decisions and acting.  

2. Give Employees A Voice To Supercharge Engagement.  

DAO participants choose which projects to work on, have a say in how things are done and are financially rewarded when tasks are accomplished. Usually, how they’re contributing aligns with their strengths and interest areas.  

As a result, DAO participants tend to be engaged and passionate, Au notes. “DAOs are self-governed, and people working in a DAO are not employees; they are contributors,” he says. “That mindset alone sets a DAO culture apart.” 

A Gitcoin report on DAOs put it this way: “DAO participants have a feeling of fulfillment, meaning and purpose not found in traditional organizations. Ownership fuels empowerment.” 

It may be impossible to give employees a similar amount of agency in how an organization is run, but leaders can ensure employees have a voice. Before making any changes that affect company culture or how employees experience their workday, make sure you’re taking time to ask employees their opinion. Don’t make assumptions about what they want or how something will affect them. 

3. Evaluate Employees By Measurable Results. 

DAOs evaluate participants by clearly defined parameters. “People contributing to the DAO are rewarded with incentives only when they fulfill measurable tasks,” Au says. “The incentives and measurable results must be clearly aligned.” In other words, you don’t get rewarded just for showing up, you must accomplish very specific things.  

The lesson here for leaders: As teams are increasingly remote and distributed, employees can no longer be evaluated by how hard they “appear” to be working. (That should never have been the marker of a strong employee, but that’s another argument for another day.) Leaders should learn to focus solely on the results employees produce, tying productivity measures to the work that gets done, not the hours logged.  

4. Learn To Harness Highly Skilled Freelancers.  

Contributors of DAOs act similarly to freelancers, choosing how much and in what manner to participate. “DAO participants can wear multiple hats within multiple different DAOs,” Au explains.  He predicts as DAOs become more prevalent, the rise of freelancers will accelerate—already, estimates say freelancers could make up over half of the U.S. workforce by 2027.  

To continue accessing top talent, companies should learn to engage freelancers now. Just like DAO participants have access to very clear norms and governance, your freelance talent strategy should include educating freelancers on your culture and how to succeed within it.  

Although recent developments point to DAOs growing in prominence, it’s still too early to predict how prevalent DAOs will become in the future. What is sure, however, is that leaders can learn some valuable lessons from this emerging form of organization.