Frst, Let’s Fire all the managersFirst Let’s Fire all the Managers

An article review

 

“First Let’s Fire all the Managers” is a interesting article  published in HBR based on a true

management model which is successfully being practiced in a large food processing

organization by the name of M/S Morning Star, the company started as a tomato trucking

company.

The article is very exciting and very hard to believe that an organization is running without

managers.

The only thing which has helped me in digesting the concept is that it is coming from a

reputable business journal, the Harvard Business Review. The company Morning Star has

been following this model since last two decades, so it must be working for them.

The concept originated by the founder of the company Chris Rufer; is simple, it is just that

there is no Boss; all of the members of the organization are their own boss. Every individual

work area is independent, responsible for meeting their targets which conform to the

corporate target. Each individual is a profit center and is responsible to generate his/her

profit as per the corporate requirement which at the end of the business cycle supports the

bottom line. Every business area is allowed to incur the budgeted expenditures, can make

the improvements in their process as they feel is required after consulting with the pre and

post process owners. There is no concept of promotions, no fancy titles, accountability is at

all levels, creativity is ample as all the members of the team are expected to create new

ideas which improves the organization. Team and team players are a must.

Organizations that are setting up the hierarchical level with line and divisional managers are

earning awesome value and profit. Today how much we learn about the successful

companies of the world, they are almost the hierarchical based company. But, Morning Star

has thought to enter the industry by using the manager-less concept. There are some of the

causes of entering into this concept:

The cost of deploying managers in an organization is very costly. It additionally

creates the hierarchy and the benefits and salary for them increases anonymously.

Decision making becomes slow: As the hierarchical level increases, manager’s

eagerness to use the authority may delay the work flow process and slows down the

decision making process.

Powerful managers even can make costly and devastating decision if the power is

centered in one person.

Some time, the powerful managers can kill the important concept and ideas of the

lower level employees.

An organization without boss becomes successful only when the employees of an

organization are competent enough to face the challenge and bear the risk. It is not for

those who are quiet pessimistic and like to work under direct guidance. Employees set their

own goals to accomplish it. And for the resources needed to achieve those goals, they need

not have to wait for the purchase officers’s decision.  Each and every person can purchase

whatever they like that supports the individual/ organizational goals. So with this decision,

employees are free to choose the sector in which they want to work for.

Although there is a minimal chance of arrising the conflict between the employees, there is

also a solution for it. If the conflict appears between two parties within an organization,

there is an independent body that helps in resolution of conflict. So it is resolved internally.

So, for the smart and deserving candidate who wants to be a leader and very eager to face

the challenges. This type of organization is very much beneficial. It gives satisfaction at the

workplace and increases delegation. But due to the lack of adoption capability, it is found

that more than 50 % of the total workers leave the organization. Proper selection of the

employees with proper guidance is seen very essential in this regards.

In the absence of a single rigid manager, everyone’s a manager. The job of managing

includes planning, organizing, directing, staffing, and controlling, and everyone at Morning

Star is expected to do all these things. Everyone is a manager of their own mission. They are

managers of the agreements they make with colleagues, they are managers of the

resources they need to get the job done, and they are managers who hold their colleagues

accountable.”

Although the context of firing all the managers in each and every organization is almost

impossible, the move taken by Morning Star is incredible. The organization and the human

resource fit the modality. But it is very hard to find the competent and self motivated human

resource in every context.

LET’S FIRE ALL THE MANAGERS!

BY DR. ROGER K. ALLEN 1 COMMENT

I’m taking my title from an article written by Gary Hamel in the December, 2011 edition of The Harvard

Business Review. In the article, Hamel reports on the practices of Morning Star, a tomato processing

company founded in 1970 with 400 employees and over $700 million in annual revenue. You’ve likely

used the company’s products since they handle around 30% of the tomatoes processed in the US each

year. In an industry that has grown by about 1% in the past 20 years, Morning  Star’s revenues have

consistently been in double digits.

However, what sets Morning Star apart from so many companies, in and outside its industry, is the fact

that it has no managers. In fact, the company is a pioneer in unusual practices:

No one has a boss

There are no titles nor promotions

Employees negotiate responsibilities with their peers

Everyone has the authority to spend the companies money

Each person is responsible to acquire the tools needed to do his/her work

Compensation is determined by peers

I recall my first work experience as an intern at an innovative Proctor & Gamble manufacturing plant. The

company was one of the first to implement high performance work systems. One of their innovations was

self-directed work teams, an uncommon practice for its day. I was impressed that some of the

manufacturing teams were leaderless. The teams had evolved to such a high degree that team members

took responsibility for all aspects of their production. A supervisor looking over their shoulders, making

decisions and directing their work added no value.

But a whole company?

The notion is virtually inconceivable to the employees (and certainly managers) of most corporations. 

Perhaps, one might reason, it is possible when work is simple and stable and employees hand-selected

for their social and emotional maturity. But it’s hard to imagine a company without leaders given the

complexity of coordinating hundreds of disparate contributions into a single product.

The fact that Morning Star (and other notable companies such as W.L. Gore and Associates) have

accomplished this turns some of the tenets  of scientific management, as espoused by such thinkers as

Max Weber and Frederick Taylor, upside down. It challenges our assumptions about the nature of work

as well as people who do that work. Perhaps people truly want to succeed, to make a contribution to the

business. Perhaps they are capable of figuring out not only what needs to be done but how to coordinate

with others to accomplish a complex set of tasks.

Morning  Star does a couple of things to get the best from their people. First, every person writes a

personal mission statement that outlines how he/she will contribute to the company’s mission of

“producing tomato products and services which consistently achieve the quality and service expectations

of our customers.”  Then people are expected to be responsible for accomplishing their mission and

acquiring the resources and cooperation to do so. Finally, employees negotiate agreements (letters of

understanding, like SLAs) with their co-workers most affected by their work. In essence, these

agreements become an operating plan that describes how one will accomplish his/her mission as well as

the metrics by which he/she will be held accountable by these peers. Not a quick or easy process but one

which assures that people add value and coordinate with others to the accomplishment of organizational

goals.

Although there are other tenets that make up the Morning Star’s operational success, these agreements

take the place of hierarchical structure. People, at the point of a decision, have the fluidity and authority to

do what needs to be done to accomplish an outcome rather than relying on someone from above

directing their activity. Organizing in this way results in a host of advantages: lower costs, more

cooperation, better decisions, increased flexibility, and higher loyalty.

Of course, it also brings certain disadvantages and challenges: tougher adjustment for some, longer

induction, harder to hold people accountable, inability to acquire other companies (with a different

culture), and so on.

I am not suggesting that the Morning Star model is right for everyone. However, it does teach us a lot

about the principles of self-management, which likely can be incorporated into many companies today. At

its heart is the notion that people are intelligent and capable. They want to contribute and can do so as we

remove barriers and design organizational structures and systems in ways that allow them the flexibility

and authority to work up to their potential.

First, Let’s Fire All the Managers Gary Hamel

FROM THE DECEMBER 2011 ISSUE

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Management is the least efficient activity in your organization.

Think of the countless hours that team leaders, department heads, and vice presidents devote to supervising the work of others. Most managers are hardworking; the problem doesn’t lie with them. The inefficiency stems from a top-heavy management model that is both cumbersome and costly.

A hierarchy of managers exacts a hefty tax on any organization. This levy comes in several forms. First, managers add overhead, and as an organization grows, the costs of management rise in both absolute and relative terms. A small organization may have one manager and 10 employees; one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That’s because an additional 1,111 managers will be needed to manage the managers. In addition, there will be hundreds of employees in management-related functions, such as finance, human resources, and planning. Their job is to keep the organization from collapsing under the weight of its own complexity. Assuming that each manager earns three times the average salary of a first-level employee, direct management costs would account for 33% of the payroll. Any way you cut it, management is expensive.

Second, the typical management hierarchy increases the risk of large, calamitous decisions. As decisions get bigger, the ranks of those able to challenge the decision maker get smaller. Hubris, myopia, and naïveté can lead to bad judgment at any level, but the danger is greatest when the decision maker’s power is, for all purposes, uncontestable. Give someone monarchlike authority, and sooner or later there will be a royal screwup. A related problem is that the most powerful managers are the ones furthest from frontline realities. All too often, decisions made on an Olympian peak prove to be unworkable on the ground.

Third, a multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making. Bias is another sort of tax. In a hierarchy the power to kill or modify a new idea is often vested in a single person, whose parochial interests may skew decisions.

Finally, there’s the cost of tyranny. The problem isn’t the occasional control freak; it’s the hierarchical structure that systematically disempowers lower-level employees. For example, as a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition a $500 office chair. Narrow an individual’s scope of authority, and you shrink the incentive to dream, imagine, and contribute.

Hierarchies Versus Markets

No wonder economists have long celebrated the ability of markets to coordinate human activity with little or no top-down control. Markets have limits, though. As economists like Ronald Coase and Oliver Williamson have noted, markets work well when the needs of each party are simple, stable, and easy to specify, but they’re less effective when interactions are complex. It’s hard to imagine, for instance, how a market could precisely coordinate the kaleidoscopic array of activities at the heart of a large, process-intensive manufacturing operation.

That’s why we need corporations and managers. Managers do what markets cannot; they amalgamate thousands of disparate contributions into a single product or service. They constitute what business historianAlfred D. Chandler Jr. called the visible hand. The downside, though, is that the visible hand is inefficient and often ham-fisted.

Wouldn’t it be great if we could achieve high levels of coordination without a supervisory superstructure? Wouldn’t it be terrific if we could get the freedom and flexibility of an open market with the control and coordination of a tightly knit hierarchy? If only we could manage without managers.

Peer inside an open-source software project, and you might think you’ve glimpsed that organizational nirvana. You’ll find hundreds of programmers and few, if any, managers. In an open-source project, however, tasks are modular, volunteers work independently, interfaces are clearly defined, and scientific breakthroughs aren’t expected. Coordination is plug-and-play. Contrast this with the challenge Boeing faces in building an all-new airliner. Here, a vast army of specialists must work shoulder-to-shoulder in tackling thousands of leading-edge design and manufacturing issues. As Boeing has learned, outsourcing chunks of development doesn’t make coordination any less perplexing. A market can’t build a Dreamliner.

Are we then stuck with these trade-offs? Is there no way to buy coordination and control tax-free? It might seem so, since most us have never come across a company that’s both highly decentralized and precisely synchronized.

Beyond Management as Usual

We are all prisoners of the familiar. Many things—the first iPhone, J.K. Rowling’s wizardly world, Lady Gaga’s sirloin gown—were difficult to envision until we encountered them. So it is with organizations. It’s tough to imagine a company where…

• No one has a boss.

• Employees negotiate responsibilities with their peers.

• Everyone can spend the company’s money.

• Each individual is responsible for acquiring the tools needed to do his or her work.

• There are no titles and no promotions.

• Compensation decisions are peer-based.

Sound impossible? It’s not. These are the signature characteristics of a large, capital-intensive corporation whose sprawling plants devour hundreds of tons of raw materials every hour, where dozens of processes have to be kept within tight tolerances, and where 400 full-time employees produce over $700 million a year in revenues. And by the way, this unique company is a global market leader.

This probably stretches your credulity; it sure stretched mine. That’s why, when I heard about the Morning Star Company, I jumped at the chance to visit one of its plants in California’s San Joaquin Valley.

If you’ve ever eaten a pizza, dumped ketchup on a hamburger, or poured sauce on a bowlful of spaghetti, you’ve probably consumed the company’s products. Headquartered in Woodland, California, near Sacramento, Morning Star is the world’s largest tomato processor, handling between 25% and 30% of the tomatoes processed each year in the United States.

The company was founded in 1970 as a tomato trucking operation by Chris Rufer, then an MBA student at UCLA, who is still its president. Today Morning Star has three large plants that process the fruit according to hundreds of slightly different customer recipes. In addition to bulk products, the company produces canned tomatoes that go to supermarkets and food service businesses. It also comprises a trucking company that

moves over two million tons of tomatoes annually and a business that handles the harvesting.

Over the past 20 years, Morning Star’s volumes, revenues, and profits have grown at a double-digit clip, claims Rufer. Industry growth, by contrast, has averaged 1% a year. As a private company, Morning Star doesn’t share its financial results, but I was told that the company has funded virtually all its growth from internal sources, which suggests it is robustly profitable. On the basis of its own benchmarking data, Morning Star believes it is the world’s most efficient tomato processor.

Morning Star is a “positive deviant”; indeed, it’s one of the most delightfully unusual companies I’ve come across. Employees (“colleagues” in Morning Star argot) are ridiculously empowered yet work together like members of a carefully choreographed dance troupe. By digging into the principles and practices that underpin this company’s unique management model, we can learn how it might be possible to escape—or at least reduce—the management tax.

The Road to Self-Management

Your organization probably wasn’t built around the principles of self-management. It’s most likely a bureaucracy—with a thicket of policy rules, a multilayered hierarchy, and a host of management processes—built to ensure conformity and predictability.

Control is the philosophical cornerstone of bureaucracy, as Max Weber pointed out nearly a century ago. In a bureaucracy managers are enforcers who ensure that employees follow rules, adhere to standards, and meet budgets.

Bureaucracy and self-management are ideological opposites, like totalitarianism and democracy. To build a self-managing organization, you can’t just prune the brambles of bureaucracy—you have to uproot them. The founders of the United States didn’t set out to temper the excesses of a monarchy; they sought to supplant it. In the same way, if you don’t make an unequivocal commitment to self-management, you’ll content yourself with easily reversed half measures when you should press for more.

Nevertheless, no one is going to just give you permission to blow up the old structures. You will have to demonstrate that self-management doesn’t mean no management and that radical decentralization isn’t anarchy. Here’s how to get started.

First,

ask everyone on your team to write down a personal mission. Ask each person, “What’s the value you want to create for your peers? What are the problems you want to solve for your colleagues?” Challenge people to focus on benefits delivered rather than activities performed. Once everyone has developed a short sentence or two, organize

people into small groups and have them critique one another’s mission statements. In the process you will start shifting the focus from rule-driven compliance to peer-negotiated accountability.

Second,

look for small ways to expand the scope of employee autonomy. Ask your colleagues, “What are the procedures that handicap you in achieving your mission?” Once you’ve identified the most exasperating ones, roll them back partially and see what happens. It’s possible to ratchet back control, and if you’re serious about self-management, you’ll do that notch by notch.

Third,

equip every team with its own P&L account. To exercise freedom wisely, employees must be able to calculate the impact of their decisions. The road to self-management is paved with information.

Finally,

you must look for ways to erase the distinctions between those who manage and those who are managed. If you’re a manager, you can start by enumerating your commitments to your team. Ask everyone who works for you to annotate the list. Getting leaders to be more accountable to the led is essential to building a web of reciprocal responsibilities.

For traditional companies, the road to self-management will be long and steep, but the experiences of Morning Star and W.L. Gore, another champion of self-management, suggest that the journey is worth the effort. At the end you’ll arrive at an organization that is highly effective and deeply human.

Unpacking the Morning Star Model

Morning Star’s goal, according to its organizational vision, is to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others.”

Did you stumble on those last four words? How the heck do you run a company where nobody gives orders and nobody takes them? Here’s how Morning Star does it:

Make the mission the boss.

Every employee at Morning Star is responsible for drawing up a personal mission statement that outlines how he or she will contribute to the company’s goal of “producing tomato products and services which consistently achieve the quality and service expectations of our customers.” Take Rodney Regert, who works in the company’s Los Banos plant. His mission is to turn tomatoes into juice in a way that is highly efficient and environmentally responsible.

Personal mission statements are the cornerstone of Morning Star’s management model. “You are responsible for the accomplishment of your mission and for acquiring the training, resources, and cooperation that you need to fulfill your mission,” explains Rufer. Adds Paul Green Sr., an experienced plant technician, “I’m driven by my mission and my commitments, not by a manager.”

Let employees forge agreements.

Every year, each Morning Star employee negotiates a Colleague Letter of Understanding (CLOU) with the associates who are most affected by his or her work. A CLOU (pronounced “clue”) is, in essence, an operating plan for fulfilling one’s mission. An employee may talk to 10 or more colleagues during the negotiations, with each discussion lasting 20 to 60 minutes. A CLOU can cover as many as 30 activity areas and spells out all the relevant performance metrics. All together, CLOUs delineate roughly 3,000 formal relationships among Morning Star’s full-time employees.

CLOUs morph from year to year to reflect changing competencies and shifting interests. Over time experienced colleagues take on more-complex assignments and off-load basic tasks to recently hired colleagues. In explaining the logic behind the CLOUs, Rufer emphasizes the idea that voluntary agreements among independent agents can produce highly effective coordination. “The CLOUs create structure,” he says. “As a colleague, I agree to provide this report to you, or load these containers into a truck, or operate a piece of equipment in a certain fashion. This is spontaneous order, and it gives you more fluidity. Relationships can change form more easily than if we tried to fix them from above.”

Strikingly, Rufer doesn’t see freedom as the enemy of coordination; he sees it as its ally. Every person at Morning Star is a contractor in a web of multilateral commitments. As one team member told me, “Around here, nobody’s your boss and everybody’s your boss.”

Morning Star’s 23 business units also negotiate customer-supplier agreements with one another annually, in a CLOU-like process. Since each

unit has a profit and loss account, the bargaining can be fierce. The farming unit and the processing plants, for example, will haggle over volumes, pricing, and delivery schedules. The philosophy is the same as with the employee CLOUs: Agreements reached by independent entities are better at aligning incentives and reflecting realities than centrally mandated arrangements are.

Empower everyone—truly.

In most companies the reality of empowerment falls far short of the rhetoric. Not at Morning Star, though. Nick Kastle, a business development specialist, draws a stark comparison between Morning Star and his previous employer: “I used to work in a company where I reported to a VP, who reported to a senior VP, who reported to an executive VP. Here, you have to drive the bus. You can’t tell someone, ‘Get this done.’ You have to do whatever needs to be done.”

That includes obtaining the tools and equipment you need to do your job. At Morning Star, there’s no central purchasing department or senior executive who has to sign off on expenditures; anyone can issue a purchase order. If a maintenance engineer needs an $8,000 welder, he orders one. When the invoice arrives he confirms that he has received the equipment and sends the bill to accounting for payment. Although purchasing is decentralized, it’s not uncoordinated. Morning Star colleagues who buy similar items in large quantities or from the same vendors meet periodically to ensure that they are maximizing their buying power.

Rufer explains the thinking behind the process: “I was signing checks one day and I recalled the saying, ‘The buck stops here.’ I thought to myself, That isn’t true. In front of me was a purchase order, a note that said the stuff had been shipped, we had received it, and that the price on the invoice matched the purchase order. A check had been prepared. Now, do I have the choice not to sign the check? Nope. So the question isn’t where the buck stops, but where it starts—and it starts with the person who needs the equipment. I shouldn’t have to review the purchase order, and the individual shouldn’t have to get a manager’s approval.” Occasionally, there are more projects than cash, and when this happens, investments will be postponed. Still, the role of Morning Star’s finance staff is to find capital rather than to allocate it.

Self-management extends to staffing decisions as well. Colleagues are responsible for initiating the hiring process when they find themselves overloaded or spot a new role that needs filling. It’s a rare company that shares the corporate checkbook with frontline employees and expects them to take the lead in recruiting. To Rufer, though, it’s common sense: “I don’t

want anyone at Morning Star to feel they can’t succeed because they don’t have the right equipment or capable colleagues.”

During my visit to Morning Star, I didn’t hear anyone use the term “empowerment.” That’s because the notion of empowerment assumes that authority trickles down—that power gets bestowed from above, as and when the powerful see fit. In an organization built on the principles of self-management, individuals aren’t given power by the higher-ups; they simply have it.

Don’t force people into boxes.

Morning Star has no centrally defined roles, so employees get the opportunity to take on bigger responsibilities as they develop their skills and gain experience. “We believe you should do what you’re good at, so we don’t try to fit people into a job,” says Paul Green Jr., who leads the company’s training and development efforts. “As a result, our people have broader and more complicated roles than elsewhere.”

Everyone has the right to suggest improvements in any area. While employees elsewhere often assume that change comes from above, at Morning Star, colleagues understand that it’s their responsibility to take the lead. “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,” Green says. “We have a lot of spontaneous innovation, and ideas for change come from unusual places.”

Encourage competition for impact, not for promotions.

With no hierarchy and no titles, there’s no career ladder to climb at Morning Star. That doesn’t mean everyone is equal. In any area of expertise, some colleagues are recognized as more competent than others, and these differences are reflected in compensation levels. While there’s internal competition, the rivalry is focused on who can contribute the most rather than who gets a plum job. To get ahead an employee must master new skills or discover new ways of serving colleagues. “Around here, there’s no such thing as a promotion,” says Ron Caoua, an IT specialist. “What strengthens my résumé is more responsibility—not a bigger title.”

Rufer offers a golfing analogy to explain how people advance at Morning Star: “When Jack Nicklaus was competing, was he concerned about becoming an executive senior vice president golfer? No. He knew that if he got good at it, he would achieve what everyone longs for: a sense of accomplishment. He also knew accomplishment would give him an income to enjoy the life he wanted. Moving up is about competency and reputation, not the office you hold.” 

Freedom to Succeed

At the core of Morning Star’s eccentric yet effective management model is a simple idea: freedom. “If people are free, they will be drawn to what they really like as opposed to being pushed toward what they have been told to like,” says Rufer. “So they will personally do better; they’ll be more enthused to do things.” Morning Star’s employees echo this sentiment. “When people tell you what to do, you’re a machine,” says one operator.

Therein lies the dilemma. To run a large-scale operation you need people to occasionally behave like machines—to be reliable, precise, and hardworking. Typically, supervisors and managers ensure that noses stay on grindstones by setting quotas, monitoring variances, and disciplining slackers. But what happens when supervisors and managers don’t exist? Morning Star’s lattice of commitments may enable a high degree of coordination, but what about discipline? How does an organization exercise control when no one is in charge?

Freedom without responsibility is anarchy. Yet, when you walk through one of Morning Star’s enormous, intricate plants, what you see is the opposite of anarchy. What is it that channels all the freedom that people at Morning Star enjoy into operational effectiveness?

Clear targets, transparent data.

Visit a winter resort, and you will see hundreds of skiers schussing the steep slopes unaided. A blind skier, on the other hand, must be coached down by a guide who shouts out directions. People can’t be self-managing without information. At Morning Star the goal is to provide staffers with all the information they need to monitor their work and make wise decisions.

Every CLOU lays out a set of detailed “steppingstones.” These metrics allow employees to track their success in meeting their associates’ needs. In addition, detailed financial accounts for each business unit are published twice a month and are available to every employee. Colleagues are encouraged to hold one another accountable for results, so an unexpected uptick in expenses is bound to get noticed. With this sort of transparency, folly and sloth are quickly exposed.

Because Morning Star is integrated vertically and horizontally, employees need cross-company information to calculate how their decisions will influence other areas. Rufer knows his people will think about the business holistically only if everyone has access to the same systemwide data. That’s why there are no information silos and why no one questions anyone else’s need to know.

Calculation and consultation.

While employees are free to spend the company’s money, they must build a business case that includes return on investment and net present value calculations. They are also expected to consult their colleagues. An employee pushing for a $3 million investment, for example, might talk with as many as 30 coworkers before pulling the trigger. Similarly, someone who wants to expand a unit’s payroll must sell the idea to his or her peers.

Morning Star colleagues have a lot of authority but seldom make unilateral decisions. Conversely, no individual has the power to kill an idea. Rather than acting as judge, jury, and executioner, experienced team members serve as coaches. A young employee with a bold idea will be encouraged to seek the advice of a few veterans, who will often provide a brief tutorial: “Here’s a model you can use to analyze your idea. Do some more homework, and when you’re ready, let’s talk again.”

Conflict resolution and due process.

What happens when someone abuses his or her freedom, consistently underperforms, or is simply at loggerheads with other colleagues? Morning Star has no managers to settle disputes, and no one has the authority to force a decision. Disagreements between contracting parties in the commercial world are often settled through mediation or in front of a jury, and so it is at Morning Star.

Suppose you and I work in different business units, and you believe I’ve failed to meet my CLOU commitments. As a first step, we’d meet, and you’d argue your case. I might offer an excuse, agree to do better, or toss the blame back at you. If the two of us couldn’t resolve the matter, we would pick an internal mediator whom we both trust and present our views. Let’s say the mediator agreed with you, but I objected to the proposed remedy. At this juncture, a panel of six colleagues would assemble to help us settle our squabble. It might endorse the mediator’s recommendation or propose another solution. If I demurred again, the president would bring the parties together, hear the arguments, and make a binding decision. It is highly unusual, though, for a dispute to land on Rufer’s desk.

When concerns about someone’s performance are serious enough, the conflict resolution process can end with his termination. Nevertheless, at Morning Star, an employee’s fate never rests in the hands of a capricious boss. Rufer explains the benefits: “When a panel of peers gets convened, people can see that the process is fair and reasonable. Everyone knows they have recourse. We’ve taken away the power a boss has to treat an employee as a punching bag because, say, they have something else going on in their lives.”

Peer review and the challenge process.

Accountability is woven into Morning Star’s DNA. New employees attend a seminar on the basics of self-management, where they learn that responsibility is freedom’s twin. Consult as widely as you like, they’re told, but in the end you have to take responsibility for your decisions. No one gets the option of handing off a tough call.

At the end of the year, every employee in the company receives feedback from his or her CLOU colleagues, and in January every business unit is required to defend its performance over the previous 12 months. Since the discussion about each unit can consume the better part of a day, the process extends over several weeks. Each unit presentation is, in effect, a report to shareholders. Team members have to justify their use of the company’s resources, acknowledge shortfalls, and present plans for improvement.

Business units are ranked by performance, and those near the bottom can expect an interrogation. “If a business unit has made investments that aren’t paying off,” notes Rufer, “they’ll be subject to a fair amount of ridicule. It will be more difficult for them to get their colleagues on board for future investments.” Agreed one team member: “There is a social risk in doing something your colleagues think is stupid.”

In February of each year, a strategy meeting provides another opportunity for peer review. Each business unit gets 20 minutes to present its plan for the coming year before a companywide audience. Colleagues then have the opportunity to invest in the most promising strategies using a virtual currency. Any business unit that fails to attract its share of fantasy money knows it will be under intense scrutiny.

Elected compensation committees.

Morning Star’s approach to compensation is more akin to that of a professional services firm than a manufacturing business. At the end of each year, every colleague develops a self-assessment document outlining how he or she performed against CLOU goals, ROI targets, and other metrics. Colleagues then elect a local compensation committee; about eight such bodies are created across the company each year. The committees work to validate self-assessments and uncover contributions that went unreported. After weighing inputs, the committees set individual compensation levels, ensuring that pay aligns with value added. 

The Advantages of Self-Management

Many colleagues at Morning Star have worked for other employers. If you ask them about the advantages of self-management, they’re passionate and eloquent. Here’s what they say:

More initiative.

At Morning Star the recipe for initiative is simple: Define roles broadly, give individuals the authority to act, and make sure they get lots of recognition when they help others.

“What is it,” I inquired of a plant mechanic, “that prompts team members to be proactive in offering help to colleagues?” His answer: “Our organization is driven by reputational capital. When you have some advice to add to another part of the company, that increases your reputational capital.”

More expertise.

The self-management model encourages employees to develop their skills. At Morning Star, the experts aren’t managers or senior staffers; they’re the people doing the work. For example, the folks filling aseptic containers on the packaging line are also deeply knowledgeable about microbiology. “Everyone here is responsible for the quality of their work,” says Scott Marnoch, an internal quality expert. “There’s a lot of pride. Besides, there’s no boss to take the fall if things go wrong.”

More flexibility.

Morning Star’s management model promotes speed and flexibility, a point Rufer makes with an analogy. “Clouds form and then go away because atmospheric conditions, temperatures, and humidity cause molecules of water to either condense or vaporize,” he says. “Organizations should be the same; structures need to appear and disappear based on the forces that are acting on the organization. When people are free to act, they’re able to sense those forces and act in ways that fit best with reality.” Paul Green Jr. notes that his colleagues come together to launch hundreds of change initiatives every year as they hunt for ways to serve their missions better.

More collegiality.

When you dismantle the pyramid, you drain much of the poison out of an organization. While competition for advancement can spur individual accomplishment, the zero-sum nature of the contest encourages politicking and accentuates rivalries. In a pancake-flat organization, there are no

bosses to please and no adversaries to elbow aside. Paul Terpeluk, a Morning Star colleague who has done stints at two Fortune500 companies, describes the benefits of a promotionless company: “There’s less backstabbing, because we’re not competing for that scarce commodity called a promotion. All your energy goes into doing the best you can do and into helping your colleagues.”

Better judgment.

In most organizations key decisions are usually escalated to executives trained in the science of business analysis. They have a wealth of data and analytical sophistication, but what they lack is context—an understanding of the facts on the ground. That’s why decisions that appear brilliant to top-level executives are often regarded as boneheaded by those on the front lines. Rather than pushing decisions up, Morning Star pushes expertise down. For example, roughly half the company’s employees have completed courses on how to negotiate with suppliers. Many have also been trained in financial analysis. Since the doers and the thinkers are the same, decisions are wiser and more timely.

More loyalty.

Few colleagues leave Morning Star for a competitor, but the reverse frequently happens. What’s more, even temporary employees are dedicated to the company. Each summer, as the tomatoes come off the vine, Morning Star’s processing plants take on more than 800 seasonal workers. Ninety percent of them return each year, and the company has trained them in the principles of self-management. When a team of independent researchers recently measured this group’s sense of empowerment and ownership, they found that the temporary workers had the sort of engagement scores that are typical of senior executives in other companies.

Finally, a manager-free payroll has cost advantages. Some of the savings go to Morning Star’s full-time employees, who earn 10% to 15% more than their counterparts at other companies do. By avoiding the management tax, the company can also invest more in growth.

Advantages

Lower Costs

Having no managers reduces head count and wage costs. The savings can be used to pay better salaries to everyone and to fuel growth.

More Collegiality

Backstabbing, politicking, and sycophantic behaviors drop dramatically when employees stop competing for promotions.

Greater Initiative

Employees are proactive because they have the freedom to act. They are also willing to help colleagues because it increases their reputational capital.

Higher Loyalty

Few employees leave to join rivals, and even temporary workers are dedicated to the organization.

Deeper Expertise

Because everyone is responsible for the quality of his or her work, employees are forced to invest in developing their skills.

Better Decisions

By pushing expertise down to the front lines, rather than escalating decisions, self-management promotes smarter, faster decisions.

Increased Flexibility

Employees respond rapidly, coming together in teams to tackle challenges and to experiment with new ideas.

A Cheap Lunch but Not a Free One

While Morning Star’s organization reduces management costs, it does have drawbacks. First, not everyone is suited to Morning Star’s model. This is less a matter of capability than of acculturation. An individual who has spent years working in a highly stratified organization often has difficulty adjusting. Rufer estimates that, on average, it takes a new associate a year or more to become fully functional in the self-management environment.

Disadvantages

Tougher Adjustment

Self-management doesn’t suit everyone. Employees who’ve worked all their lives in hierarchical organizations may not be able to cope.

Accountability Challenges

If employees fail to deliver a strong message to colleagues who don’t meet expectations, self-management can become a conspiracy of mediocrity.

Longer Induction

It takes time to fit in. New employees may need a year or more to become fully functional in the system.

Growth Issues

Without a corporate ladder to climb, employees find it difficult to evaluate their progress relative to peers. That can become a handicap when someone wants to switch companies.

That adds time and complexity to the hiring process. When the company was smaller, Rufer spent half a day interviewing every prospective employee, usually in the candidate’s home. The bulk of the conversation focused on assessing the fit between Morning Star’s philosophy and the applicant’s expectations. Today every potential hire gets a two-hour introduction to self-management and is interviewed by 10 to 12 Morning Star colleagues. Even then, mistakes happen. Paul Green Jr. estimates that as many as 50% of seasoned hires leave within two years because they have a hard time adapting to a system where they can’t play god.

Getting colleagues to hold one another accountable is a second challenge. In a hierarchical organization the boss deals with troublemakers and underperformers. At Morning Star everyone is responsible for safeguarding quality, efficiency, and teamwork by calling out colleagues who violate policies or norms. If employees shirk that duty and fail to deliver tough love when needed, self-management can quickly become a conspiracy of mediocrity. That risk is explicitly addressed in Morning Star’s training programs, which stress the fact that peer regulation won’t work without courageous colleagues.

Growth is a third challenge. Though Morning Star continues to grow faster than the industry average, Rufer and his colleagues are wary of diluting the company’s culture—a concern that makes them reluctant to acquire companies. Although Morning Star has been looking for ways to expand, it has so far resisted the urge to trade away its management advantage for even faster growth.

Tracking personal development is also tough. In most companies the rungs of the corporate ladder serve as benchmarks. With no hierarchy, Morning Star colleagues can find it difficult to evaluate their progress relative to

industry peers. That can be a handicap for someone who wants to switch companies but can’t claim to have attained a particular rank.

Managers Versus Managing

When I suggested to Rufer that Morning Star had learned how to manage without managers, he immediately corrected me. “Everyone’s a manager here,” he said. “We are manager rich. The job of managing includes planning, organizing, directing, staffing, and controlling, and everyone at Morning Star is expected to do all these things. Everyone is a manager of their own mission. They are managers of the agreements they make with colleagues, they are managers of the resources they need to get the job done, and they are managers who hold their colleagues accountable.”

Nevertheless, Rufer knew what I was driving at. For decades the assumption has been that the work of managing is best performed by a superior caste of formally designated managers, but Morning Star’s long-running experiment suggests it is both possible and profitable to syndicate the task to just about everyone. When individuals have the right information, incentives, tools, and accountabilities, they can mostly manage themselves.

Turns out we don’t have to choose between the advantages of markets and hierarchies. Morning Star is neither a loose confederation of individual contractors nor a stultifying bureaucracy; it’s a subtle blend of both market and hierarchy.

On the one hand, you can think of Morning Star as a socially dense marketplace. Colleagues are free to negotiate marketlike contracts with their peers. While this might seem a contentious and complicated process, several factors mitigate those risks. First, everyone involved in the negotiations shares the same scorecard. In a pure market, a consumer doesn’t really care whether a deal is good for the seller. By contrast, people at Morning Star know they won’t have a great place to work if the company doesn’t do well.

Second, team members at Morning Star know that if they take advantage of a colleague or fail to deliver on a promise, the repercussions will catch up with them. This encourages associates to think in terms of relationships rather than transactions. Finally, because most folks at Morning Star have been in the tomato business for years, they have a good sense of what needs to be done and who needs to do it. Not every aspect of every contract needs to be rewritten each year. Without this social glue—shared goals, long-term relationships, and industry knowledge—Morning Star’s system would be much less efficient.

On the other hand, 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.

In most companies the hierarchy is neither natural nor dynamic. Leaders don’t emerge from below; they are appointed from above. Maddeningly, key jobs often go to the most politically astute rather than the most competent. Further, because power is vested in positions, it doesn’t automatically flow from those who are less capable to those who are more so. All too often managers lose their power only when they’re fired. Until then they can keep mucking things up. No one at Morning Star believes that everyone should have an equal vote on every decision, but neither does anyone believe that one person should have the last word simply because he or she is the boss. While management’s future has yet to be written, the folks at Morning Star have penned a provocative prologue. Questions remain. Can the company’s self-management model work in a company of 10,000 or 100,000 employees? Can it be exported to other cultures? Can it cope with a serious threat, such as a low-cost offshore competitor? These questions keep Rufer and his colleagues up at night. They readily admit that self-management is a work in progress. “Ideologically, we’re about 90% of the way there,” says Rufer. “Practically, maybe only 70%.”

I believe Morning Star’s model could work in companies of any size. Most big corporations are collections of teams, departments, and functions, not all of which are equally interdependent. However large the company, most units would have to contract with only a few others. With $700 million a year in revenues, Morning Star certainly isn’t a small business, but it’s not a humongous one, either.

There’s no reason why its self-management model wouldn’t work in a much larger company where Morning Star was, say, a single division—as long as other divisions shared its management philosophy. It’s not too hard to imagine divisional representatives within a global giant negotiating the same sorts of intracompany agreements that Morning Star’s business units forge each year. In fact, the real question is not whether the model can be scaled up but whether it can be adopted by a traditional, hierarchical organization. Again, I believe the answer is yes, but the metamorphosis will take time, energy, and passion. (See the sidebar “The Road to Self-Management.”)

Whatever the uncertainties, Morning Star’s example makes two things clear. One, with a bit of imagination, it’s possible to transcend the seemingly intractable trade-offs, such as freedom versus control, that have long bedeviled organizations. Two, we don’t have to be starry-eyed romantics to dream of organizations where managing is no longer the right of a vaunted few but the responsibility of all.

A version of this article appeared in the December 2011 issue of Harvard Business Review.

First, let's fire all the managers First, Let's Fire All the Managers Gary Hamel

Management is the least efficient activity in your organization

. • A hierarchy of managers exacts a hefty tax on any organization. This levy comes in several forms. 1. managers add overhead, and as an organization grows, the costs of management rise in both absolute and relative terms.

2. the typical management hierarchy increases the risk of large, calamitous decisions. As decisions get bigger, the ranks of those able to challenge the decision maker get smaller

3. a multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making

4. there’s the cost of tyranny. The problem isn’t the occasional control freak; it’s the hierarchical structure that systematically disempowers lower-level employees

Hierarchies Versus Markets

• markets work well when the needs of each party are simple, stable, and easy to specify, but they’re less effective when interactions are complex

• It’s hard to imagine, for instance, how a market could precisely coordinate the kaleidoscopic array of activities at the heart of a large, process-intensive manufacturing operation.

• That’s why we need corporations and managers. Managers do what markets cannot; they amalgamate thousands of disparate contributions into a single product or service. They constitute what business historian Alfred D. Chandler Jr. called the visible hand. The downside, though, is that the visible hand is inefficient and often ham-fisted.

Beyond Management as Usual

• We are all prisoners of the familiar, it’s tough to imagine a company where…

• No one has a boss. !

• Employees negotiate responsibilities with their peers.

• Everyone can spend the company’s money.

• Each individual is responsible for acquiring the tools needed to do his or her work.

• There are no titles and no promotions.

• Compensation decisions are peer-based.

The Road to SelfManagement

• Your organization probably wasn’t built around the principles of selfmanagement. It’s most likely a bureaucracy—with a thicket of policy rules, a multilayered hierarchy, and a host of management processes—built to ensure conformity and predictability.

• Control is the philosophical cornerstone of bureaucracy, as Max Weber pointed out nearly a century ago. In a bureaucracy managers are enforcers who ensure that employees follow rules, adhere to standards, and meet budgets.

• Bureaucracy and self-management are ideological opposites, like totalitarianism and democracy. To build a self-managing organization, you can’t just prune the brambles of bureaucracy—you have to uproot them. The founders of the United States didn’t set out to temper the excesses of a monarchy; they sought to supplant it. In the same way, if you don’t make an unequivocal commitment to self-management, you’ll content yourself with easily reversed half measures when you should press for more.

The Road to SelfManagement

• Nevertheless, no one is going to just give you permission to blow up the old structures. You will have to demonstrate that self-management doesn’t mean no management and that radical decentralization isn’t anarchy. Here’s how to get started.

1. ask everyone on your team to write down a personal mission. Ask each person, “What’s the value you want to create for your peers? What are the problems you want to solve for your colleagues?” Challenge people to focus on benefits delivered rather than activities performed. Once everyone has developed a short sentence or two, organize people into small groups and have them critique one another’s mission statements. In the process you will start shifting the focus from rule-driven compliance to peer-negotiated accountability.

2. look for small ways to expand the scope of employee autonomy. Ask your colleagues, “What are the procedures that handicap you in achieving your mission?” Once you’ve identified the most exasperating ones, roll them back partially and see what happens. It’s possible to ratchet back control, and if you’re serious about self-management, you’ll do that notch by notch

3. equip every team with its own P&L account. To exercise freedom wisely, employees must be able to calculate the impact of their decisions. The road to self-management is paved with information 4. you must look for ways to erase the distinctions between those who manage and those who are managed. If you’re a manager, you can start by enumerating your commitments to your team. Ask everyone who works for you to annotate the list. Getting leaders to be more accountable to the led is essential to building a web of reciprocal responsibilities.

Unpacking the Morning Star Model

• Morning Star’s goal, according to its organizational vision, is to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others.”

• How the heck do you run a company where nobody gives orders and nobody takes them? Here’s how Morning Star does it:

• Make the mission the boss

• Let employees forge agreements

• Empower everyone—truly

• Don’t force people into boxes

• Encourage competition for impact, not for promotions

Freedom to Succeed

• the core of Morning Star’s eccentric yet effective management model is a simple idea: freedom. “If people are free, they will be drawn to what they really like as opposed to being pushed toward what they have been told to like

• Therein lies the dilemma. To run a large-scale operation you need people to occasionally behave like machines—to be reliable, precise, and hardworking. Typically, supervisors and managers ensure that noses stay on grindstones by setting quotas, monitoring variances, and disciplining slackers

• Freedom without responsibility is anarchy. Yet, when you walk through one of Morning Star’s enormous, intricate plants, what you see is the opposite of anarchy. What is it that channels all the freedom that people at Morning Star enjoy into operational effectiveness?

• Clear targets, transparent data.

• Calculation and consultation

• Conflict resolution and due process

• Peer review and the challenge process

• Elected compensation committees

The Advantages of SelfManagement

• More initiative. Define roles broadly, give individuals the authority to act, and make sure they get lots of recognition when they help others.

• More expertise. The self-management model encourages employees to develop their skills. Everyone here is responsible for the quality of their work, There’s a lot of pride. Besides, there’s no boss to take the fall if things go wrong.

• More flexibility. Organizations should be the same; structures need to appear and disappear based on the forces that are acting on the organization. When people are free to act, they’re able to sense those forces and act in ways that fit best with reality

• More collegiality, There’s less backstabbing, because we’re not competing for that scarce commodity called a promotion. All your energy goes into doing the best you can do and into helping your colleagues.”

• Better judgment.In most organizations key decisions are usually escalated to executives trained in the science of business analysis. They have a wealth of data and analytical sophistication, but what they lack is context—an understanding of the facts on the ground. That’s why decisions that appear brilliant to top-level executives are often regarded as boneheaded by those on the front lines.

• More loyalty,

The Disadvantages of SelfManagement

• Tougher Adjustment, Self-management doesn’t suit everyone. Employees who’ve worked all their lives in hierarchical organizations may not be able to cope

• Accountability Challenges, If employees fail to deliver a strong message to colleagues who don’t meet expectations, selfmanagement can become a conspiracy of mediocrity

• Longer Induction. It takes time to fit in. New employees may need a year or more to become fully functional in the system

• Growth Issues. Without a corporate ladder to climb, employees find it difficult to evaluate their progress relative to peers. That can become a handicap when someone wants to switch companies

Managers Versus Managing

• Everyone is a manager of their own mission. They are managers of the agreements they make with colleagues, they are managers of the resources they need to get the job done, and they are managers who hold their colleagues accountable

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First, Let's Fire All The Managers (harvardbusiness.org)

118 points by vellum 627 days ago | 79 comments

peterhunt 626 days ago

I'm somewhat surprised that everyone is so anti-management here.

First of all, Morning Star seems like a pretty well-run place, but the whole system works because they have the luxury of hiring the right people. This is, of course, the single most important factor in any effective organization. If you don't hire the right people or play to their strengths you won't be able to pull this off.

Anyway, a lot of the reasons listed in this piece look like they're sourced from companies with crappy management and I don't think they represent the reality of management, at least in a lot of places.

At Facebook (the only company where I have experience as both an IC and manager) there are three important things to know about management: * It's a parallel track to IC (individual contributor aka hacker). You aren't "promoted" to manager. It's a lateral move. There are plenty of ICs making more money than managers. * All managers go through "bootcamp" (6-week engineering onboarding) and commit code. * The role of the manager is to basically do all the shitty work so ICs don't have to.I want to stress that third point. If you're anything like me, as a hacker you want to be given a well-defined problem (unless the problem is defining the problem) and go off and hack on it for a while with minimal distraction. There are a lot of crappy distractions that come with working in the real world. Here are a few: * Dealing with interpersonal issues * Onboarding new hires * Coordinating engineering efforts and priorities (aka: going to meetings so ICs don't have to) * Telling that guy in sales or that gal in product management that we can't work on their tasks right now * Dealing with medium-priority bugs during crunch timeIf I'm shipping a product I don't want to deal with any of this stuff as long as I'm not being micromanaged or feel like a second-class citizen to management.

So what managers end up doing is being responsible for all of the shit work so their team can go do what they do best. I'm actually concerned that this whole "no management" movement is going to lead to less motivated and less coordinated teams as these companies grow.

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protonfish 626 days ago

The problem is that menial work (arranging meetings, organizing schedules, handling communications with colleagues and clients by phone and mail) used to be handled

by secretaries. If Mad Men is to be believed, at a certain employment level you would get a personal secretary and below that you could draw from a common pool. Where did all these secretarial jobs go? Their title was changed to "manager" and they were put in charge. God help us all.

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crazygringo 626 days ago

Um, no. Secretaries were replaced with personal computers and websites. Nobody needs to take dictation anymore, after all, and information is now at everyone's fingertips.

And the logistics of arranging meetings etc. are handled by office managers generally, if you're talking about who uses which room and for how long.

The idea that secretaries turned into management is bizarre.

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merrua 626 days ago

I think this is a generational gap. As far as I am aware their is a gap between what the role of secretaries was seen as (typing, filing) and what the range of roles contained within the post actually did. There was a good reason why even now, some people said that a computer, and great search hasnt caught up with an excellent secretary.

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lostlogin 626 days ago

I know of dozens of secretaries and typists in the medical field. Voice dictation software doesn't cut it yet. Software that works sort of ok is dependent on platforms companies don't have, and humans are better at error correction, answering the phone and resolving problems. Many surgeons seem to have 2 or 3 secretaries to keep on top of the work. It might be an industry or country specific thing, but secretaries aren't going anywhere fast in my little world.

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AndrewKemendo 626 days ago

So what managers end up doing is being responsible for all of the shit work so their team can go do what they do best.

This is the definition of management if it is being done correctly. In effect you manage inbound tasks from upper management to ensure that important tasks get completed while FUD is diverted or eliminated. This strikes at a larger point though that if you didn't get crap from above there would be little need for management.

The issue is when everyone thinks their project is the most important and should have resources allocated towards it. Then you need someone with a better strategic picture to marry all of the competing requirements such that it fits into the position that your organization takes in the market for that time period.

It also reinforces the fact that there are different layers of "knowledge" from strategic global markets to lines of code. If you want anything better than luck to line those two things up across dozens or hundreds of projects you will need some kind of middle management.

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grecy 626 days ago

Wow, those three dot points sound like dream-land compared to my current company.

I think when people say "get rid of managers", they are not referring to the setup you

mention, but to the old-world where managers are clueless about the work actually being done, take all the credit, and make much more money. Also, being "promoted" to management means leaving tech forever.

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kokey 626 days ago

I have found the approach like the Facebook example above to be more common in the UK, to South Africa or India. I have been wondering whether it's just my experience, or if developing countries are just simply behind and resemble an old class system. That said, in all these countries a specialist surgeon would be seen as an equal or superior to a hospital manager, almost exactly like the Facebook example. So, the issue may be down to the immaturity of the IT industry.

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dworin 626 days ago

Management practices, on average (there are always exceptions) tend to be much better in the developed world. Here's some research from Harvard Business School that looks at it more quantitatively:http://www.hbs.edu/faculty/Publication%20Files/12-052.pdf Here's another one, although it's less academic and more consultanty: http://www.stanford.edu/~nbloom/ManagementReport.pdf

Improved management is actually one of the reasons that developing countries are able to achieve such remarkable productivity gains. Here's a study that actually used Randomized Controlled Trials to show the effects of improved management practices in India: http://www.stanford.edu/~nbloom/DMM.pdf

The TL/DR on that last one is that a small amount of management consulting led to pretty big productivity improvements.

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mercer 623 days ago

I've spent much of my life in a poor, developing country, and in my experience there is a huge difference in how people perceive formal structures in general, but power dynamics in particular. People in charge tend to be more authoritarian, and people in lower positions tend to be more subservient and they do exactly as they're told and no more than that.

Except for the ones who have a really obvious stake in the structure's success (owners usually), the thing people in each of these positions have in common is that they do not perceive themselves as individual, autonomous actors with responsibilities, but rather as roles to inhabit and strictly follow - and never go above and beyond.

This often led to hilarious and infuriatingly inefficient results, and me and my family constantly marvelled at this, even after ten years in such an environment. Some examples:

In construction, the boss would have to be on-site at all times. He'd just be standing there watching his workers work, because if he left, they would immediately slack off. And if he gave instructions, they would follow these instructions to the letter, sometimes with disastrous consequences. When asked why they did something particularly stupid, they'd shrug and explain that they were told to do this and so they just did it. It often had little to do with their abilities.

When an individual worker would be promoted to a managerial position, he or she, no matter their personality, would instantly turn into a rather

unpleasant bossy character, and not take any initiatives beyond 'managing'. Working alongside their underlings was unacceptable. Seeing this sudden transformation was a bit scary.

A translator working for my father wasn't very familiar with computers but when tasked to translate some text using word perfect, she went ahead and started working hard. A few hours in, he checked up on her and while she said everything was fine, he noticed that she hadn't translated more than a page. After some prodding, she explained that she was rather frustrated that as she reached the end of the page, her earlier translations vanished. It turned out that she had translated a screen full of text multiple times and simply didn't understand that off-screen text was still there. At no point did she feel an urge to ask about this, despite her frustration.

I could keep going, but what really struck me, again and again, was the sense of lemming-like behavior that people exhibited as soon as they were assigned a role, the huge inefficiencies of having multiple people do very specific jobs that one person could do faster and better in the same amount of time, and the complete lack of a sense of 'professional pride' in their roles.

What was especially interesting about all this is that my 'home' culture (Holland) is pretty much on the extreme other end of the scale (often, not always): bosses dress down and tried to avoid any kind of pulling rank (to a fault sometimes), employees have opinions on everything, even things outside their responsibility, and they express these opinions vocally and often with little regard of rank and appropriateness. Flat power structures (polder model) are favored over big hierarchies.

When children in this developing nation talked back to their parents, they'd receive punishment whether they were correct or not. When Dutch kids talk back we consider them cute and precocious.

These are broad strokes, of course, but these differences were apparent time and time again.

I have some theories as to why this is the case, but none that seem to fully explain these massive differences.

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rch 626 days ago

> as a hacker you want to be given a well-defined problem

I think identifying and solving open problems is more of a hacker mindset.

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dworin 626 days ago

>> "What managers end up doing is being responsible for all of the shit work so their team can go do what they do best"

This is, in essence, a manager's most important job. It gets under valued, because when it's working it doesn't look like a manager is doing anything, it just looks like a bunch of great people working away. You notice managers when they're bad, not when they're good.

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dredmorbius 626 days ago

Sorry, but IC is what?

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zhte415 625 days ago

Individual Contributor i.e. someone that doesn't manage others, but contributes as an individual.

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crazygringo 626 days ago

From what I recall, there's a big counter-argument to this, which is that management is necessary because organization is fundamentally necessary, and that when there are no formal "managers", certain people wind up being informal managers, but because this is "hidden", it winds up being less accountable, more open to cliquishness and/or discrimination, and having a host of problems of its own.

I've been trying to find an article I remember which describes how this is particularly bad for women, who can easily be "informally" excluded, but I can't find it... All I can find is this, on Valve:

http://www.pcgamer.com/2013/07/08/valves-flat-structure-cont...

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chaz 626 days ago

When Ryan Carson's post made the rounds here not too long ago, I was really surprised by what got them thinking about removing their managers. http://ryancarson.com/post/61562761297/no-managers-why-we-re... By 2013 we had grown to 60 people with seven managers and four executives. As we added more people to the team, we noticed something disconcerting: rumors, politics and complaints started appearing.If you have more than two people in an organization of any kind (company, sports team, high school, PTA), you're going to have all of those things, and it has nothing to do with good or bad management. They seem pretty happy with their decision to have changed their structure, but if they think that the rumors, back channeling, and quiet lobbying are gone, I think they're going to be disappointed.

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amirmc 626 days ago

I think the article you're referring to is called The Tyranny of Structurelessness.

Article: http://www.jofreeman.com/joreen/tyranny.htm

Wikipedia page: http://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessnes...

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ep103 626 days ago

This is a wonderful article, and details quite nicely why you can't simply throw managerial theory out the window and pretend everything will be okay. It goes into depth about the problems one encounters if an organization attempts to eschew all management, and then goes into depth about how to fix these issues while maintaining a flat organization (in short, just because you acknowledge that a managerial position exists does not mean that that position needs to hold asymmetric power over the people who are managed, as occurs in the traditional hierarchical model).

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amirmc 625 days ago

Indeed. Doing away with the 'formal' structure doesn't mean the function of that structure also goes away (if that makes sense). This is true for many things e.g even if you don't have a sales team in your company you still have a sales function. Superficially getting rid of

something (say, 'management') instead of dealing with the specific problems (e.g. miscommunication, poor incentives, opaque decision-making etc) doesn't seem like a long term solution, though it may be very satisfying for a couple of years.

Something I found ironic when I read that article is that it (very nicely) articulated things I've known since school, just by observing social interactions. I suspect most people also know these things but they get forgotten as we grow up.

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ep103 626 days ago

So I spent some time in anarchist circles, and what you've just described comes up regularly. It can actually be even worse than what you just described, specifically because the informal managers are also not given the social status a formal manager is. That means that in worst case scenarios and poorly working teams, they are expected to both keep up the workload of the position they officially hold, while also keeping up the managerial position (burnout), or alternatively they are regularly challenged as to the validity of their managerial knowledge.

That said, in rapidly changing situations, that second component is actually a great strength, as it ensures a free market of ideas within the potential "manager" pool, and allows an organization extremely rapid ability to respond to change. And so long as there is some intra-team awareness and team focus on measurable goals, the former can be placated as well.

There is another weakness, in situations where the managerial overhead is extremely intensive, unchanging and time consuming, ie, when the situation results in people who informally spend all of their time doing management, simply because it is more efficient for one person to do it, than that burden to be shared on everyone. The positive to this is because the position is informal, the number of people working on it will be exactly proportional to the amount of work required to be done, while in a normal organization there is a drive to increase management as much as is sustainable by the organization, both as employees attempt to gain higher salaries, and individuals already in management attempt to retain theirs. The negative is that as the informal position moves between individuals willing to put in the time to do the work, if there is no process to track who has done what, accountability can be an issue.

To attack this accountability issue, the traditional anarchist response has always been to formally recognize these positions, and work hard to ensure that these people are replaced regularly by democratic process. Someone below linked the tyranny of structure-less management article, which goes into far more depth, and arrives at the previous sentence as its main conclusion.

In our modern software startups, these are exactly the situations we attempt to automate, so it is less of an issue.

So now we are left with an issue of the size of the organization which wants to attempt this managerial structure.

In small groups, such stringent processes as just described need not be defined. If you have a decently working team, this is how people coordinate by default nature, and this informal position will move between people as different individuals show initiative. A simple system of ledger books or signing line on various forms will likely be sufficient to keep organized most tasks undertaken informally.

If these positions are not acknowledged, it begins to break down once you reach teams where members are counted in 3 digits, hundreds or several hundreds, simply because now you have to recognize that individuals do not work in groups of such size. So really, you are working with a large group of groups, and the dynamics change quickly. Unfortunately, I cannot comment on how this works in reality. In modern America, by the time a group grows to this size, it is considered a political threat, and ripe for extrajudicial dismemberment by the state. I do not know how it

would act in the comparatively safe environment of corporate organization, though I imagine most of the problems could be alleviated by automation and programming, such as a good CMS system, but I have no experience there.

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amirmc 625 days ago

> "... the number of people working on it will be exactly proportional to the amount of work required to be done … "

I strongly disagree. This is a recipe for burnout because it ends up being done by the people who care most and are willing to sacrifice more than others (in terms of time/health/whatever). Taking the view that 'the work got done, therefore this was the correct number of people' does nothing to account for the human cost. Example: One person can organise and run a conference with hundreds of attendees and tens of speakers but I'd argue it's not a good idea. FWIW I've seen team sizes between 1 and 75 for exactly the above scenario.

I've been in this kind of position (great learning experience) and seen others go through it but it's a completely unsustainable way to run any kind of organisation.

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Shivetya 626 days ago

I don't believe having managers is bad, I believe in having too many is what really causes issues. I have seem some organization charts where managers managed a single person and they themselves might be the only report to another. Its like the title is giving out in lieu of compensation or to not hurt someone's feelings. Worse is assigning people to someone just because their a manager regardless of the assigned person's work.

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r00fus 626 days ago

So what is the ideal proportion of managers to workers - and do you count a manager who gets his/her hands dirty to be a worker or manager?

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ryanbrunner 627 days ago

It seems like this is becoming more and more of a trend, and is just starting to push into the realm of legitimacy, rather than "kooky company does something crazy".

There's plenty of examples in tech of companies without traditional management structures (and mostly no management at all) - GitHub, Valve, Treehouse, etc. Now a food processor of all places pulls this off.

I do think this is an approach that doesn't necessarily work well for large companies - building the sense of camaraderie necessary for this is impossible at 10,000 or even 1,000 employees IMO, but on the other hand - who says we need to have giant companies? Wouldn't things work a lot better with a whole lot of 150 person companies?

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moconnor 626 days ago

This article is from the December 2011 issue, it's 2 years old now. However, the self-management principle at Morning Star still seems to be in effect: http://morningstarco.com/index.cgi?Page=Self-Management

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hythloday 626 days ago

WL Gore & Associates has over 10 000 employees and operates on a similar structure (and has done for decades):

http://en.wikipedia.org/wiki/W._L._Gore_and_Associates#Cultu...

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molsongolden 626 days ago

A similar but more fringe structure that is regaining popularity is the worker collective/cooperative. Mondragon pulls it off to some degree with 10,000+ employees but their structure definitely involves more hierarchy than the smaller coops. 10,000 employees doesn't have to mean 10,000 employees all doing the same work in the same division, you can still have camaraderie within divisions or work groups and organize the entire company democratically. The worker collective gives ownership and influence to every worker and lessens the "us vs. them" dynamic by empowering workers and basically eliminating managers.

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wsc981 626 days ago

The Brazilian Semco company has a similar structure, IIRC:

http://www.schneede.se/assets/files/Ricardo_Semler.pdf

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mathattack 626 days ago

I recall an interview with John Chambers of Cisco many years ago where he mentioned having 20 or 30 direct reports, to avoid too much meddling in people's affairs. This can work if you don't need to make drastic changes (we have had a massive disruption in our industry and need to let half the workforce go - which half?) and if there doesn't need to be any cross-functional tiebreakers.

What's strange is in a more recent (2009) article [1] he claims to be more command and control, but shifting towards a more bottom-up organic method.

[1] http://www.mckinsey.com/insights/high_tech_telecoms_internet...

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Swannie 621 days ago

Today JC's direct report more or less == Cisco Board.

He really only has three: COO and Co-President Gary Moore, Co-President Sales & Development Rob Lloyd, and CFO Frank Calderoni. Pretty much all other C-level and EVPs report to Gary and Rob.

John talked about cutting, primarily, middle management during the recent 4000 job cuts announcement. You can guess how well that has worked. There is still plenty of scope to broaden the span of control in Cisco.

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nodata 626 days ago

I thought Valve didn't pull it off once it got to a certain size? http://www.wired.co.uk/news/archive/2013-07/09/valve-managem...

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mattlutze 626 days ago

It seems Ellsworth's firing was hyped a lot around the tech news, and she definitely leveraged that to get her new AR goggle project off the ground.

I'd like to see this story corroborated by other former Valve employees. Her interview there feels a lot like self-victimization.

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ryanbrunner 626 days ago

Yeah, stuff like that is what I was getting at about it not working for larger companies.

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analog31 626 days ago

Disclaimer: I work for a Fortune 500 company. I suspect the inefficiency added by managers is overblown, because most of them do not spend 100% of their time on traditional management activities such as supervision and decision making. A lot of their work is on tasks that would fall in somebody's lap within any organization. Some of those tasks are ones that I find to be dreadful.

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RamiK 626 days ago

Parkinson's law and Peter's Principle apply to privately held corporate structures as well. There's whole mountains of busywork and paperwork related to hierarchical structures that give the impression of "work" to both outsiders and insiders where it's really just non-productive paper shovelling.

https://en.wikipedia.org/wiki/Peter_Principle

https://en.wikipedia.org/wiki/Parkinson%27s_law

Mind you, I'm not sure getting rid of the managerial staff is enough to address these problems fully.

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fiatjaf 624 days ago

This is the best comment.

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exodust 626 days ago

Most managers will instinctively delegate dreadful tasks. That's part of the fun of management.

I wonder if there's any managers around who also code? Maybe 50% of their time could be management, 50% coding. Nothing like getting hands dirty with the company code to see where things are at.

Shared management roles could also be an option. Or, manage by committee? There's enough design by committee happening, surely we can all jump in on management decisions?

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weland 626 days ago

> I wonder if there's any managers around who also code? Maybe 50% of their time could be management, 50% coding. Nothing like getting hands dirty with the company code to see where things are at.

An important part of the reason why so many technical people have an "overblown" idea about the inefficiency added by management is negative experience.

I have met maybe a dozen people who were in management position and were not completely and utterly incompetent at what they were managing. More often than not, the managers I meet were people who started out as programmers, but quickly realized they don't stand a chance building a career out of it. This is an incredibly common career path.

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MrBuddyCasino 626 days ago

This. I'm working as a consultant, and I see the same thing over and over again. There aren't many "IT Managers" that are competent at what they're doing. If you are good at what you are doing (which might be programming), go and look for an environment with like-minded individuals with a sense of craftsmanship and pride in their work. Everything else will suck the life out of you.

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kabdib 626 days ago

The best managers I've had are ex-coders who have fully realized they cannot both code and do a good job as a manager.

I had one really good coder cow-orker who became my manager. He tried, and it was pretty poignant at times, but eventually realized the truth. Until he did, he mostly sucked at both jobs.

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weland 626 days ago

Yeah, this pretty much sums up what I've seen as well. I know good ex-coders who became good managers, but the stepping stone to doing it was having to stop writing code.

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_puk 626 days ago

> Most managers will instinctively delegate dreadful tasks. That's part of the fun of management.

I think this becomes one of the reasons that so many managers end up being viewed in a negative light.

Surely part of a manager's job is to protect the team from external pressures. The decision to delegate should be made on the basis of the impact of delegating / not delegating, not on how dreadful the task is.

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mtrimpe 626 days ago

As one of my old (properly self-deprecating) managers used to say "If you're a lightweight you'll float to the top eventually."

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embwbam 626 days ago

I've tried. It doesn't really work. Organizing is a "heads up" activity and trying to achieve flow while being available to answer questions and stuff is frustrating at best.

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mattlutze 626 days ago

This is my life right now. About a month ago I took on ~4 reports, but still need to maintain my previous productivity levels. It's really hard to both be available for them / our client and still get into my groove.

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_puk 626 days ago

> I wonder if there's any managers around who also code? Maybe 50% of their

time could be management, 50% coding. Nothing like getting hands dirty with the company code to see where things are at.

Yes.

Though there is such a mental disparity between coding and higher level management that it is not 100% efficient.

You're either coding or you're managing. You can't be knee deep in an obscure rendering bug whilst also still mentally committing to keeping track of what everyone else is doing. Getting back up to speed (from either one to the other) always takes a small amount of time.

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VLM 626 days ago

I've worked at places with this, usually called something like rotating team lead, or duty engineer, or ops duty, or pager week, or something like that. To the best of my knowledge everyone involved dreaded when their week came up. I've only experienced this implemented WRT (metaphorical) fire fighting not traditional dev work. If an earthshattering bug appears this week, you'll be fixing it and/or triaging it and/or figuring out who can help you fix it.

Its awesome at getting rid of "pass the buck" and awesome for everyone else in the org to have a single point of contact (even if its a different human each week). Not so awesome around changeover time or if your docs aren't up to spec or when you discover the hard way someones code isn't good. Also not so hot at fixing major architectural issues (like, its going to take more than a week to fix this correctly, and I'm only on duty for a week, so whip out the band aids...)

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dredmorbius 626 days ago

Rotating through on call, especially having not just ops, but engineering rotate, is a huge benefit.

As much as DevOps is being promoted, there are still two fundamentally different skillsets and job descriptions, and if its just the Ops side of the house getting the 2am wake-up pages, you're going to get a decidedly different attitude toward Things Wot Breaks Prod than if the developers are on that rotation as well.

Plus it means rotation comes up that much less often, which is a good thing.

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frobozz 626 days ago

What sort of dreadful tasks are you talking about?

There are plenty of things that managers do, that could just as well be done by some kind of junior administrator.

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analog31 626 days ago

Tasks that require someone to be fairly articulate and numerate, and at a level where they can be "privy" to sensitive information. From a technical standpoint, a lot of it could be described as data gathering, analysis, and reporting, in situations where those things can't quite be automated.

Comment above about Parkinson's Law and the Peter Principle are duly noted. ;-) I was a manager for a while, so I don't exempt myself from those observations.

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api 626 days ago

I have seen this too. I worked for a while as a contractor for the U.S. federal government (IT/programming), and saw that the next rung up for me within the fed was becoming a "full fed" and entering management. I saw what many of those people did and ran away screaming, taking a higher-paying alternative coding gig instead.

One of them had worked in the past for Microsoft and said the fed was remarkably similar. I suspect any organization approaches the fed exponentially as its size approaches, say, tens of thousands.

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bane 626 days ago

I've seen lots of these "x-role free" companies: no managers, no sales department, etc. Inevitably the function that those roles take on end up on somebody. Companies will sit in denial about it for a very long time, even making up weird titles to pretend like they still don't have managers, but ultimately they'll end up with them in the end because that's how they have to interface with the rest of the world and many of these roles exist because it's how work naturally breaks down and how people naturally specialize.

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lmm 626 days ago

The point I took from the article was that it's better for managerial tasks to be distributed across the team than reside with specific individuals. Of course there's no free lunch - an self-managed coder can get less coding done than a managed one, because they have to spend some of their time on managerial tasks. But it's possible they'll be more effective at it than an external manager.

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bane 626 days ago

I think in some organizations this should happen anyway by giving the individual wide degrees of autonomy. Micromanagers are the bane of everybody's existence.

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hythloday 626 days ago

I'm extremely suspicious of the word "naturally" there. What nature are they conforming to?

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bane 626 days ago

For example, there's a natural split between people who need to spend their days quietly writing software and the constant interactions and distractions of sales. It's almost mentally impossible to do both, not because either job is hard, but the context switching means software never gets developed and when writing software, possible customers never get called and deals never get closed.

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juanuys 626 days ago

The file name -- [B@58aa11eb.pdf -- seems like it was created by something written in Java: instead of printing the real file name, they printed the signature of the Byte array holding the file name data.

See here [1] for a better-than-Oracle explanation:

[1] http://stackoverflow.com/questions/1040868/java-syntax-and-m...

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cygwin98 626 days ago

Umm, my take is that developers are taking over the world, in term of duties. We don't need BA, since we do agile development and talk directly to customers. We don't need DBA now that we have ORM and NOSQL. We don't need sys-admin/sysops because we are devops now. Now, no managers. Next, no VC or no boss?

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wil421 626 days ago

HA! This might work for smaller companies. Try doing this we a 25,000+ FTE plus 5,000 or so temps and contractors in a company with a presence in around 100 countries. Although our managers dont supervise us constantly they have their own work to do. They usually give us tasks or projects and then we give them updates.

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Joeboy 627 days ago

This really needs an NSFW tag...

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vanderZwan 626 days ago

I like how that can be interpreted in more than one way.

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gulbrandr 626 days ago

Why?

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RankingMember 626 days ago

It's a joke. Normally NSFW tags are for porn-ish links, but this is unique in that it's not porn but could potentially make your manager equally upset.

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exodust 626 days ago

Mediation sounds good, and the 6 member panel idea also good.

In online tech, it pays to keep the mood relaxed and the office comfortable and spacious. Regardless of how much "serious business" is happening online, the internet is still a chilled out place.

The traditional hierarchy of managers is inherently unrelaxed. When you have multiple managers surrounding you, their presence might cause some to hold back on decisions, or pause that initiative. The managers will take care of all those nasty little details such as making decisions, you just keep doing the task you were delegated.

Remember what it felt like when the teacher left the room? If the manager leaves the office for the day and you feel that same rush of freedom feeling, you know things might be better without managers (or just a new manager).

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michaelochurch 626 days ago

I've come to a realization that managers and programmers have something in common. The bad ones try to perpetuate job security by creating complexity (whether in code or interpersonal issues) that only they can navigate. The good ones want to do their jobs so well that they "program" (literally for engineers, figuratively for managers) themselves out

of a job, so they can graduate to better things.

You see this most strongly with consultants. The good engineer does the best work he can, assuming it will lead to more challenging and interesting projects in the future. He's not worried about job security, or at least not enough to do things that are unethical; he assumes that doing a good job and becoming better at his work is job security. The bad consultant obfuscates code, documents poorly, and tries to make it impossible to ever fire him. He's not trying to bigger, badder (and more lucrative) projects in the future; he's just aiming to keep whatever income stream he has in perpetuity.

I think that managers exhibit the same dynamic, and I think that solving this problem requires recognizing it and watching for the warning signs early on.

I'm strongly in favor of open allocation, but that's not quite the same thing as "no management", which I think might take the idea too far. Why? Because management is a fact of life; some people will have more power than others, and I'd rather it be dealt with in a fair and reasonable way than in an ad-hoc and unstable way.

Having a permanent class of entitled (literally, not necessarily pejoratively) managers may not be the solution, and I support making people more self-managing-- actually, I'd use the term self-executive-- but acknowledging the basic fact of management, and encouraging the positive manifestations while avoiding the negative, is probably healthy as well.

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wdewind 626 days ago

Honest question: have you ever met someone who purposefully obfuscates code? I've met some shitty programmers, but I don't think I've ever met someone doing it on purpose.

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gpcz 626 days ago

Purposefully? No, but I'll admit that during undergrad I mistakenly obfuscated code. We were competing in the Intelligent Ground Vehicle Competition (igvc.org), but I didn't really understand the "meat" of the problem very well. Instead of focusing on machine learning and simultaneous localization & mapping I got way too focused on the "multi-threaded architecture" of our robot and basically rewrote protobuf poorly rather than actually solving the problem.

I've improved in those areas since then, but I slap my forehead whenever I think back to those days about how stupid I was. The worst was that the whole time I thought I was so smart, too.

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yxhuvud 627 days ago

Somehow, I doubt this will be an easy sell to the management hierarchy.

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kfk 626 days ago

Completely OT. What's with these articles that look like traditional magazines on the web? I get this is a PDF, but it makes reading on screen painful. I think something like the medium layout is the best way to present writings and you can still build fancy edits on top.

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krmmalik 626 days ago

Yes, that really annoyed me about the article too. It made it much harder to read on a mobile device for one, plus I wanted to copy some text and share it as a quote with a link to the pdf but that was harder due to it being a pdf.

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ioesf 626 days ago

A Technology Freelancer's Guide to Starting a Worker Cooperative

http://techworker.coop/resources/technology-freelancers-guid...

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jbgreer 626 days ago

A counter-example from HBR Magazine's December 2013 issue

http://hbr.org/2013/12/how-google-sold-its-engineers-on-mana...

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PaulRobinson 626 days ago

cf. "Maverick" by Ricardo Semler, the CEO of Semco.

I think you'd all enjoy reading it. It changed my attitude to work and management considerably. I am still a manager, but I give a lot more responsibility to my team than most.

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VLM 626 days ago

I'll try a pitiful attempt at a TLDR, feel free to try an improve it (if you can):

The IRS has extremely strong opinions on what it means legally to be a contractor. However you can easily avoid the legal issues and run a company as if it were full of contractors, if you want, by merely treating them legally as employees but treat them managerially (sorta) as contractors. And at least anecdotally sometimes this works really well.

Or a really short TLDR is contemplate the building trades and the role of a general contractor, and run your (probably) non construction company that way.

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api 626 days ago

Horray! Stick it to the man! Wait...

This is a double-edged sword.

Management tracks are typically the next step up in terms of career advancement for regular workers. Eliminate those and what do you have? A couple mega-rich owners, and then a flat field of "peasant" laborers. It starts looking a lot more like a feudal fief.

What will take the place of middle management for career advancement?

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squozzer 626 days ago

Interesting idea, but it seems to have a trade-off -- instead of negotiating a single (or perhaps a few) relationships, you have to negotiate about 20. It sounds a lot like a n*(n-1) problem.

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fiatjaf 624 days ago

The world is not a computer (or else AI would be easy).

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at-fates-hands 626 days ago

For all of the companies who are successful without a management structure, their are exponentially more with a standard or modified structure that do quite well.

Any of those, "Let's get rid of management structure" companies on this list??

http://money.cnn.com/magazines/fortune/fortune500/2013/full_...

You might want to ask yourself why then. . .

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static_typed 627 days ago

Boss has a problem, so he hires an MBA, now he has 300 problems, and he got fired as well.

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“First, Let’s fire all the Managers”. Organizational Redesign – Managing without Managers.Image that you had no boss, no title, compensation was based on the value added, as determined by peers, and you where empowered to make decisions, based on business cases, and implement, accountable to your team. 

My boss put me on the spot a few years ago and asked me at a conference what intrinsic motivation meant, and was it implementable in our organization. I did not have an answer. Why? To me our existing culture and organizational structure could not accommodate. Or could it? 

As a manager and leader of a small commercial banking team, within the smallest of the big banks, I continue to be a supporter of this model despite alignment impediments, and tell my account managers, “run your portfolio and your desk as if it was your own business!”. But reality is that the existing culture and architecture will not accommodate, and intrinsic motivation is quickly overshadowed by a supervisory super structure, where managers manage managers. 

As per Gary Hamel’s “First Let’s Fire All The Managers” Harvard Business Review, Dec.2011, pp.49, the biggest problem and risk with our current organizational structures, is that the most powerful managers “are the ones furthest from the frontline”. And because of their “naïveté” can lead to impede or lead to slow, or poor decision making. 

Hamel also points out that a multi-tiered management structure means that direction and decisions are not always aligned with that of the front lines. The result, the decision makers bias is seen as a “tax” to the front line. 

The biggest demotivating flaw is what Hamel describes as the cost of “tyranny”. The architecture of many of our organizations, by design, are also flawed in that they systematically disempower the lower level staff and managers. Front line managers and staff who are the single most important part of the organization, and closest to the clients, products, service, and ways to improve and drive stakeholder value, do not have the authority. 

With every utopia, there is also a reality check! The structure of having no boss, and everyone as your boss, may work in complex systems \ organizations, where the many moving parts produce a common output ie. ketchup or tomato paste. 

But in banking as in many other “complex” organizations the outcome is not always known, and the need for multiplicity. Is there room to develop a hydrid? A union of the two management systems, in the complex organizations, and complicated organizations as described in the attached HBR article “ First, Let’s Fire all the Managers”? Would such a structure work within your organization, without it crumbling? I would appreciate your thoughts. Thank-you.

First, Let's Fire All the Managershbr.org•How essential is it to have layers of executives supervising workers? Managers are expensive, increase the risk of bad judgment, slow decision making, and often disenfranchise employees. Yet most business activities require...

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Created: May 13, 2010 Type: Nonprofit Gr

Critical Analysis of Article “First Fire All the manager”December 12, 2014 admin In Article Review, Organizational Behaviour

PrefaceThe article entitled”First Let’s Fire all the Manager“ is a very distinct and charismatic management related article written by Gary Hamel and published in HBR. The article’s main focus is upon the management model successfully practiced in a large food processing organization named Morning Star’s, started as a tomato trucking company.

US Company, Morning Star here demonstrates how to create an organization that combines managerial discipline and market-centric flexibility—without bosses, titles, or promotions. This practice has been practiced by Morning Star since last two decades.

Morning Star’s goal, according to its organizational vision, is to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others.”

And Company’s goal is back end by their effective management model of simple idea: freedom. They think that “If people are free, they will be drawn to what they really like as opposed to being pushed toward what they have been told to like, so they will personally do better; they’ll be more enthused to do things.” Their way of working is totally different from the general organizations. Employee at Morning Star is also responsible for drawing up a personal mission statement that outlines how he or she will contribute to the company’s goal of producing the quality product and services. Even employee negotiates a Colleague Letter of Understanding (CLOU) with the associates who are most affected by his or her work. A CLOU covers as many as 30 activity areas and spells out relevant performance metrics. It has produced a dedicated workforce with exceptional initiative and expertise. The successfulness of such an odd practice became popular only by practicing the core concept of empowering everyone, not forcing people into boxes and encouraging competition for impact, not for promotions.

As Morning Star do not have centrally define roles, employee get bigger responsibility as the develop skills gain experience. According to Paul Green, you should do what you are good at so don’t force people to think in boxes. There is internal competition for impact, not for promotion and company belief that freedom is most important to get success in any organization. As morning star is integrated vertically and horizontally, employees think and try to achieve their goal if there is clear target and transparent data.

The core concept is better elaborated as

All of the members of the organization are their own boss.

Every individual work area is independent, responsible for meeting their targets

which in turn helps to achieve the Organizational target.

Each individual is a profit center and is responsible to generate his/her profit as

per the corporate requirement which at the end of the business cycle supports

the bottom line.

Every business area is allowed to incur the budgeted expenditures, can make

the improvements in their process as they feel is required after consulting with

the pre and post process owners.

There is no concept of promotions, no fancy titles, accountability is at all levels,

creativity is ample as all the members of the team are expected to create new

ideas which improves the organization.

Team and team players are a must.The writer, Gary Hamel believes that Morning Star’s model could work in companies of any size as, most big corporations are collections of teams, departments, and functions, all of which aren’t equally interdependent and are coordinating with their goals and functions as the employees in Morning Star have been doing. In large the companies most units would have to contract with others. There’s no reason why its self-management model wouldn’t work in a much larger company where Morning Star would be equivalent to a single division—as long as other divisions shared its management philosophy. It’s not too hard to imagine divisional representatives within a global giant negotiating the same sorts of intra company agreements that Morning Star’s business units forge each year.

But the main problem lies in the difficulty of adoption this model by a traditional, hierarchical organization. Again, it is possible, but the metamorphosis will take time, energy, and passion. Morning Star’s example makes two things clear. One, with no hierarchy and perfect coordination, it’s possible to obtain both freedom and control, that is the main trade off for traditional organizations. And lastly, it is possible to dream of

organizations where managing is no longer the right of a selected few but the responsibility of all.

Critical AnalysisThe concept presented here in the article ― First, Let’s Fire All the Managers by Gary Hamel is a real life scenario which is very much different than the general management concept. The company Morning Star has been following the manager less model since last two decades, which proves that such a practice is also possible for successful operation of an organization. After going through the overall article, we can say that company is totally against the typical and general idea of management.

The article critically argues that “Management is the least efficient activity in an organization”. It says that the inefficiency stems from a top-heavy management model that is both cumbersome and costly. The article also argues that management may be the least efficient activity in any company, yet market mechanisms alone cannot provide the degree of coordination and control that many companies require.The old and general management practice is seemed to be inappropriate in an organization because: A hierarchy of managers exacts a hefty tax on any organization since managers

add overhead.

Typical management hierarchy even increases the risk of large calamitous

decisions.

Multilayered management structure means more approval layers, disenfranchise

employees and slower response.So here Morning Star, a leading food processor in California, US demonstrates a new and distinct way of structuring the organization, innovation and management. The company followed a roadmap of Self-Management for its successful operation. Its basic idea is simple; it is just that there is no Boss. Every individual work area is independent, responsible for meeting their targets which conform to the corporate target. This implies that the new concept provides full freedom to employees to do their job. They are not focused just to think inside the box. Such a practice is only appropriate for those employees who are self-motivated, self-managed and are freedom lovers. But for those who need a direction, a proper managed work environment and supervision this practice might create a problem of adaptation.Morning Star has thought to enter the industry by using the manager-less concept. There are some of the causes of entering into this concept:

The cost of deploying managers in an organization is very costly. It additionally

creates the hierarchy and the benefits and salary for them increases

anonymously.

Decision making becomes slow: As the hierarchical level increases, manager’s

eagerness to use the authority may delay the work flow process and slows down

the decision making process.

Powerful managers even can make costly and devastating decision if the power

is centered in one person.

Some time, the powerful managers can kill the important concept and ideas of

the lower level employees.The new concept of an organization without boss becomes successful only when the employees of an organization are competent enough to face the challenges and bear the risk. For the person who like to work under guidance and structured supervision, this type of practice is not appropriate. Due to the lack of adoption capability, it is found that more than 50 % of the total workers leave the organization. But for the smart and deserving candidate who wants to be a leader and very eager to face the challenges. This type of organization is very much beneficial. It gives satisfaction at the workplace and increases delegation. Employees set their own goals to accomplish it. Due to the self-managed system employees do not have to wait for other’s decision. They can purchase and utilize office resources so as to fulfill organizational goals.So with this decision, employees are free to choose the sector in which they want to work for.

Although there is a minimal chance of arising the conflict between the employees, there is also a solution for it. If the conflict appears between two parties within an organization, there is an independent body that helps in resolution of conflict. So it is resolved internally.

As we all know that the job of a manager includes planning, organizing, directing, staffing, and controlling, and everyone at Morning Star is expected to do all these things. Everyone is a manager of their own mission. They are managers of the agreements they make with colleagues, they are managers of the resources they need to get the job done, and they are managers who hold their colleagues accountable.

Employees depending upon their interest, skills and qualification can take benefit from such a practice but there even lies various challenges with the organization aspect too.More time and effort is spend on hiring the competent employees who can match up with the organizational goals. Employee turnover is also one of the biggest challenge for any organization.Getting colleagues to hold one another accountable and

growth is another important challenge. Tracking personal information and evaluation employees even becomes difficult.

ConclusionIn the conclusion we can say that the self-management practice helps in boosting the capability of employees. It even motivates employees towards their work. For the smart and deserving candidate who wants to be a leader and very eager to face the challenges. This type of organization is very much beneficial. It gives satisfaction at the workplace and increases delegation. Employees set their own goals to accomplish it. Due to the self-managed system employees do not have to wait for other’s decision. It is a full flexible system. But such a practice is not applicable everywhere in the world.

Nepalese ContextI think such type of practice is not applicable in Nepalese context. As we go through the organizational systems of any type of organizations; financial institutions like banking, insurance companies, IT Companies, service sector companies like Unilever Nepal, Dabur Nepal, even the Hospitals too follows the Hierarchical System of Management. Only some companies operated by 4 or 5 people follows the flat based system. Analyzing the current situation of Nepalese Organization every organization has a traditional system of working. All the operations, tasks, activities are performed under supervision, distinct system, rules and regulations so as to fulfill the organizational goal. Employees are focused to perform the task assigned to them. In general practice, all the decision making authority, planning, forecasting are done by the Top Level Management. And resource allocation, controlling, monitoring, communication is done by Mid-Level Management. And the Low Level Management performs the day to day operations. Everyone is assigned with the distinct task and everyone has to use their full effort to accomplish it.

Education system also plays an important role in organization development. As per Nepalese context, illiteracy rate is very high and many organizations have both educated and non-educated employees so if we implement flat system according to the case, the highly skilled employee will be not be motivated.

Organizational Culture even plays a great role in influencing such practice in Nepal. And other reason might be like resistance to Change from Organization Perspectives due to its Fixed Investments, Interrelationship with other organizations, Organizational Culture, etc. And also other reason might be Individual/Employees Resistance to Change due to their Personality, Habit, and Perception etc.

First Let’s Fire all the Managers.

I have just completed reading an article written by Gary Hamel and published in Harvard Business Review of December 2011. The article titled,” First Let’s Fire all the Managers” is a interesting article based on a true management model which is successfully being practiced in a large food processing organization by the name of M/S Morning Star, the company started as a tomato trucking company; today Morning Star is the world’s largest tomato processing company, handling between 25% to 30% of USA’s tomato processing.

I am sure all of us have experienced situations where an idea is so farfetched that the brain refuses to accept and the concept refuses to register. This has been the case with me while I was reading this article. The only thing which has helped me in digesting the concept is that it is coming from a reputable business journal the Harvard Business Review and that the company Morning Star has been following this model since last two decades, so it must be working for them.

Before I discuss the concept I want to share the company’s vision which will also help in understanding why the model is successful for them. The Vision is to create a company in which all team members “will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others”.    

The concept originated by the founder of the company Chris Rufer; is simple, it is just that there is no Boss; all of the members of the organization are their own boss. Every individual work area is independent, responsible for meeting their targets which conform to the corporate target. Each individual is a profit center and is responsible to generate his/her profit as per the corporate requirement which at the end of the business cycle supports the bottom line. Every business area is allowed to incur the budgeted expenditures, can make the improvements in their process as they feel is required after consulting with the pre and post process owners. There is no concept of promotions, no fancy titles, accountability is at all levels, creativity is ample as all the members of the team are expected to create new ideas which improves the organization. Team and team players is a must. Summarizing the concept in brief: (this is taken from the article written as “Idea in Brief”.

Issues which led to the decision made regarding the model under discussion:

How important is it to have layers of executives supervising workers? Managers are Expensive.

Managers increase the risk of bad judgment.

Decision making becomes slow.

The supervisory layer often disenfranchises employees.

Business activities require greater coordination than markets can provide.

After brainstorming on the issues above following business model which is elaborated in the article was concluded upon and put into practice.

“Is there a way to combine the freedom and flexibility of markets with the control of a management hierarchy? Economists will tell you it’s impossible, but the Morning Star Company proves otherwise. It has been managing without managers for more than two decades. This is the conclusion in brief of the questions raised above.

At Morning Star, whose revenues were over $700million in 2010, no one has a boss, employees negotiate responsibilities with their peers, everyone can spend the company’s money, and each individual is responsible for procuring the tools needed to do his or her work.

By making the mission the BOSS and truly empowering people, the company creates an environment where people can manage themselves”.  

 

Throughout the article I was wondering how is it possible that the organization is flourishing, there are no operational fires, bottom line is constantly being met, no politics what so ever, no inter fights between departments, no personnel is taking advantage of the fact that there is zero supervision. When I imagine about the fact that every individual is making his own goals in line with the corporate goals; is getting them approved individually by the board and then briefing the board with regards to its status periodically; the board is also approving individual budgets. Every year each Morning Star employee negotiates a Colleague Letter of Understanding (CLOU) with the associates who are most affected by his or her work. A CLOU is, in essence, a

operating plan for fulfilling ones mission. Altogether a CLOU delineate roughly 3000 formal relationships among Morning Star’s full time employees.

At the end of each year every employee develops a document which shows how he/she performed against the CLOU goals, ROI targets and other metrics (self-reporting). Colleagues then elect a local compensation committee; about eight such bodies are created across the company each year. The committees work to validate self-assessments and uncover contributions that went unreported. After weighing inputs, the committees set individual compensation levels, ensuring that pay aligns with value added.         

In our existing environment getting department goals made and approved is a nightmare; budget is a dreaded exercise every year. Trusting your peers and subordinates is something which is unthinkable, even though most of the human resource in any organization is and should be considered as trustworthy until proven otherwise. How many of us are result oriented? How many of us are willing to put their necks out for the organizations we work for? Will we consider making that extra effort if the result would mean helping our organization in a small way? How many of us believe and practice initiative? How many of us are self-motivated? In today’s business world the buzz word is “Driver”; in this model who is the driver? How can an organization reach its destination if all are drivers and no passengers? In case of Morning Star all the questions raised above are answered in one statement mentioned in the article,” People at Morning Star know they won’t have a great place to work if the company doesn’t do well.” In Morning Star one accumulates authority by demonstrating expertise, helping peers and adding value.  

Still there are so many questions and so many more which come to mind. This model has been in practice for the last two decades, I am sure that most of these questions have answers; the article however does not address them, even the official site of M/S Morning Star does not raise these questions.

The model is good must be workable that is why an organization like M/S Morning Star is benefiting with minimum impact.

The one question which is haunting me is, why did no other company pick this model?

Any guesses?       

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“Self Management brings organizational structure to an enterprise

expontaneously” Chris J. Rufer

“Bureaucracy is the art of making the possible impossible” Javier

Pascal Salcedo

Gary Hamel from The London Business School wrote the article:

“First, Let’s Fire All The Managers”. This article is about a $700

million a year in revenue company Morning Start, which is one of the

world’s largest tomato processor, that handles around 30% of the

tomato production in the United States. This company does not have

a single manager!

Morning start is regarded as one of the most efficient tomato

processors in the industry, with self-managed employees that are

responsible for the coordination of their activities with colleagues,

customers and suppliers in the absence of directives from others.

Self-management not only includes roles and expectations within

the workplace; but also in other areas like contracting, hiring and

even company’s money spendature.

Advantages of this self-management approach have effect in

lowering management costs; boosting collegiality; motivating better

decisions increasing loyalty, initiative and flexibility. While in most

companies employees assume and expect that changes come from

a higher hierarchy, at Morning Start colleagues are aware that is

their responsibility to take the lead.

With no hierarchies and not titles, there is no ladder to climb or

promotion to get. Recognition is based on size of contribution and

responsibility taken, thus reputation is the motto that motivate

employees to serve.

In just 30 minutes, a long-time senior marketing executive at a Canadian company went from thinking he'd been doing a great job to becoming demoralized.

All it took was his performance review.

In that half-hour, the executive was completely taken aback when the boss for whom he'd worked only a couple of months pulled out a file of memos and statistics and lambasted his performance. The executive was given no chance to respond.

Even a month later, "the guy was still numb and in shock," recalls Prof. Samuel Culbert, who relates the tale as an example of why he thinks performance reviews should be trashed - a view he expresses in his new book, Get Rid of the Performance Review: How Companies Can Stop Intimidating, Start Managing - and Focus on What Really Matters.If the mere thought of a performance review sends a shiver down your spine, you're hardly alone. Between 80 and 90 per cent of both employees and managers dread the stressful, ritualized sit-downs, says Prof. Culbert, who teaches at the University of California at Los Angeles Anderson School of Management.

"Performance reviews have hung on in corporate cultures for far too long, and this is the perfect time to finally dump them because they produce no results of any value," Prof. Culbert says.

In their place, he recommends a much more personal and two-way approach, he tells Wallace Immen. Here are excerpts of their conversation:You say that formal performance reviews are not only despised and useless, but they ultimately create confrontation rather than co-operation. Why didn't the practice die out long ago?In part, it's because the performance review is all executives have ever known. In part, it's because managers appreciate the fear that reviews create among staff because too many lack the confidence that they can motivate without that fear. And a third reason is that human resource professionals encourage performance reviews because it provides them with busy work to make them seem important. Meanwhile, most people whose performance is being reviewed just fake it and lie to impress the boss, just to get out the door intact.

Strong words, but don't you need a process to evaluate employee performance?Of course, but reviewing performance and previewing needs for the future should happen every day. Employees need evaluations that make them strive to improve and are dictated by need, not a date on the calendar. But if the relationship is one-sided, with the boss giving the review, the subordinate is not on a level playing field and will feel his or her viewpoint doesn't count. Rather than having one-way question and answer sessions to fill in a report card, the boss and employees should be having regular, informal dialogues in which they can ask each other questions and feel comfortable voicing their concerns and needs.

So what is your alternative for a discussion that will be effective?The concept should change from a review to a preview, and focus on whether what you both are doing now is going to be sufficient to meet your goals as well as the company's goals. The first question the boss and employee get to ask each other should be: "What are you getting from me that you like and find helpful?"

The second should be: "What are you getting from me or the way things are done here that impede your effectiveness and you would like to see stopped?" And finally, "What are you not getting from me that you think would enhance your effectiveness?"

By doing this you affirm the positive and you get your annoyances into the open and tell the other person what you lack that would be useful for making any negatives into positives. The discussions may happen daily or weekly or monthly. They may happen in the office, in an airplane, in a restaurant, and it may be a two-minute conversation or a two-hour one. Taking the time to identify and solve problems that keep people from performing to their best potential makes sure that bosses and

subordinates have not only addressed immediate problems between them, but that they won't have to revisit the problems because they will stay solved.

Isn't a formal review system important in setting pay?In reality, no. The idea that pay might be linked to our performance rests on the assumption that the world of work is a meritocracy, which it isn't, and that department budgets aren't constrained, which they are, even in the best of times. So, in most organizations, pay and performance don't have that much to do with each other. And even if they do, when praise is linked to pay, bosses will have to hold back their kind words for fear they'll be expected to back up that appreciation with money the company doesn't have. That's why studies repeatedly find that, in performance reviews, 60 to 70 per cent of people are rated average. I don't know anyone who likes to be called average. That's antithetical to motivating people to do their best.

Why do you say this is the best time to scrap the performance review process and start over ?Right now, we've still got a questionable economy, and management has to inspire people who are still in survival mode. It's a time when employees will try to hide their problems and not discuss them because they worry it will cost their jobs if they talk about needs and lack of resources. If managers can build a more trusting relationship, they can get at unspoken issues and develop a more trusting relationship that will help employees face up to adversity. And even in good times, you build up much more good will and enthusiasm with a preview of what is needed to face the future, rather than a review of past mistakes. People are adults and they want to be appreciated for the positives they bring. They don't want to be known for their deficiencies; they can see their deficiencies better than anyone. In my model, you change the politics. You hold both the boss and employee accountable together for getting results and you find ways to identify the help they need and have a timely discussion of when it is needed. Ultimately the big question is: Why wreck a perfectly good relationship by going through a performance review? People are sensitive and talented and they don't come in a neat package the way most performance reviews expect.

HR speak: what they really meanDecoding catch phrases in performance reviews

Managers often hide behind catch phrases in performance reviews, rather than say what they really mean, contends author Samuel Culbert in his book, Get Rid of the Performance Review. Here are some of his translations:WHAT THEY SAY: Employee is average.WHAT THEY REALLY MEAN: Not good enough.WHAT THEY SAY: Exceptionally well-qualified.WHAT THEY REALLY MEAN: Has made no major blunders - yet.WHAT THEY SAY: Zealous attitude.WHAT THEY REALLY MEAN: Opinionated.WHAT THEY SAY: Quick thinker.WHAT THEY REALLY MEAN: Offers plausible excuses.WHAT THEY SAY: Careful thinker.WHAT THEY REALLY MEAN: Won't make decisions.WHAT THEY SAY: Takes pride in work.WHAT THEY REALLY MEAN: Conceited.WHAT THEY SAY: Forceful.WHAT THEY REALLY MEAN: Argumentative.WHAT THEY SAY: Aggressive.WHAT THEY REALLY MEAN: Obnoxious.WHAT THEY SAY: Conscientious.WHAT THEY REALLY MEAN: Scared.WHAT THEY SAY: Meticulous attention to detail.WHAT THEY REALLY MEAN: A nitpicker.WHAT THEY SAY: Has strong principles.WHAT THEY REALLY MEAN: Stubborn.WHAT THEY SAY: Career-minded.WHAT THEY REALLY MEAN: Backstabber.WHAT THEY SAY: Loyal.

WHAT THEY REALLY MEAN: Can't find a job anywhere else.Wallace Immen

WHAT EXACTLY IS CHARISMA? IT'S REAL. IT MATTERS TO YOUR SUCCESS. AND IT CAN BE DANGEROUS.

By PATRICIA SELLERS REPORTER ASSOCIATES SHAIFALI PURI, DAVID KAUFMAN

January 15, 1996

(FORTUNE Magazine) – So, hotshot, you've got a sheepskin from a high-class business school. You've nailed the vision thing. You learned all those leadership bromides. You're tough but sensitive. And you've empowered everyone from your personal assistant to the company mascot.

You think you're on the fast track, right? Wait a minute. See that fellow moving into the corner office down the hall? He attended some middling college. Doesn't have an MBA. But he has an aura. He persuades

people--subordinates, peers, customers, even the S.O.B. you both work for--to do things they'd rather not. People charge over the hill for him. Run through fire. Walk barefoot on broken glass. He doesn't demand attention, he commands it.

What's he got that you don't? In a word, charisma.

You don't hear much about charisma in business school. And you've probably never read about it in a business magazine. To most people, it's the inscrutable X factor--a mystical, almost magical career booster. Not many people have charisma. But when you talk to those who do, you discover that it isn't such a mystery after all. Yes, it's charm and personal magnetism, but--more important--it's the remarkable ability to get others to endorse your vision and promote it passionately. Charisma makes you a leader.

The guy on this issue's cover sure has it--and knows precisely how to use it to advance his career. You probably think Michael Jordan's magic derives from his transcendent talent on the basketball court or his $45-million-a-year celebrity. Wrong. Here is a man who cleverly deploys his charisma--and not just when he's in front of a crowd or a camera. Jordan, a co-captain of the Chicago Bulls, says he cares much more about being a leader than being liked. "I can inspire people to do things I believe in," Jordan tells FORTUNE, "especially when I see someone with ability who isn't trying his hardest." He rankles, sometimes infuriates, his teammates. But he uses charisma the way all successful leaders do: to lift the whole team's level of play.

Think of General Electric, where Jack Welch's kinetic zeal zaps employees like 2,000 volts. Or Ted Turner using his brash personality to attract luminous talent--then diffusing the wattage. "A full moon blanks out all the stars around it," says Captain Outrageous about himself. And the air reeks of charisma in the 26th-floor corner suite in Manhattan's Trump Tower. "I know more about charisma than anyone," says Donald Trump. "I think my charisma now is higher than ever. As I get more successful, I feel more energy around myself." Love him or hate him, the Donald is back from the financial dead, getting the highest condo prices in New York City. Asked by a FORTUNE reporter how she, too, might become charismatic, Trump replies, "Take over FORTUNE. Then go for Time Warner!"

Charisma is a tricky thing. Jack Kennedy oozed it--but so did Hitler and Charles Manson. Con artists, charlatans, and megalomaniacs can make it their instrument as effectively as the best CEOs, entertainers, and presidents. Used wisely, it's a blessing. Indulged, it can be a curse. Charismatic visionaries lead people ahead--and sometimes astray. They can be impetuous, unpredictable, and

exasperating to work for, like Turner. Trump. Steve Jobs. Ross Perot. Lee Iacocca. "Often what begins as a mission becomes an obsession," says John Thompson, president of Human Factors, a leadership consulting service in San Rafael, California. "Leaders can cut corners on values and become driven by self-interest. Then they may abuse anyone who makes a mistake."

Like pornography, charisma is hard to define. But you know it when you see it. And you don't see much of it in the FORTUNE 500. As Al Dunlap, the pugnacious renegade who rejuvenated Scott Paper, says, "Corporate America, what a bunch of boring guys!" Look at the men heading the largest U.S. companies: Jack Smith at GM, David Glass at Wal-Mart, Robert Allen at AT&T, Robert Eaton at Chrysler. Eaton, like many charismatically impaired chiefs, has an inspiring lieutenant beneath him: Bob Lutz is Chrysler's magnetic, hard-driving No. 2. And most good CEOs compensate with other strengths--brains, toughness, vision, ambition. But those are commodities compared with charisma.

Why does it matter? Jeffrey Sonnenfeld, who chairs Emory University's Center for Leadership and Career Studies, says that when a CEO is perceived to have charisma, his business performs better. Direct reports feel inspired. Excitement cascades through the organization. Even so, says Sonnenfeld, "most leadership courses focus on followership and compliance and consensus management instead of leadership. The result is a sort of guerrilla war against charisma."

Charisma matters more or less, depending on the business. Says Gerard Roche, the effusive chairman of the executive search firm Heidrick & Struggles: "There are professions where charisma bubbles and boils and leads to success, and others where it doesn't make much difference." Such as? "Dentists, CPAs, morticians, engineers, architects, and bankers, for the most part, don't need charisma," reckons Roche, who has placed CEOs of both varieties. (Larry Bossidy at AlliedSignal has it; Harvey Golub at American Express doesn't.) By contrast, charisma matters enormously in startups, turnarounds, or whenever a business is ripping through rapid, unpredictable change. Aren't most companies these days? Robert House, a Wharton School professor who has studied charisma for 20 years, says that when conditions are uncertain, charismatic bosses spur subordinates to work above and beyond the call of duty.

Consider that combustible little Internet software company Netscape Communications. CEO Jim Barksdale used to be the No. 2 executive at Federal Express and then at McCaw Cellular. At both places he was considered a genius at motivating people. Barksdale, 52, has no MBA. His college degree is from the University of Mississippi. Barksdale's most valuable asset is his self-effacing, Jimmy Stewart-style affability. Frank and funny, he instantly charmed the two moneybags behind Netscape: Silicon Valley entrepreneur Jim Clark and John Doerr, high-tech's Uber-venture capitalist. "You gotta take the job, Jim," Clark yammered the day he first met Barksdale. "You can have my chairman's title and be CEO. We'll move this whole damn company up here to Seattle if you want."

As Clark tells FORTUNE, "A huge portion of what Netscape is worth is Jim Barksdale telling investors it's going to work. He has this great ability to convey confidence and give comfort." Adds Clark, who also founded Silicon Graphics: "To me, charisma is almost the definition of leadership." And he's willing to pay plenty for it; he and Doerr gave Barksdale an almost unheard-of 11% stake in Netscape. The stock has quintupled since its public offering in August, making Barksdale's holdings worth $500 million.

The irony is that, like a lot of people with charisma, Barksdale isn't sure he wants it. Blushing and burying his head in his hands, he says, "Charisma, to me, is almost a phony thing. It's what those TV evangelists have."

Finding people with charisma for this story was a vexing mission. FORTUNE scrutinized many candidates, rejected most, and identified four who seem to have been born with it: Barksdale, Jordan, new Sears CEO Arthur Martinez, and Bain & Co. chairman Orit Gadiesh. Martinez, in particular, feels a passion about the subject. "Charisma matters more than it used to," he says. "When you had command-and-control environments, everyone knew his role and almost automatically executed the boss's program.

Today, if you're unable to galvanize people into action, all the thinking, the analysis, the strategic prioritizing doesn't matter at all."

Acquiring charisma isn't easy, and a lot of leaders shouldn't even bother. Who hasn't cringed at the sight of an awkward guy trying to be a live wire? Or remember Richard Nixon schmoozing with Elvis? Still, there are aspects of charisma that are very useful--and easily attainable. Says Jay Conger, a professor at the University of Southern California who has written books on the subject: "Understanding the traits of charismatic people can help anyone become a better leader."

SIMPLIFY AND EXAGGERATE. Charismatic people have a remarkable ability to distill complex ideas into simple messages. What's their secret? They communicate by using symbols, analogies, metaphors, and stories. If they're really charismatic, the guys on the factory floor, even the janitors, understand their pitch. Remember Jack Welch redirecting GE--going on the road to tirelessly preach his "No. 1 or No. 2" strategy requiring managers to "fix, close, or sell" any business that wasn't first or second in worldwide market share. Recall Ronald Reagan, unwavering on his two core beliefs: a strong defense and less government.

Barksdale uses the same technique. "Jim views his mission in life as boiling everything down to a few basic principles that motivate people," says Craig McCaw, who was Barksdale's boss at McCaw Cellular. McCaw, not a detail man, says, "Jim is like the World War II general, you know, in the movie Patton. The one played by the guy in the American Express commercial."

Karl Malden, Craig. He played Omar Bradley, the mild-mannered "soldier's soldier." Unlike the brilliant Patton, who often terrified his troops, Bradley was an amiable teacher who turned a million undisciplined boys into great fighters.

Last January, when Barksdale arrived in Silicon Valley, Netscape was a chaotic corps of 100 employees, some younger than his own kids. Engineers were panicked about product-delivery deadlines. Managers were bewildered about strategy. Jim Clark so feared Netscape would run out of money that he had imposed a hiring freeze. Says Marc Andreesen, 24, the engineer who developed the predecessor to Netscape's software with his pals at college: "We were spinning like a tornado. We were desperate for leadership."

Barksdale, who calls himself "the president of doin' stuff" and Andreesen "the vice president of thinkin' stuff up," says his first reaction was "to put the pedal to the metal. Let 'er rip." He lifted Netscape's hiring freeze, ramped up R&D, opened foreign offices, broadened the target market, and cut prices. His message to employees: Netscape is like a rocket. If it fails to reach escape velocity, it will crash back to earth. "We've gotta go full speed," he says. "We've got low barriers to entry and incredible competitors. If we can't establish presence and a brand name, we'll die." Inside Netscape, Barksdale promotes the strategy in two words: "Netscape everywhere." He describes the fight with the enemy (Microsoft) this way: "We're like an ant climbin' up the elephant's leg, with rape on its mind."

Many people figured Barksdale was cracked when he set a goal for Netscape to become the fastest-growing software company in history, based on first-year revenues. Morgan Stanley analyst Mary Meeker says that judging by recent financial results--including an unexpected profit in the third quarter--Netscape should hit its target and beat Lotus Development's record.

ROMANTICIZE RISK. Charismatic leaders relish risk. They feel empty without it. "Fear of failure," says Barksdale. "That's the thrill. It's what gets your heart rate up." Great optimists, charismatic people long to do things that haven't been done before. Whether they succeed or not, a remarkable thing often happens: Their audacity enhances their charisma. Take the case of Michael Jordan, baseball player. He hit .202, with only three home runs, for the Birmingham Barons two seasons ago. But he didn't strike out in the charisma game. Quaker Oats, which pays Jordan to promote Gatorade, surveyed consumers daily as Jordan floundered on his field of dreams--and found that his appeal never waned. Most people, in fact, related even more personally to Jordan the baseball player, in part because he seemed less

superhuman--and more like one of them. Jordan, a master of modesty and swagger, understands this: "The picture painted of Michael Jordan always is, Whatever he does, he's great at it. A lot of people thought I wasn't successful at baseball because I didn't make it to the major leagues. Baseball gave me a more humanistic side."

Charismatic people speak emotionally about putting themselves on the line. They work on hearts as well as on minds. Arthur Martinez, the former vice chairman of Saks Fifth Avenue, knew he had big problems when he joined Sears in 1992 to rescue its sinking retail unit. "The old joke about the Titanic was not too far off the mark," says Martinez, 56, a polished Irishman (with a trace of Spanish blood). He was intent on luring top talent to Sears. "So I felt I had to be an evangelist. I needed disciples. I really was enrolling people in a mission."

Martinez met with almost all applicants who visited headquarters for jobs at the level of vice president or higher. "I started by explaining why I took the job," he says. Then he told them: "This is one of the greatest adventures in business history. Retailers don't turn around. A major retailer never has. There's no model for what we're gonna do. It's very risky. You have to be courageous, filled with self-confidence. If we do it, we'll be wealthier, yes. But more than that, we'll have incredible psychic gratification. How can you not do it?"

Martinez became CEO last August. He has assembled one of the best teams in retailing. Sears is gaining market share and is solidly profitable again. Says senior executive VP of marketing John Costello, formerly president of Nielsen Marketing Research USA: "I had no interest in switching jobs. Arthur changed my mind. He convinced me that Sears could be transformed, that I'd have a major impact."

DEFY THE STATUS QUO. Charismatics are rebels who fight convention. They may seem idiosyncratic, but their oddball image augments their charisma.

Defiance isn't easy for an insider. So Orit Gadiesh's success is particularly surprising. She is a high-decibel firecracker chairing one of the most secretive firms (Bain & Co.) in one of the lowest-key industries (management consulting) in an old-line city (Boston). Meeting Gadiesh, you first notice her skirt; it starts about eight inches above her knee. Then her hair; viewed from the side and back, it's magenta. Then her long red fingernails. She is complex, intense, driven, painfully direct, sometimes ribald, and a lot of fun. Bain was rebounding from dire financial problems when the partners elected her chairman in 1993. Largely because of her inspiring leadership, observers say, Bain has expanded to 1,400 employees, from 990. Revenues are increasing 25% a year.

The "Orit mystique" is well known around Boston and the consulting industry, as is her history: how this daughter of an Israeli army commander served two years in army intelligence, enrolled in Harvard business school knowing little English, and graduated in the top 5% of her class. When Gadiesh joined Bain in 1977, straight out of Harvard, she was one of the firm's first female consultants. Founder Bill Bain recalls her job interview: "The way she listened made my energy level go up. She asked the most thoughtful, original questions. There was nothing boilerplate about her."

Business, to Gadiesh, is not systematic. Success comes from pulling emotional levers. If you're a pinstriped stiff, she'll loosen you up--fast. "In a serious meeting, it wouldn't be out of character for Orit to sit down and put her feet on the table, high heels and all," says Bain managing director Tom Tierney, who has known Gadiesh since 1979. "The client might say, 'Don't you think we oughta be growing this business?' Everyone will nod. It'll be Orit who says, 'Wait. I disagree.' " Adds Tierney: "Her style comes from this intense passion about being true to herself and the client."

Like Barksdale and Martinez, Gadiesh abhors bureaucratic doublespeak--and the unthinking conservatism it usually reflects. She flashes her wit to kill it. A story she prefers that you not know: A few years ago she was trying to help Chrysler executives reduce options on cars, thereby lowering costs. The auto execs were leaning on market research to avoid tough decisions. "We can't cut that option because

our average customer wants it," they said again and again. Exasperated, Gadiesh shot back, "Well, the average customer has one tit and one ball." The boys from Detroit got it.

STEP INTO ANOTHER'S SHOES. Not everybody "gets" Gadiesh. But clients, colleagues, and ex-Bainies have a remarkably consistent view of her: She is a brilliant consultant. While her looks and nervy style get her noticed, it is her empathy, they say, that makes her so successful. Charismatic people are able to see things from another person's perspective. Gadiesh, who spends 70% of her time working with clients, says, "I constantly try to think, 'If I were the client, how would I feel about this?' That's step No. 1 if you're going to find common ground."

Says James Morgan, CEO of Philip Morris USA, one of Bain's clients: "Orit has that talent for making you feel you're the most important person in the room. She bleeds your blood." One way she makes clients feel important is by never looking at her watch. Inside Bain, Gadiesh has long been regarded as a junior consultant's most generous mentor. "Orit defies expectations because she really is not a boisterous, intimidating woman," says ex-Bainie Dan Quinn, who heads Rath & Strong, a rival consultancy. "She's like a Jewish mother figure to many of the people at Bain."

Studies show that women tend to be better than men at stepping into another's shoes. But Barksdale proved himself to be fairly nimble recently when hackers cracked a security code in Netscape's software. What to do? Barksdale quickly assembled his key people. He let everyone toss out ideas about how to fix the problem and assure customers that the company's software is safe for navigating the Net. Then he made an odd suggestion: Give cash rewards to anyone who finds security flaws. What? That's like paying a burglar to break into your home to test the alarm system. Perhaps, but as Barksdale explained, "These hackers can work in our favor. They're experts on the Net. We'll tell 'em, 'Come on, crack our code!' "

And so began Netscape's Bugs Bounty program. Hackers receive rewards--ranging from $12 coffee mugs to $1,000 in cash--for reporting flaws. Thus far, two significant new bugs have been detected, and $2,000 in cash bounties have been paid. Simply by offering to pony up for its mistakes, Netscape won admirers. "If you admit you made a mistake," says Barksdale, "the customer will always cut you slack."

SPAR AND RILE. Charismatic leaders goad and challenge, prod and poke. They test your courage and intellectual mettle. Jack Welch or Arthur Martinez will lose interest in you quickly if you don't play at their level--or at least try to.

Michael Jordan is the same way. In the Bull's closed-door practices, he is always the loudest man on court. If you play against him and don't give 110%, he riles, he trash talks, he dunks the ball on you. Says Jordan: "That's just a way of being inspirational." His teammates often beg to differ. On court and off, they say, he never stops competing. But as Jordan explains, "Success isn't something you chase. It's something you have to put forth the effort for constantly. Then maybe it'll come when you least expect it. Most people don't understand that."

Scott Paper's Al Dunlap also succeeds by riling and trash talking. In one year, Dunlap created $6.4 billion in market value at Scott by slashing 11,000 jobs. Asked whether he has more enemies or friends, he laughs: "Shareholders love me! A lot of my contemporaries don't because I challenge the status quo and I don't give a damn." Now that Scott is being acquired by Kimberly-Clark, Dunlap is hunting for another corporate dinosaur. Says he: "I have zero problems with your calling me an egomaniac." Spencer Stuart President Thomas Neff, the headhunter who recruited Dunlap for Scott, says he's cautioned his man to cool it. "I've told Al, 'Don't be so outrageous.' He sort of listens. But he's enjoying himself so much."

So how do you manage charisma, this wonderful, terrible thing? Gadiesh suggests using an internal compass. She got the idea from her husband, Grenville Byford, an offbeat British entrepreneur who in the late 1980s spent two years sailing around the world by himself. When he returned, Byford talked with Gadiesh about the importance of "true north." An ordinary compass, he explained, points to magnetic north, which is fickle and unreliable. A gyrocompass, on the other hand, works on its own internal

mechanical system and always points to true north. Gadiesh loved the image. She adopted true north as her personal guideline and as Bain's core value.

"The most important thing a leader can have is true north," Gadiesh says. "It's a set of principles that directs him or her to what's virtuous and right. Charisma can be a positive or negative force. It all depends on whether it's anchored by true north."

Learning charisma from people who are loaded with it is a bit like studying acting with De Niro or playing basketball with, well, Jordan. Regardless of how hard you try, you may never win an Oscar or make it to the pros. But you'll certainly improve your technique--a crucial advantage no matter what your career.

Reporter Associates Shaifali Puri, David Kaufman

1. 1. Level 5 Leadership: Humility + Will Based on Jim Collins article, “Level 5 Leadership: The Triumph of Humility and Fierce Resolve”, in Best Of HBR, HBR, July-August, 2005, p.136-146

2. 2. The key to an organization becoming great is having a Level 5 leader Someone who blends genuine personal humility with intense professional will

3. 3. ““Level 5”” z The highest level in a hierarchy of leadership capabilities z Leaders at the other four levels in the hierarchy can produce high levels of success but not enough to elevate organizations from mediocrity to sustained excellence z Good-to-great transformations don’t happen without Level 5 leadership z Level 5 is not the only requirement for transforming a good organization into a great one z Other factors include getting the right people on the bus (and the wrong people off the bus) and creating a culture of discipline

4. 4. The Level 5 Hierarchy z Sits on top of a hierarchy of capabilities z Four other layers lie beneath it z Each one is appropriate in its own right, but none with the power of Level 5 z We do not need to move sequentially through each level of the hierarchy to reach the top z But to be a fully-fledged Level 5, we need the capabilities of all the lower levels, plus the special characteristics of level 5

5. 5. Level 5 Executive Level 5 Executive Level 4 Level 4 Effective Leader Effective Leader Level 3 Level 3 Competent Manager Competent Manager Level 2 Level 2 Contributing Team Member Contributing Team Member Level 1 Level 1 Highly Capable Individual Highly Capable Individual TThhee LLeevveell 55 Hiieerraarrcchhyy

6. 6. The Level 5 Hierarchy Makes productive contributions through talent, knowledge, skills, and good work habits Highly Capable Individual Level 1 Contributes to the achievement of group objectives; works effectively with others in a group setting Contributing Team Member Level 2 Organizes people and resources toward the effective and efficient pursuit of predetermined objectives Competent Manager Level 3 Catalyzes commitment to and vigorous pursuit of a clear and compelling vision; stimulates the group to high performance standards Effective Leader Level 4 Builds enduring greatness through a paradoxical combination of personal humility plus professional will Level 5 Executive

7. 7. Level 5 Leadership z Counterintuitive z Countercultural – people generally assume that transforming from good to great organizations requires charismatic, larger-than- life leaders

8. 8. Not by Level 5 Alone z Level 5 leadership is an essential factor for taking an organization from good to great, but it’s not the only one z There are other “drivers”, combined with Level 5 - the combined package which takes the organization beyond unremarkable z The drivers are – First Who, Stockdale Paradox, the Flywheel, The Hedgehog Concept and A Culture of Discipline

9. 9. First Who z Good-to-great leaders start with people first and then deal with vision and strategy second z They get the right people on the bus, z Move the wrong people off, z Usher the right people to the right seats, and z Determine where to drive it

10. 10. Stockdale Paradox z Named after Admiral James Stockdale, winner of the Medal of Honour who survived for 7 years in a Viet Cong POW camp by hanging on to two contradictory beliefs z His life couldn’t be worse at the moment, and his life would someday be better than ever z Good-to-great leaders confront the most brutal facts of their current reality, yet simultaneously maintained absolute faith that they will prevail in the end z They held both disciplines – faith and facts – at the same time, all the time

11. 11. Buildup-Breakthrough Flywheel z Good-to-great transformations do not happen overnight or in one big leap z Rather, it starts one movement at a time, gradually building up momentum, till there is a breakthrough z Mediocre organizations never sustained the breakthrough momentum but instead lurch back and forth with radical change programmes, reactionary moves and restructuring

12. 12. The Hedgehog Concept z The fox knows a little about many things z A fox is complex z A hedgehog knows only one big thing very well z The hedgehog is simple And the hedgehog wins!

13. 13. The Hedgehog-like understanding of three intersecting circles What an organization can be best in the world at How its economics work best What best ignites the passions of its people

14. 14. Technology Accelerators z Good-to-great organizations have a paradoxical relationship with technology z On the one hand they avoid jumping on new technology bandwagons z On the other they pioneer the application of carefully selected technologies, making bold farsighted investments directly linked to their hedgehog concept z Like turbochargers, these technology accelerators create an explosion in flywheel momentum

15. 15. A Culture of Discipline z Good-to-great organizations have three forms of discipline 1. Disciplined people – you don’t need hierarchy, 2. Disciplined thought – you don’t need bureaucracy, and 3. Disciplined action – you don’t need excessive controls z Combining a culture of discipline with an ethic of entrepreneurship results in great performance

16. 16. Level 5 Leaders z A study in duality z Modest and wilful, z Shy and fearless

17. 17. A Compelling Modesty z Level 5 leaders are extremely modest z They don’t talk about themselves z They would talk about the organization, about the contribution of others and instinctively deflect discussion about their own role z Unlike big personalities like Lee Iacocca, Jack Welch

18. 18. The Yiin and Yang off Levell 5

19. 19. The Yin and Yang of Level 5 Personal Humility Professional Will Looks out the window, not in the mirror, to apportion credit for the success of the organization – t other people, external factors, and good luck Looks in the mirror,not out the window, to apportion responsibility for poor results, never blaming other people, external factors, or bad luck Sets the standard of building an enduring great organization; will settle for nothing else Channels ambition into the organization, not the self; sets up successors for even more greatness in the next generation Demonstrates an unwavering resolve to do whatever must be done to produce the best long-term results, no matter how difficult Acts with quiet, calm determination; relies principally on inspired standards, not inspiring charisma, to motivate Creates superb results, a clear catalyst in the transition from good to great Demonstrates a compelling modesty, shunning public adulation; never boastful

20. 20. An Unwavering Resolve z Besides extreme humility, Level 5 leaders also display tremendous professional will z They possess inspired standards, cannot stand mediocrity in any form, and utterly intolerant of anyone who accept the idea that good is good enough

21. 21. Succession Planning z Level 5 leaders have ambition not for themselves but for their organizations z They routinely select superb successors z They want to see their organizations become even more successful in the next generation z Comfortable with the idea that most people won’t even know that the roots of that success trace back to them z Level 4 leaders often fail to set up the organization for enduring success – what better way to demonstrate your personal greatness than that the place falls apart after you leave

22. 22. The Window and the Mirror z Level 5 leaders, inherently humble, look out the window to apportion credit – even undue credit – to factors outside themselves z If they cannot find a specific event or person to give credit to, they credit good luck z z z At the same time, they look in the mirror to assign responsibility, never citing bad luck for external factors when things go poorly z z Compare this with leaders who look out the window for factors to blame but preened in the mirror to credit themselves when things go well z

23. 23. Born or Bred? : Can Level 5 be developed? z There are two categories of people z Those who don’t have the Level 5 seed within them, z And those who do

24. 24. The first category z Will never bring themselves to subjugate their own needs to the greater ambition of something larger and more lasting than themselves z Work will always be first and foremost of what they get – fame, fortune, power, adulation, etc. z Work will never be about what they build, create and contribute z The great irony is that the animus and personal ambition that often drives people to become a Level 4 leader stands at odds with the humility required to rise to Level 5

25. 25. The second category z Could evolve to level 5 z Capability resides in them, perhaps buried or ignored or simply nascent z Under the right circumstances – with self-reflection, a mentor, a significant life experience, loving parents, or other factors – the seed can begin to develop

26. 26. Level 5 z A key component inside the black box of what it takes to shift an organization from good to great z Inside this black box is another – the inner development of a person to Level 5 leadership z A very satisfying idea, a truthful idea, a powerful idea, and to make the move from good to great, very likely an essential idea

27. 27. “For like all basic truths about what is best in human beings, when we catch a glimpse of that truth, we know that our own lives and all that we touch will be better for making the effort to get there.”RecommendedMore from this author

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