Philippine Daily Inquirer

A manager-less organizati­on

- Ranulfo P. Payos

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.

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.

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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