When Employees Run Their Own Company? Profit!

Feeling annoyed by the fact that managerial wages wolf down too much money? Here's my interview with the man who nuked my mind - Doug Kirkpatrick, organizational change consultant the author of the world-famous experiment of organizing a successful company with NO supervisory management - Morning Star.

This is a company where the employees decide on development, innovation, equipment purchase and recruitment. According to Wikipedia, Morning Star processes 25% of the California processing tomato production, and supplies approximately 40% of the U.S. industrial tomato paste and diced tomato markets. It has 400 employees and revenues of $700 million. According to the Morning Star's founders, self-governance doesn't only save millions on the costly manager positions but makes all members of the team more responsible, rational, tight-knit and REALLY interested in the result.

Since the successful launch of Morning Star, how many self-managed organization have you seen appear in the US (and, perhaps, globally)? What is their background?

It’s quite amazing the number of organizations expressing interest in organizational self-management in the last four years. While many organizations express interest, or even explore the topic, relatively few have actually undertaken the journey. Most of the names have surfaced in the press, including Zappos, Valve Software, Menlo Innovations, Buurtzorg, Sun Hydraulics and
others. Several others have begun the journey. Whether the new voyagers will stay the course is yet to be determined.

Are there areas/activities where self-management cannot be applied?
I don’t believe there are any inherent barriers to applying self-management anywhere. There may be attitudinal barriers, regulatory barriers, psychological barriers—but no barriers that can’t be overcome by the exercise of will on the
part of visionary leaders.

Have you seen companies that attempted shifting to self-management but had to step back to the traditional business model?
Those companies stepped back by choice, largely out of fear of losing control or the perception that people were
taking advantage of the change, rather than out of necessity.

How is the income distributed in Morning Star? Who decides over the wages size and defines the company’s strategy?

Let’s deal with strategy first. Strategic decisions are simply one class of decisions for which someone holds the decision rights in the organization. In the case of Morning Star, the founder has held those decision rights because no one knows more about the industry than he does. If someone were to acquire superior expertise in making those decisions, they would be perfectly free to negotiate for the ownership of those decision rights and perhaps acquire them.

Regarding income: virtually everyone who works year-round (Morning Star is a seasonal operation) is a salaried professional. Salaries are subject to the free, open marketplace for talent. So people are hired at a market-based salary for their particular skill set. There is a definite premium, however, attached to most salaries reflecting the fact that in self-management, everyone is a manager—performing all the functions of management: planning, organizing, controlling, selecting and coordinating.

** Will, in your opinion, digital revolution contribute to the further development of self-managed organizations?**

Yes, the digital revolution will contribute to the further development of self-managed organizations—and already has. Traditional management originated in the age of Morse code—where the primitive communication systems of the 1800’s moved information one character at a time. We now live in a light speed world, where people must act instantly on information gushing everywhere on rivers of light. Traditional command-and- control hierarchies simply don’t work well anymore in a quantum world, furthering self-management. If we look into the future, we see the development of the blockchain revolution, which may change the very nature of work itself. Coupled with trends like robotics, genetic engineering, nanotechnology and artificial intelligence, the idea of control through bureaucracy will soon be as outdated as travel by horse and buggy.

How, in your, opinion, could a wider acceptance of self-managed organizations reshape the society?

The drivers of change are clear. First, technology will change everything as described above. Second, the millennial generation will not tolerate traditional command-and- control structures. Third, there are compelling economic drivers
for self-management, such as slashing the “management tax”. The management tax, as described by Gary Hamel, is the cost of bureaucracy. If the span of control of traditional management is 1-10 (one manager for every ten workers), if the workers can take on the burden of management, they can all receive a raise and a company will no longer need the manager (or can redeploy the manager into something productive), resulting in significant cost savings. This is a structural, competitive strategic advantage for companies willing to undertake the journey.

What competences should a company founder possess to start a self-managed business and succeed? And what will they gain from this approach?

The competencies include: high self-awareness, mindfulness, consciousness, initiative, courage, ethic, vision, determination,tolerance for ambiguity, value- creation mindset, maturity, internal locus of control, organizational culture
awareness and a belief in collective intelligence and networks. By cultivating these characteristics, a leader has a fighting chance of success in transforming an organization.

*Picture source: officevibe.com