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  • Writer's pictureRuss Powell

"We know a lot about organizations; they’re not as mysterious as they seem." –Bill Daniels

Updated: Dec 13, 2023

Recently, I re-watched the HPT Legacy interview of one of my favorite evidence-based practitioners, Bill Daniels.

This post contains a brief introduction to Bill and a summary of my favorite part of the interview: his description of System Four organizations.

About Bill

Bill Daniels is an amazing guy, and an inspiration to anyone interested in improving human performance, but especially to those of us interested in helping managers become better #leaders.

Bill has a quick wit, a quiet demeanor, and valuable insights gained over a long and productive career.

One of the most important things to know about Bill is that the primary focus of his career has been management development.

That, and he’s a big fan of Rensis Likert.

You know Likert. From the Likert scale. Yes, that Likert. [Turns out it’s pronounced LICK-ert. And, I confess, I too have been mispronouncing it most of my life.]

Likert’s work with the Institute for Social Research (at University of Michigan) and, in particular, his management systems (e.g., the study of “system four” organizations) had a huge impact on Bill.

Likert’s System Four Organizations

I met Bill for lunch many times several years back. And our conversations were always wide-ranging and insightful. And I think anyone who knows Bill knows that if you start to talk about his work, or society, or management, it won’t be long before Bill tells you—with great reverence—about System Four organizations.

While System Four does not seem to be in common usage [meaning only that I had not heard of it], the concepts are both hauntingly familiar and existentially important.

If you’d like to hear Bill’s full description of these management styles, watch the interview. For a brief (or brief-ish) written description, read on.


Likert studied the relationship, involvement, and roles of #managers and their subordinates in business settings and outlined four systems (or cultures) to describe what he found. He based these systems on observations of highly productive supervisors and their team members.

The systems have complicated, multi-syllabic names (which you can learn more about here), but for now let’s refer to them as Systems One though Four, with Four being the most effective for long-term organizational viability.

“We know a lot about organizations,” Bill says. “They’re not as mysterious as they seem. And what they [the Institute for Social Research] call System Four is consistently the best kind of organization we see.”

System One –

System One cultures are authoritative and exploitative.

In System One, leaders have low regard for people and they tend to use threats and other fear-based tactics to get the work done. As a result, workers may be quick to perform well, but the environment is loaded with stress and negative feelings.

In a System One culture, communication is almost entirely downward and the psycho-emotional concerns of people are ignored.

Bill explains that System One organizations are characterized by “vicious, autocratic management” and represented by the manager who says, “Look, I didn’t hire you to listen to you. I hired you to do what I tell you to do.”

It’s intimidating. And overbearing.

And yet sometimes there’s value in this style. Much like yelling at a child just before she burns her hand on a hot stove, Bill says, “it’s great for a quick, brief success; but for the long term, it’s a disaster.”

Bill warns, “any department you let [a System One leader] run, they will kill it within 30 months.”

System Two –

System Two cultures are authoritative and benevolent. But Bill cautions about that combination. He says they are also “devious and psychologically dangerous.”

In a System Two culture, there’s less control over workers than in System One. In this system, workers are motivated through potential punishment AND rewards. Lower-level workers are more involved in the decision making processes, but they’re still limited by upper management.

In Bill words, the System Two culture is “autocratic [like System One], but it smiles while it’s doing it.” He explains, it’s “very devious and psychologically dangerous because it’s highly manipulative, very dishonest, and full of covert conflict."

“It’s a VERY emotionally stressful working environment... worse than the overt ones.”

Quoting one of his mentors, Bill’s recommends, “Don’t try to work with ‘Twos.’ But work with ‘Ones,’ because very often Ones know they’re failing and they’re looking for help. And they make very good students.”

System Three –

System Three culture is consultative. Lower-level workers are motivated through rewards and occasional punishments, and have some involvement in making decisions and setting goals.

Compared to the first two systems, workers in this consultative environment have more freedom to communicate and make company decisions, but communication still tends to flow mostly downward.

Bill refers to System Three culture as, “the muddled thing you get when you really aren’t trying to do it together.” It’s typified by managers who say, “Eh, however you want to manage is fine by me, as long as you get some results.”

While the consultative approach may seem productive at first, the problem is a lack of consistency. “Everybody’s running their part of the organization their own way,” says Bill. “It’s terribly inefficient and uncoordinated.”

Bill notes that there’s often, “a lot of covert conflict” in a System Three culture. And “it doesn’t feel autocratic until crisis time.”

Bill suggests that most organizations (about 60%) in America today are System Three.

We have many, many companies doing okay but not great with, as Bill puts it, “lots of mismatched management theories at play.”

System Four –

Highly Participative

A System Four culture is highly participative. It promotes genuine participation in decision-making and goal setting. And in comparison to the other systems/cultures, it is the most effective.

In System Four, managers value and encourage cohesiveness between team members. Communication is free-flowing and lateral. Creativity is encouraged. As a result, workers become more involved within the organization and they’re more satisfied and productive.

Bill describes System Four organizations as being “consultative” and “decision-oriented.” Group work-process seems very important.

Disciplined, Systematic Decision-Making

“The key difference,” Bill says, “is the System Four organization’s dependence on small group decision-making in the management structure.”

The System Four culture has a “highly disciplined system of meetings that link together so that the organization literally cycles its resource issues from the bottom of the organization as high as sometimes five- or six-levels of management. And from dinky little stuff that doesn’t require anything to $50 million decisions.”

A System Four organization can turn important decisions around very quickly. “And the decisions are good,” Bill says. “And they get implemented immediately.”

High Capacity for Flexibility and Innovation

A System Four organization, according to Bill, has “an unusual capacity for flexibility and innovation. After entering an industry, they can take it over in about 10 to 15 years.

“It’s highly disciplined and overt in its conflict.

“It’s not the warm fuzzy thing people were thinking it might be back in the '60s and '70s.”

An organization of this nature, “has rules of engagement which allow people to make their decisions openly and to disagree and commit—to continue disagreeing while they actually decide we will do this anyway.”

Only About 20% of Organizations are System Four

On the effectiveness of System Four organizations, Bill notes that the statistics are consistent over time—these organizations are year after year the best of the best.

Considering the distribution of these management systems, he explains:

  • “About 20% of American organizations will be absolutely destroyed in the next 30 months by their System Ones and Twos.”

  • “20% are about to take over their market in another 10 to 15 years—even if they’re very small—and they’re System Four.”

  • “In between is the large part of the curve, the other 60% of the organizations in America, and they’re in System Three.”

Recommended Resources

Bill recommends several resources for learning more about these kinds of organizational distinctions:

  • Likert’s New Patterns of Management and The Human Organization. These may be tough to find, but Bill refers to them as “the bibles” of this kind of work.

He also recommends:

  • Peters’ and Waterman’s In Search of Excellence

  • Jim Collins’ work (e.g., Good to Great)

Two things about Jim Collins’ work:

  1. Bill say he’s “very excited about the consistency with which Collins rediscovers these patterns in his work. And he [Collins] is pretty specific about the behaviors.”

  2. On Collins’ Good to Great, Bill notes, “the quiet leadership that Collins highlights in Good to Great—his Level 5 Leaders—is common in System Four organizations. These are leaders who are humble and rarely showy. They can be hard to find.”

Other Highlights

Throughout the interview, Bill also offers insight and wisdom on the importance of our work in HPT and how we can help:

  • managers clarify outputs, feedback and resources

  • organizations become more productive and productive of the right things

  • businesses cover for inadequate educational systems

  • leaders improve the way they communicate and make better use of technological advances available to them

  • workers build and maintain trust


Reflecting back on the problems of the COVID-19 crisis and the fact that many of our governments and organizations have failed us in their lack of preparations and response speeds in times of crisis, here’s one more favorite quote from Bill:

“It is important that we get our organizations out of the muddle. We must help more organizations perform their functions so that our society is productive and productive of the right stuff. We have a big, big change ahead of us.”

See the full interview here.


Additionally, Likert's System 4 Management is the basis for the "Iterative Management" approach Ed Muzio describes in his book Iterate.


Many thanks to Guy Wallace for capturing the wit and wisdom of so many HPT practitioners over the years! THANKS, Guy!


Come join us for—and bring some of your up and coming managers to—my foundational leadership workshop, Leadership and the Middle Path. Everything I teach in this program supports companies who aspire to become System Four organizations.


Follow me on LinkedIn and/or Twitter.


Sources: I leaned on Wikipedia as a secondary source for information about Likert's management systems.

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