Oil Energy’s Experiment in Self-Governance

What happens when a successful founder realizes the company he built has become too dependent on him?

This article is based on an online session with the Sociocracy 3.0 community in April 2023, during which Oil Energy founder Dmitry Zatsepin shared his experiences and reflections on the company’s journey towards self-governance.

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When Dmitry founded Oil Energy, he had three reasons for doing it.

The first was practical: he wanted to earn enough money to buy a good flat in Moscow. The second was professional: he wanted to do better than others in the oil and gas industry, and build a name for himself. The third was more personal: he wanted to create “a place of work where people like me could be happy and could stay.”

By 2017, the first two goals had been achieved. The company had grown. Dmitry had bought not one but two flats in Moscow, and Oil Energy had made a name for itself in its industry.

But the third goal remained out of reach.

“I didn’t make a good place to work, even for me,” Dmitry reflected.

He was unhappy as General Manager. He had become the person others came to for answers. And the more he told people what to do, the more they asked him what to do.

He began to wonder what it would take for the company to become less dependent on him, and for the people doing the work to take greater ownership of its future.

When success stopped feeling like success

Founded in 2010, Oil Energy is a Russian company that develops and produces materials and technical solutions for oil and gas wells. At the time of the case-study session, it operated across several locations, including Berezovsky near Yekaterinburg, Kazan and Moscow. Dmitry described it as a medium-sized business by Russian standards, with turnover of approximately €20 million at the exchange rate at that time.

In its early years, the company was small, entrepreneurial and close to its customers. Dmitry calls this the “pioneer phase.” In the original group of seven people, he recalled, five were directors and the other two also held leadership responsibilities. There was “a lot of fire.”

As Oil Energy grew, Dmitry introduced a more conventional management structure. Departments were established, experienced managers were recruited and additional layers of hierarchy appeared. By spring 2018, one part of the organisation had as many as five levels.

He had expected the new structure to help the company succeed. Instead, he saw managers competing for his attention and budgets, departments pursuing their own targets, and employees becoming increasingly dependent on direction from above.

Dmitry describes this transition using a model of organisational development: an entrepreneurial pioneer phase gives way to a phase of differentiation, in which specialisation and formal structures increase. These can be necessary as a business grows, but they can also fragment responsibility. “There is almost nobody who thinks for the whole,” he said. The organisation, in his words, had become “cold.”

By the end of 2017, Dmitry described himself as depressed. He recalled studying photographs of wealthy businesspeople on a Forbes list and wondering why none of them looked happy to him. Had he been pursuing the wrong thing?

Selling Oil Energy did not feel right. Nor did he believe that finding a better general manager would resolve the underlying problem. He had devoted too much of his life to the company to walk away without trying another approach.

Discovering another possibility

A turning point came when Dmitry encountered the work of Armin Steuernagel and the Purpose Foundation on steward ownership.

What struck him was the idea that control of a company should remain with people actively involved in its work, rather than being treated simply as a transferable possession. In his words, the “wheel” should be in the hands of those working in the company, and their authority should not continue merely because they had once worked there.

Dmitry recalled crying for 30 minutes after watching Armin’s TEDx talk.

“For me, this is the truth,” he said. “The company should belong to the people who work there.”

The idea also presented a practical difficulty. Dmitry did not believe Oil Energy was ready to govern itself. Some managers still expected someone above them to settle disagreements and decide what should happen next. Giving up control without developing the organisation’s capacity to make decisions and handle conflict could simply create new problems.

That was where Sociocracy 3.0 (S3) came in. Dmitry saw in its principles and patterns ways to make authority and responsibility more explicit, support collaborative decision-making and help people develop effective working arrangements. It was not a complete organisational model to copy. It offered resources for addressing the difficulties they were facing.

A bold experiment, and a difficult beginning

In spring 2018, Dmitry gathered the company and announced that it would, in his words, “belong to itself.” He said he would retain 10% and give the remaining 90% “as a gift to the company.” He also announced a move towards self-governance, informed by S3.

“Everybody was laughing,” he recalled.

For several months, little changed. Then, in October 2018, he announced a more radical restructuring. The company would no longer operate through its existing layers of managerial hierarchy. In order words, all the managers were fired. As Dmitry put it, it moved to one layer “in one moment.”

Removing the hierarchy was quick. Learning to govern together took much longer.

Former departments, including commercial, finance, procurement and production, became circles: teams expected to govern their own areas of responsibility. Each selected a representative to participate in making decisions affecting the wider organisation.

Initially, Dmitry and his colleagues relied on what they had understood from the S3 website. They experimented with circles, internal agreements and Consent Decision-Making, but later recognised important gaps in their understanding.

For example, what they initially called consent was closer to consensus. They were trying to involve people and avoid top-down decisions, but were still seeking agreement rather than deliberately testing proposals for reasoned objections: arguments showing why a proposal might not be good enough, safe enough, or could be meaningfully improved.

Questions about authority persisted. Who was responsible for what? Which decisions could a team make for itself? How could people move forward when they disagreed?

Dmitry and two colleagues attended training in Finland with S3 co-developers Lili and James, who subsequently also worked with Oil Energy in Russia. The participants arrived with months of practical experience, including mistakes and frustrations. That experience helped them understand why distinctions they had previously overlooked mattered.

A further stage of development followed with support from S3 colleague Ivan Maltianov, who joined the internal domain dedicated to the transformation. Together, they worked to apply the principles and patterns with greater clarity and precision.

Learning to share authority and responsibility

One of Oil Energy’s most important discoveries was that removing management layers did not, by itself, establish effective self-governance.

The company had circles and a representative body, but responsibilities for strategy, investment, feedback and difficult decisions remained unclear. It established an executive or strategic circle, selecting people through the S3 Role Selection process.

Some problems were more uncomfortable. Dmitry described instances of theft and behaviour that colleagues were reluctant to confront. In theory, anyone could raise an issue. In practice, fear of conflict and its consequences sometimes prevented people from acting.

In response, Oil Energy created a domain it called the “immune system.” Dmitry compared this to a town electing a sheriff: the community deliberately grants authority to act in situations where action is necessary. According to his account, this domain could respond rapidly to serious risks, potentially including a decision that someone should leave within a day. He said its authority was agreed by the organisation rather than exercised by him alone, and that it was used twice in the early period.

The example raises important questions about how distributed authority is both enabled and constrained.

Self-governance does not eliminate authority.

It makes the boundaries of authority, the reasons for granting it, and the accountability that goes with it especially important.

As the organisation developed, it also clarified domains: defined areas of responsibility and authority within which people or teams could decide and act. Some first-level domains could change their internal arrangements without seeking permission from the strategic circle. If several circles wanted to establish a shared service and could finance it themselves, for example, they did not need the strategic circle’s consent.

Over time, the former functional divisions increasingly gave way to cross-functional teams organised around products and customers. Instead of focusing only on sales, procurement or production targets, people had more reason to consider how their choices affected the work and results of the whole.

Dmitry saw this as a move from differentiation towards integration. “This looks like a living system, and it’s really alive,” he said.

But structures and decision-making processes were only part of the change. Oil Energy described its evolutionary purpose as: “All the world’s wells are built and operated with extreme care using materials that meet the highest standards of quality and safety.”

It also developed a “living code” that translated values into expectations for everyday behaviour: how colleagues communicate, work together and respond to difficult situations. Staff spent around a year developing it. New colleagues encountered it during recruitment and, after three months, took part in a process in which they explained why they wanted to work according to those values.

When asked which S3 patterns had mattered most, Dmitry singled out Artful Participation, Adopt the Seven Principles and Agree on Values. These spoke to the quality of people’s interactions and their willingness to take responsibility, not just to the design of organisational structures.

At the case-study session, a colleague also presented a map showing which S3 patterns the organisation used regularly, occasionally or rarely. Oil Energy had developed some practices of its own and had not adopted every S3 pattern. The aim was to respond to its circumstances, not to implement an entire catalogue.

When transparency changed the conversation

In December 2018, Oil Energy opened information about salaries and company finances to employees. From 2019, it also began distributing 20% of profits among them.

The new financial transparency exposed tensions that had previously remained out of sight. People could compare what they were paid, question differences and confront disagreements about contribution and fairness.

Making information visible did not automatically make difficult conversations easier.

The period also brought substantial employee turnover. According to Dmitry, in 2019 two people were asked to leave by the company, while twenty-four left voluntarily. Previously, he said, almost all departures had been initiated by him or other managers. Some people did not support the new arrangements; others struggled with the changes that transparency brought. Those who remained were choosing to continue, but the figures alone do not tell us how everyone experienced that transition.

By 2020, another shift was becoming visible. Dmitry reported that around half of those who left that year did so after colleagues, rather than managers, raised concerns about continuing to work together.

Oil Energy developed what it called a “circle without roles,” where someone leaving a team could continue to receive their regular payment for up to two months while looking for another position inside the organisation. Some found work in different areas, moving between production, sales, finance or the culture and climate circle. Eventually, people also began entering this transitional arrangement voluntarily when they wanted a change.

These arrangements gave teams more responsibility for who they worked with, while also offering a possible route to another role. They did not remove the challenges of deciding when a collaboration was no longer working, or of making such decisions fairly.

By 2021, Dmitry reported only eight departures over the year, three of them during employees’ first three months. He interpreted this as a sign that the organisation was becoming more stable. It is an encouraging change in the figures, although turnover alone cannot establish what caused it or how the experience differed across teams.

Co-ownership and the micro-enterprise model

Oil Energy’s model continued to evolve into an ecosystem of micro-enterprises. Dmitry described each first-level domain as having its own profit and loss, cash flow, account and share of profits. Someone starting a new venture within the ecosystem could invest 10% of its startup costs and receive 10% of that circle’s profit for life; no individual could hold more than a 10% stake in a circle.

Dmitry said his own interests varied across circles: approximately 9.5% in one, 6.5% in another, and none in some established after he stepped back, where he had invested nothing. Overall, he estimated that roughly 9% of the company’s profits flowed to him.

These arrangements make it important to distinguish between economic participation and authority over decisions. A right to receive profits does not necessarily imply an ongoing right to govern a team. The precise relationship between the two in Oil Energy’s structure still needs confirmation.

Shared ownership changed how people talked about contribution, fairness and responsibility.

Within circles, colleagues also had to learn how to distribute profits among themselves. Dmitry recalled a team that initially divided a bonus equally because it seemed the simplest and fairest solution. One worker left unhappy, believing he had contributed more. Asked why he had not spoken up, he replied, “I was shy.”

The next quarter, he did speak up. In later rounds, others began doing so too. The discussions could be difficult; Dmitry described instances in which someone received nothing. But he reported that nobody left the company because of a dividend-distribution decision.

What changed was not merely the formula for dividing money. People were learning to discuss their contributions, challenge assumptions and make decisions together even when the consequences were personal.

By 2023, Dmitry said, the company had stopped using the word “salary” internally and referred to monthly payments as “dividends in advance.” These were advances against expected profits, with adjustments once the final results were known.

If a circle ran at a deficit, the strategic circle could choose to finance it while its work remained valuable and there was a credible reason to continue. Persistent deficits, however, could lead to support being withdrawn. The intention was to combine entrepreneurial responsibility with a capacity to support work facing genuine difficulties.

Results, and questions that remain open

Dmitry reported considerable improvements in Oil Energy’s financial performance during the transformation. From 2017 to 2022, sales increased by approximately 70% and net profit by close to 500%.

In 2022 alone, he said, sales grew by 8% while net profit increased by 57%. He found the contrast striking: “Could anyone imagine … that we could write down such a KPI?”

Dmitry associated some of the improvement with people becoming more attentive to costs and resources. Under the profit-sharing arrangement, saving €100 could mean €20 more in the pool shared among employees. He described colleagues questioning unnecessary equipment purchases and reducing warehouse stock because the financial consequences had become more immediate to them. “They are not working for me,” he said. “They are working for themselves.”

He also acknowledged that the figures could not simply be attributed to self-governance. A large tender contributed to sales growth, and wider market conditions were changing too.

The financial results are part of the story, not proof that a particular organisational model caused them.

Some challenges remained unresolved. One concerned service circles such as finance, IT, HR, and culture and climate. How should teams providing essential internal support operate within an entrepreneurial system?

At the time of the session, the strategic circle commissioned and funded a defined set of basic services. Other circles could purchase additional services directly, and some support circles could also serve external customers. This offered a mix of predictable income and entrepreneurial opportunity, but Dmitry questioned whether it was appropriate to expect everyone to work in the same entrepreneurial way.

“Do we really want everyone in the company to be entrepreneurs?” he asked. He compared it to family life, where necessary responsibilities do not always fit the same model as paid work. Oil Energy was still experimenting with what would work for people in different roles.

Lessons, not a blueprint

Oil Energy’s experience offers lessons for others exploring distributed authority and self-governance, but it is not a ready-made organisational model.

The starting point was not a method. It was Dmitry’s recognition that the successful company he had built was no longer the kind of place he wanted to work. That gave the transformation a reason beyond changing the organisational chart.

The early difficulties also showed that removing hierarchy is not the same as building the capacity to govern together. People still need clarity about authority, responsibilities and constraints, and ways to address conflict and make decisions. Those arrangements need to evolve alongside people’s ability to use them.

Transparency and participation brought opportunities, but also discomfort. Shared financial information exposed disagreements. Greater responsibility meant having conversations that managers might previously have handled. And the consequences of those changes were not necessarily experienced in the same way by everyone.

Oil Energy made economic participation tangible through profit-sharing, local financial responsibility and micro-enterprises. Yet its experience also shows why financial incentives alone are insufficient: values, trust, participation and the willingness to work through difficult decisions matter too.

Above all, Oil Energy adapted the principles and patterns it found useful and developed others where needed. Its experience offers an invitation to examine the problems and possibilities within a particular organisation, rather than to copy its structures or repeat its most radical decisions.

Becoming more than the founder

Perhaps the most significant change was in Dmitry’s relationship with the company.

He had founded Oil Energy partly because he wanted to create a place where people like him could be happy and realise their potential. For a time, the business grew more successful while becoming increasingly dependent on him. The transformation that followed was neither straightforward nor complete. It involved difficult decisions, mistakes, departures, new arrangements and continued experimentation.

Eventually, Dmitry was able to step away from operational involvement. At the time of the case-study session, he said he had been out of the operating company for approximately a year. He was spending more time on what the company called sustainable social investments, including support for Waldorf and Montessori schools and organisations working with people with disabilities, as well as helping other businesses explore self-governance.

He described Oil Energy almost as a young adult: something he had helped bring into being, but could no longer fully understand or direct. He watched its development with excitement and pride.

At the session, he also said he would rather hear the story from the colleagues who had lived through it: people who had worked as managers or occupied positions lower in the old hierarchy, and could describe the transformation from their own perspectives. “I think this is much more interesting,” he said. His account is, after all, one perspective on a change experienced by many people.

Still, it brings the story back to the ambition with which he began. Oil Energy no longer had to depend on him in the same way for its future.

“The company became more than me,” Dmitry said.