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Ranulfo P. Payos

A manager-less organization

Can you imagine an army without a sergeant, lieutenant, captain, major, and colonel? Can you think of a basketball team without an assistant coach and coach? Could a symphony orchestra dish out good music without a conductor? Can a business organization operate without managers? Unthinkable, isn’t it?

A company cannot achieve its business targets without managers planning, leading, organizing and controlling its people. But I’ve got one surprise for you. Morning Star Company of America has done an incredulous act–managing its business without managers!

Operating in Sacramento, California, the company is the world’s largest tomato processor handling between 25% and 30% of the tomatoes processed each year in the United States. Reading the feat of this manager-less company whose revenues were over $700 million in 2010 is a fascinating study in management.

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Featured in the Harvard Business Review (December 2011 issue), with a highly provocative title, “First, Let’s Fire All The Managers,” Morning Star Company, “demonstrates how to create an organization that combines managerial discipline and market-centric flexibility–without bosses, titles, or promotions.” It has been managing without managers for more than two decades!

The employee’s boss is his/her mission. Driven by one’s mission and its accompanying commitments, not by a manager, the employee is responsible for the accomplishment of his/her mission and for acquiring the training, resources, and cooperation that he/she needs to fulfill this mission. One has to negotiate with his/her colleagues to get cooperation. The process shifts from “rule-driven compliance to peer-negotiated accountability.” By making the mission the boss, the company provides an environment where employees can manage themselves.

While there is freedom for employees to spend company’s money, every team or business unit has a Profit and Loss (P & L) goal that each member must adhere to. They have to build “a business case that includes return on investment and net present value calculations.” They have to consult with their colleagues. An employee, for example, who is pushing for a $3 million investment, might talk to as many as 30 people before spending the amount. Adding more people must be sold to one’s peers.
Negotiating with one another sometimes leads to conflict. How does the company resolve conflicts? Experienced team members serve as coaches. Conflicts are resolved through mediation by a colleague whom both parties trust. If one party objects to the proposed remedy, a panel of 6 colleagues is assembled like a jury to offer a resolution. If there’s still disagreement, the conflict is elevated to the president who would bring the parties together, hear the arguments, and make a binding decision. It is rare though a conflict goes to the President’s desk.

At the end of the year, every employee receives a feedback from his or her colleagues. It could probably be like the 360 degree performance review system where everyone rates you. When someone’s performance is consistently poor, it can end with his or her termination.

A manager-less organization offers a lot of advantages. Firstly, it saves overhead costs. Consider the 1:10 span of control in some companies. That means for every 10 employees, you need one supervisor or manager to manage them. Imagine the management cost. Assuming that a manager’s salary is three to five times the salary of an average employee, the cost could be staggering. You have not even counted yet the secretary or assistant that a manager needs and the perks that go with his/her office like company car, professional/sports club, incentive bonuses, etc.

Secondly, it removes the heavy bureaucracy common in hierarchical organizations. I’ve seen one government owned and controlled company where an employee reports to a supervisor who reports to a manager, who reports to an Asst. Vice-President who reports to a Vice-President who reports to a Senior Vice-President who reports to an Executive Vice-President who reports to the President. Somewhere along this layer of managers some are either doing nothing or just coasting along. The system retards communication and beclouds accountability.

Thirdly, there is more collegiality and teamwork. Political intrigues, backstabbing, and ass-licking behaviors could drop dramatically as employees in a manager-less organization do not compete for promotion. Sometimes, in hierarchical organization, the politically astute gets promoted than the competent and high achiever.

Fourthly, there is real employee empowerment that results in greater initiative, better decision and higher loyalty. A lot of companies trumpet about employee empowerment through LMCs, Quality Circles, Suggestion Box, etc. But when you come down to it, empowerment assumes a giver–the manager.

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Admittedly, a manager-less organization is not without problems. I don’t think it will work for large companies like San Miguel, PLDT and the like. But then, about 95% of business companies are Micro, Small, Medium enterprises (MSMEs). It is perhaps where this style of management could be applied. I submit that not all MSMEs can adapt to this change. Given the hierarchical command that our business culture is used to, this system won’t work.

The major drawback is the lack of career growth. Succession plan is non-existent and in fact, not needed. One’s goal is only to become President one day. Obviously, the chance is not anymore better than snow in hell. It could be stultifying and frustrating to the ambitious who dreams of rising through the executive ladder until one reaches the top–COO or CEO.
In summary, self-management has come before it’s time. Nevertheless, it strikes as a fascinating study to a student in management.

Unorthodox and deviant as it may appear, it has worked miraculously at Morning Star. It challenges the concept of control in management which is the bedrock of bureaucracy. It blots out the distinction between management and non-management employees, between the planners and enforcers of the plan who provide the rules, standards and budgets and the followers. It makes the job of managers extinct. Self-management–anyone?

(The author is Chairman of Change Management International, Inc., a management consultancy firm. He is past president of PMAP, past president of Society of Fellows in Personnel Management. He is currently Vice-President of ECOP and Vice-President of ECOP Institute of Productivity and Competitiveness. He is a member of the Tripartite Industrial Peace Council (TIPC), Tripartite Executive Committee (TEC), representing the employer sector. He is a Commissioner of the Tripartite Voluntary Arbitration Advisory Council (TVAAC). He is co-author of the revised book of the late Perfecto Sison now entitled: “Personnel Management in the 21st Century” and author of the book, “Human Resources Management – From the Practitioner’s Point of View.” His email address is: nolipayos@gmail.com)

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