Why not get rid of management entirely? That was the thesis of Doug Kirkpatrick’s talk at the Building Business Capability conference this week about the Morning Star Company, a company which has tried the radical approach of being entirely flat, and having no managers are all.  Far from failing, they have become the largest company in their domain (tomato processing).  In Dec 2011, Harvard Business Review called them the world’s most creatively managed company.

Doug started with some figures from a 2013 Gallup Poll (State of American Workplace) about management and workers.  30% of workers are engaged and inspired at work.  That means that 70% are disengaged including 20% which are “active disengaged” who aren’t just unhappy at work, but are acting out their unhappiness undermining what their engaged coworkers accomplish.  Over the entire economy that comes to 20 million people what are not really working.  Gallup estimates that active disengagement costs the U.S. $450 billion to $550 billion per year.

If people know how to do their jobs, why do they need a boss?

People already make lots of key, life altering decisions on their own — without a boss.  Can we move beyond the ‘command and control’ model of management, which was designed in the 1800 for the railroad industry?

Morning Star was founded and is led by Chris Rupert.  Its mission is to construct and operate a state of the art facility for processing tomatoes.  It was started in 1990 with a meeting to talk about organizing the enterprise around the idea that there would be no human bosses in this organization.  Instead, the company mission statement is the boss.  Founded on two core principles:

• humans should not use force or coercion against other humans.  If you think about it, this is the basis of all law.
• People should keep their commitments they make to each other.  If you think about it, this is also the basis of all law, certainly contract law.

How can you fail to agree with these? This was the birth of “organizational self-management”.   To date, they have produced 90 Million pounds of tomato paste without a single boss.

There are no bosses.  People can not be fired.  People can make requests of others, and there is an obligation to respond.  Nobody can simply terminate another person’s employment.  Similarly, nobody can tell someone else what to do.  People who like to push others around, can not survive in this environment, because they don’t get the official position that enables this behavior.  On the other side, people without initiative can’t survive either.  The mantle of leadership is earned, not conveyed by title or position.  One measure of success: in some years 100% of seasonal colleagues return the following season.

Some companies try initiatives called “empowerment programs”.  But in self-management you don’t need this.  Empowerment implies that someone with power is loaning it to someone with less power.  But whatever is loaned can be repossessed.  In self-management employees have all the power they need the first day they show up.

Another approach is “Worklife Balance Programs”.  With self management we try to make work enjoyable.  We keep lots and lots of scorecards.  This turns work into a game.  The scorecard is the only way to know whether a person is managing themselves properly.

Most people grew up with a hierarchy, so when they come to self-management it takes a lot of time. Morning Star does not have employees; instead they are all called “colleagues”. They all get training every two years in self-management.

At Morning Star everyone is a professional, even though this is a manufacturing company. The distinction between white collar and blue collar in industry is arbitrary, and Morning Star simply does not have that.

Total Responsibility

Everyone is responsible for a role, and those roles are defined very specifically. Sometimes issues can take a while to resolve, because lots of people are involved. But according the the book Wisdom of Crowds (James Surowiecki) the more people you involve, the better the decision will be. Everyone is protected from capricious acts by bosses.

• No power trips. And no power distance either. No punishment. The only reason to review a business failure is to learn from it. No excuses are given or accepted.
• Communications is absolutely vital. Massive amounts, both listening and speaking.
• Lots of Checklists. First item on checklist: everyone gets together and discusses the situation. Just getting together and talking can prevent a lot of problems. Also business rules and business processes.

The “Colleague Letter of Understanding” (CLOU, pronounced ‘clue’) is the instrument of self-management.  These are used to create direct agreements between colleagues, each of whom has equal voice, define personal missions, roles responsibilities, process stewardship, and how to measure the outcome.  Originally this was done on paper, but now it is all done online.  These are formal, explicit commitments, and includes short term ad-hoc commitments made on a day to day basis.  These documents, like contracts, are signed.  They are transparent and available to everyone.  Stepping stones are the performance metric, benchmark against perfection.

Questions

The question we all want to ask is: how do you keep from losing control?  Doug’s response was that if your company is like those profiled in the Gallup poll, with 20% actively disengaged, you are not really in control today.

How do you manage yourself?:  Primarily by answering two questions: why am I here? what does success look like?

This might work well for tomato processing, but what make you think this would work for a really complex industry?  Doug’s answer was a bit off the point.  He pointed out that many of the jobs at Morning Star are quite sophisticated, involving chemistry, biology, and complex production planning.  No doubt this is true, but the question was really about the product and risk inherent in different industries.  There are thousands of ways that an airplane could be flawed with tremendous consequences, while making a mistake on a batch of tomato paste will rarely be more consequential than having to throw out the batch.  A better answer is that “quality depends upon a culture of quality”.  Boeing ships excellent planes not because managers mandate it, but because every employee knows that attention to detail and quality are essential to their business.  It seems to me that a self managed organization could foster that same level of attention to quality — at least it is not clear that having a manager is necessarily required.

I asked a different question: When I think of situations where there is no hierarchy, I think of the kids in a school yard or the attendees of a conference.  In those situations, there tend to be what I call “popularity contests”  that is people who gain some level of power due only to persuasion of others, and not because they are doing the right things.   Sometimes these people have hidden agendas which they manipulate others to their own benefit.  I am reminded of the our own pubic debates around creationism and global warming denial.  How then, do you design the system to avoid these problems?  The answer was simply: we have not seen those problems at Morning Star.  I resisted the urge to ask “Are you sure?”

Should managers be fired?

The HBR article “First, Let’s Fire All the Managers” by Gary Hamel went into quite a bit more detail.   A couple of key points about management:

• managers add overhead, and as an organization grows,
• the typical management hierarchy increases the risk of large, calamitous decisions
• a multitiered management structure means more approval layers and slower responses as manager occasionally exercise their authority to reject ideas.
• the cost of tyranny, the systematic dis-empowerment of lower-level employees to control what they do.

to me, it seems natural that by decentralizing all decisions, and empowering employees to make the decisions that effect them directly, you will create an agile organization that is able to respond very quickly to external pressures.

“Since we believe you have a right to get involved anywhere you think your skills can add value, people will often drive change outside their narrow area,” Paul Green says. “We have a lot of spontaneous innovation, and ideas for change come from unusual places.”

Since there is no hierarchy, people do not compete for hierarchical advancement.  Instead, they compete to make the best product.  Like a sports star who does not need to worry about playing the hierarchy, and instead can focus 100% on developing skills of the game.

The key to making is work is good information.  You can decentralize decision making if the people making the decisions have good information.

These advantages seem to appear from being self-managed:

• More Initiative
• More expertise: Colleagues develop skills better and more consistently
• Speed and flexibility.
• Collegiality
• Better Judgement
• More Loyalty

But there are some drawbacks:

• This style of organization does not suit everyone
• Hiring process is long and complex
• Getting peers to hold each other accountable is a challenge
• The company is limited to organic growth, acquisition is probably not possible
• Tracking personal development is a challenge

On closer inspection, it is not the case that there is no hierarchy.

Morning Star is a collection of naturally dynamic hierarchies. There isn’t one formal hierarchy; there are many informal ones. On any issue some colleagues will have a bigger say than others will, depending on their expertise and willingness to help. These are hierarchies of influence, not position, and they’re built from the bottom up. At Morning Star one accumulates authority by demonstrating expertise, helping peers, and adding value. Stop doing those things, and your influence wanes—as will your pay.

This is the real difference.  The hierarchy in a regular company is not natural or dynamic.  Jobs in key positions can go to people who play politics well, or brought in based on a faulty assessment of qualities.

Opportunities

Many of the organizational aspects that we talk about knowledge workers needing are exemplified in this self-management company:

• work is not defined by traditional cookie-cutter job titles, but instead by collections of commitments made in light of need and availability of resources,
• individual specialize and are able to offer unique capabilities to their colleagues,
• workers manage themselves and optimize their own work,
• hierarchy is natural and dynamic, based on the actual performance of the worker, instead of on an artificial construct imposed on the organization
• the organization is agile and can rapidly adapt to situations.

When you think about it, Morning Star has turned all of the workers into knowledge workers because they manage themselves, they are involved in the way that they work, and they have to learn things about their specific area that nobody else knows.

Such ideas of self-management are essential for organizations of knowledge workers.  It is not necessary for the organization to be 100% self managed the way that Morning Star is.   A mix of traditional management with self-management will work if the managers in the parts of the organization that need self-management are trained and allow workers the flexibility to work out their own work agreements with each other.  This already happens with knowledge workers today if not formally, at least informally.  Flexible time and remote work both indicate a high degree of autonomy.

The formal agreements between colleagues might be a significant burden on paper, but information technology should be able to make this much easier to make and track these commitments.  In may ways, a key aspect of an ACMS is to provide support for these kinds of agreements.

I doubt that large numbers of companies will be converting to be self-managed very quickly in any great number. Still Morning Star shows clearly and unequivocally that self-management works.  It gives clear experimental results that self managed organizations are viable in their own right, even in the field of manufacturing which is normally thought of being a fairly routine line of work.

Hybrid organizations that already exist will grow more prominent as the population of knowledge workers grows.   The lessons from Morning Star are important for understanding the best practices for these knowledge worker heavy organizations.

Resources

• Managing Without Managers blog post on the Drucker Institute, Feb 2, 2012
• I, Tomato: Morning Star’s Radical Approach to Management, Reason.com, December 27, 2012
• One Company’s Audacious Org Chart: 400 Leaders, 0 Bosses, Inc. April 18, 2013
• First, Let’s Fire All the Managers – Harvard Business Review, December 2011
• Morning Star Self-Management Institute
• If Self-Management Is Such a Great Idea, Why Aren’t More Companies Doing It? – Forbes, Sept 25, 2012