Building Self-Managed Teams

Ask most leaders and they’ll agree that organizations are supposed to have things like a clear chain of command, a single leader at the top, centralized controls, and managers overseeing the work at every level. You can’t expect to succeed by playing fast and loose with your hierarchy and tossing your policy manuals in the rubbish bin.

Yet this is exactly what an increasing number of organizations are choosing to do. Around the world and across industry lines, there is a movement of people exploring new ways of working together:

• At a tomato processing facility in California, over 2,400 employees work with no managers or bosses.
• At a materials science company in Delaware, salaries and raises are determined by peers.
• At a game software company in Silicon Valley, employees choose which projects they will work on, literally wheeling their desks to different parts of the building as needed.
• At a group of manufacturing companies in Brazil, employees set their own pay.
• At a bank in Sweden, over 800 branches operate with no annual budget and no fixed targets coming from the corporate head office.
• At the world’s largest and fastest-growing home appliance company, roughly 60,000 employees are broken up into decentralized, independent microenterprises where members can choose their own roles and elect their own leaders.

According to traditional management theory, none of these companies should be successful – they’re breaking the rules.

At the centre of this movement is a phenomenon known as self-management.

A World Without Bosses

In 2014, online shoe retailer Zappos made headlines when it transitioned to a self-managing structure.

Known for its quirky culture and ability to create “WOW experiences” for its customers, CEO Tony Tsieh noticed that the company had become slower at sensing and responding to customer needs. Like many organizations, as they grew, the traditional layers of management became cumbersome.

The particular expressions of self-management are as varied as the organizations who adopt them.

Something needed to change if their employees were to continue truly living out their unique values. Each person needed to have the authority and autonomy to quickly make decisions that could improve how they serve their customers.

The solution for them was self-management. They define the concept as follows:

“At its core, ‘self-management’ means knowing exactly what you are responsible for, and having the freedom to meet those expectations however you think is best. ‘Self-organization’ is being able to make changes to improve things – beyond what is required of you.”

While that sounds simple enough, in practice it results in a radically different organization than most are used to.

The particular expressions of self-management are as varied as the organizations who adopt them, but there are core principles that weave a unifying thread between all of them.

Principles of Self-Management

In order to better understand this concept, let’s consider some of its core elements:

Default to Transparency

If teams are to manage themselves, they need access to the right information in order to make decisions that will benefit the whole organization. The traditional values of secrecy and only sharing information on a need-to-know basis don’t work here. Buffer, a social media company of 70+ employees, has baked this into their core values and shares everything from their salary information to the computer code they use for their products.

“An individual without information can’t take responsibility.  An individual with information can’t help but take responsibility.” – Jan Carlzon, former chairman of SAS airlines

No Formal Hierarchy

In a self-managing environment, the roles and functions of managers are not eliminated but simply distributed among the team. For example, if one of the roles of the manager was to act as a facilitator for team meetings, that role doesn’t disappear when the manager position is removed. Rather, it becomes one of many roles that needs to be voluntarily filled by the team. Alternatively, a management role might not be shared among team members but rather embedded into a key process or system (a decision-making process, for instance).

However, this does not mean that every self-managing organization has a completely “flat” hierarchy. For example, Handelsbanken (which Bloomberg named one of Europe’s strongest banks) eliminated five of their management layers, but kept three (yup, they had eight).  The leadership that does remain is no longer a directive, authoritative body, but exists simply for the support and alignment of its 800+ branches.

In a self-managing environment, the roles and functions of managers are not eliminated but simply distributed among the team.

A New Approach to Pay

Self-management leaves most traditional compensation strategies in a tattered mess. With no single manager who has the power to negotiate wages, you need an agreed-upon system to value the work. With more fluid roles and shared responsibility, you can’t rely on traditional titles or industry benchmarks to guide you. And with greater transparency, you no longer have the cloak of secrecy to cover up the inequities that exist in traditional settings.

In many self-managing organizations, you’ll find a more participative approach to pay.  Groups or individuals not only know what others are making – they often help determine the amount.

At Semco, a Brazilian manufacturer, employees have been setting their own salaries since the 80s. You’ll also find programs like profit-sharing or employee equity to spread the wealth among the teams and narrow the gap that exists between the highest and lowest paid individuals (i.e., the current reality of CEOs making 351 times the typical worker is not acceptable in self-managing circles).

No Top-Down Controls

“Controlling” the work is one of the traditional functions of management, and while it’s still important in self-managing teams, it shows up very differently. A traditional workplace may use control measures such as policies, time clocks, location tracking, or even workstation cameras that are implemented and monitored by someone higher up the chain.

In self-management, the responsibility to control the work lives at the team level. People decide what commitments are needed and then communicate those commitments to everyone they work with. It’s up to teams and individuals to make decisions such as where and when they work and what success looks like.

At Morning Star, these are recorded in Colleague Letters of Understanding (CLOUs), which are created by individuals and signed off on by their colleagues. At the self-managing consultancy, The Ready, they simply call these commitments “working agreements” and have created a software platform to ensure they remain transparent and changeable.

In self-management, the responsibility to control the work lives at the team level.

Measure Everything

Metrics can often be used as another form of top-down control, but self-managing teams use measurements to gauge progress and have a real-time scoreboard for their work.  Individual metrics are replaced by team-based metrics and are used to help the team learn and improve what they do. The metrics are utilized in the spirit of transparency and trust rather than suspicion and control.

Shared Decision-Making.

This can have an adverse effect on teams that are just transitioning into self-management.  How do you make decisions without a boss? If you’ve been conditioned to rely on someone else to make the final call and bear the weight of responsibility, this can feel a bit unnerving or stressful. To start, it only works well if the transparency principle is in play, otherwise teams don’t have the information they need to make the best decision for the organization.  Once that bridge is crossed, it helps to define “decision rights” for each role that exists on the team. Essentially, teams need to figure out the boundaries between what a person can decide on their own and when a shared decision-making process is needed.

For group processes, it helps to have a few options in your back pocket. Not every shared decision needs to be consensus or a majority vote (there are at least 6 other decision-making models to choose from). One approach is to institute what is known as the advice process, which gives each individual the power to make the final decision as long as they first earnestly seek out advice from a) those with expertise on the matter, and b) everyone who might be affected by the decision. This is a muscle that is underdeveloped in most teams, but with practice it can prove to be an engaging and rewarding experience.

If you’ve been conditioned to rely on someone else to make the final call and bear the weight of responsibility, self-management can feel a bit unnerving or stressful.

No More Special Privileges

Titles and hierarchies aren’t the only ways that power is communicated in a traditional organization. The reserved parking spots, executive bathrooms, company vehicles, and large corner offices are all symbols that communicate a power imbalance. In a self-managing environment, these are done away with. Executive offices get repurposed into team suites, vehicles are provided for roles that require them, and nobody’s too delicate for the common facilities.

As you can see, this isn’t a step to take lightly.

Transitioning to self-management is a radical paradigm shift that requires deep cultural changes. Rushing headlong in this direction can create a lot of chaos and uncertainty for a team. While it can be an incredibly fulfilling and rewarding experience for employees, it can also feel overwhelming if not implemented well.

A change like this can’t be rushed or forced upon employees. Unless staff are well-informed and thoroughly on board, the transition is not likely to succeed. K2K Emocionando, a group that helps organizations transition away from hierarchy, will not move forward unless a minimum of 80% of employees are on board with the change.

In some settings, only certain teams or functions will embrace self-management while others remain in a fairly traditional structure. There is no one-size-fits-all approach here.

Transitioning to self-management is a radical paradigm shift that requires deep cultural changes.

For those that are interested in moving further along the self-managing path to discover their unique application of these principles, here are a few first steps to consider:

• Learn. Nerd out on as much content as you can to fully understand how this is being lived out in different organizations. Read, watch videos, find podcasts, visit progressive companies – absorb whatever you can. See the list of resources below for places to start.
• Have open conversations. Given the principles of self-management, it’s counterproductive to try to move in this direction from a secretive, top-down starting place. Introduce the topic as a nonthreatening concept to learn from, share a few of the resources below, and see what’s resonating with people and where there is resistance to the ideas. Don’t force or try to sell anything – self-management may or may not be right for you.
• Clarify the WHY and make a transparent decision. Moving toward self-management requires strong resolve and a clear sense of purpose. Things will get messy, so ensure you and your team have a deep understanding of why this is the right move for you before you start the transition. Once you have that, make a clear decision to turn the corner. You don’t have to start big, but you don’t want there to be any ambiguity over the direction.
• Start small and where the energy is. If there is a particular unit, department, or team that’s enthusiastic and ready to experiment with these new ways of working, test it out there before expanding.
• Find others like you. Reach out to organizations that are further down the road than you. Learn from them and find support. You’ll be in the minority and will quickly discover that many of your corporate peers think you’re being unrealistic. Surround yourself with people who remind you that a different organizational structure is possible.
• Experiment and keep learning. There’s no finish line here. Treat every new practice, working agreement, or group norm as an experiment to learn from. You are not moving from one static state to another, but towards a more dynamic, adaptive place, where continuous change is the norm. This has certainly been the case for the teams at Zappos, who have continued to learn and adapt their structure over the years to create something that is uniquely theirs.

If you’re still skeptical, that’s probably a good thing. After nearly 200 years of operating in hierarchical organizations, it can be difficult to believe that another way is possible.

Once we understand that the traditional structures and management styles are not untouchable, sacred elements, we can approach organizational design with a freedom and playfulness to create workplaces that are more adaptive, more effective, and ultimately more human.

Additional Resources

Books

• Brave New Work by Aaron Dignan
• Reinventing Organizations by Frederick Laloux
• Corporate Rebels by Joost Minnaar and Pim de Morree
• Holacracy by Brian Robertson

Articles

• First, Let’s Fire All the Managers
• The Future of Management Is Real

Videos

• How to run a company with (almost) no rules
• I, Tomato: Morning Star’s Radical Approach to Management
• Aligned Autonomy at Spotify
• Brave New Work | Aaron Dignan | Talks at Google
• The truth about self-managing teams

Podcasts

• Brave New Work
• Leadermorphosis
• A World Without Bosses – WorkLife with Adam Grant

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For more FREE RESOURCES, visit our resources page.

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