How can a self-managing organisation work?

Bosses. Love them or hate them, you can’t live without them. Or can you?

 

More than 95% of people in the workforce either have a boss or are a boss (or both). However, a small but growing number of organisations are experimenting with getting rid of bosses altogether. Can “self-management”, as it’s commonly known, effectively replace a traditional hierarchical structure? And what are the benefits of going bossless?

Self-management is not a new idea. As far back as 1954, management guru Peter Drucker called for “management by self-control” to replace “management by domination.” As Frederick Laloux reports in his 2014 book Reinventing Organizations, innovative companies have been experimenting with new ways to organise for decades, including Morning Star, the world’s largest tomato producer, outdoor apparel company Patagonia, and Florida-based global manufacturer Sun Hydraulics.

I began my own journey into self-management as CEO and founder of a small software development company in 2001, where I experimented with various approaches before creating the system now known as Holacracy. In 2007, I launched a new company to support organisations transitioning to Holacracy, which is today, as Harvard Business Review writes, “the best-known and most fully specified” among self-management systems. It’s currently in use by more than a thousand organisations worldwide, including the online retailer Zappos, the David Allen Company, and at a team or departmental level within several Fortune 500 companies.

Over the past decade, I’ve had a unique opportunity to observe the shift toward self-organisation – both on a broad scale, as the movement has gained momentum and prominence, and up close, as I’ve personally coached and advised people from hundreds of organisations, large and small, who are making the transition. It’s still early days, and we don’t yet have the benefit of much academic research on the topic (Harvard Business School is currently conducting its second study on Holacracy, but the world is still waiting to see the results of both). However, there is already much we can learn from the experiment in self-management.

Can self-management work?

We are all familiar with the limitations of traditional hierarchy – the concentration of power in the hands of a few, the inevitable politics that ensue, the lack of motivation further down the pyramid (reflected, year after year, in the dismal statistics on ‘employee engagement’. However, many people consider the alternative to be much worse. When they hear business structure described in terms like “flat”, “self-organising”, “cooperative” or “organic” the first image that comes to mind is anarchy. They picture an organisation just like the ones they currently work in, but with no managers running the show. Nobody knows what they’re supposed to be doing, decision-making requires endless meetings attempting to reach consensus, productivity grinds to a halt, and chaos reigns. No wonder they quickly conclude that bosses are a necessary evil.

I’m sympathetic to those concerns. I’ve tried running a “flat” organisation with consensus, and it’s not an experience I’m eager to repeat. We spent all our time in meetings rather than getting work done. What it taught me is that bosses serve critical functions. But here’s the question I was left with: what if we could retain the positive functions that bosses represent, while eliminating the need for traditional hierarchy, with all its downsides?

The functions of a boss

If you’ve spent any length of time in a business environment, you’ve probably encountered bad bosses – those who wield power aggressively, suppress creativity, micromanage, or rule by intimidation. If you’re lucky, you may have encountered good bosses too. At their best, bosses serve several key functions. These include (but are not limited to):

Keeping things moving – by monitoring work, inspiring motivation, and removing obstacles.

Creating clarity – by defining who does what, who has the authority to make which decisions, and what priorities the team should focus on.

Improving alignment – by making sure team members are all pulling in the same direction.

Inviting trust by creating a space in which people feel emotionally and psychologically safe to express their creativity.

Liberating and empowering – by giving people space and freedom to get work done and the authority to do so.

All of these are critical functions. But do they need to be held by a person known as the boss? The best forms of self-management value these functions but decouple them from individuals. They embed them in the organisational systems and processes rather than any single person’s job description. For example, in Holacracy there is a written constitution that acts as the core rulebook for the organisation. Its rules and processes become the authority governing the organisation, and not even the CEO can override them. At Morning Star, “colleagues” as they are known, draft agreements known as CLOUs (Colleague Letters of Understanding), defining their work, priorities, and outcomes.


Workflow using the Holacracy model

Keeping things moving

A good boss is both cheerleader and traffic cop – inspiring employees to keep moving, assigning tasks, setting deadlines, and monitoring productivity. If we remove the boss, what happens to the work? Employees who feel subordinate and disempowered, like cogs in a system, don’t have much intrinsic motivation to work hard. Take away the parental figure of the boss, and won’t they just slack off?

In fact, in a robust self-management system, the opposite is true. The system grants people much greater authority over their domains of responsibility, and the result is that most people take ownership of their roles and step up to drive their own workflows without needing a boss to motivate or discipline them. Each person becomes the boss of their own roles. Doing away with traditional hierarchy does not create leaderless chaos, but a leader-full workplace.

Creating clarity

Another key function good bosses provide is clarity. They define the structure of the team – who’s doing what, what roles need filling, who gets to make which decisions, who is accountable for what. In a traditional organisation, if you removed the boss, this structure might quickly collapse. In a self-managing organisation, however, this function becomes something everyone participates in. The result is that you end up with more structure, not less, than in a management hierarchy.

Let’s face it – centralising the responsibility for creating clarity and structure in one person has never worked too well. It’s hard work, and a lot of bosses de-prioritise it or just don't do it at all. They’d rather jump in themselves to solve a crisis than do the harder but more strategic work of figuring out what changes to roles and processes would remove the need for them personally to ever deal with that particular type of crisis again.

In Holacracy, we call this function Governance, and it’s a process that everyone on the team is invited to engage in. We use a defined decision-making process to continually refine and streamline the way teams work together. Governance generates a clear role-based organisational structure for the team, and then continually evolves it to fit the team’s changing realities. Everyone, in a sense, becomes more entrepreneurial – creating structure and defining key processes.

Governance also allows teams to create processes to replace common boss-functions like hiring, firing, compensation, and performance review. Rather than vesting these significant powers in a single person, they can be entrusted to peer-to-peer assessment processes that the team create together.

Improving alignment

A good boss can act as a rudder for a team, keeping it on course and ensuring that everyone is pulling in the same direction. Without bosses, how is that alignment achieved? What’s to stop every individual simply pursuing his or her own agenda? This is a legitimate concern in the shift to self-management.

Here again, a good governance process proves to be as effective as a boss, if not more so. For example, misalignment in organisations is often caused by implicit assumptions and mismatched expectations. The governance process can be used to make the expectations attached to a role explicit so that everyone knows what they and their colleagues are accountable for. And if something goes out of alignment, governance meetings provide a venue for self-correcting and getting clarity.  

Another key force that aids alignment is a clear and compelling purpose, which calls out the organisation’s deepest creative potential to add value to the world and serve its stakeholders. Self-managed organisations are necessarily purpose-driven, and this purpose is often broken down into a more focused purpose for each team, and again for each individual role. Having a clear purpose gives people something to align around that’s not just ‘the boss’, and serves to direct and constrain decisions and individual agendas. “Is this serving the organisation’s purpose?” and “Will this cause harm to the organisation’s purpose?” are powerful questions for keeping teams aligned.

Inviting trust

Trust is the glue that holds teams together, and it’s often the job of a good boss to create a trustworthy environment in which people feel safe to take risks, be creative, and work together. Without a boss holding this space, there’s a danger that people will run roughshod over each other and both the individuals and the team will suffer as a result.

Self-managing companies need to take this seriously. Researchers in Google’s “People Operations” division recently conducted a several-year study into what makes a successful team, and found that a feeling of “psychological safety”was by far the most important of the defining traits. In order to achieve this all-important environment of trust, it’s essential that a self-managing organisation has a robust set of rules and processes that protect each individual’s space and authority to fill his or her roles.

One of the most common criticisms of Holacracy when people first encounter it is that “there are too many rules.” Holacracy’s meeting processes, for example, are very specific about who can speak and when other people are allowed to comment and respond. Far from being constraining or limiting, these rules are in fact what create a safe space where human beings feel empowered and supported to seek solutions and be creative.

Liberating and empowering

The more forward-thinking bosses in corporate culture today are all too aware of the problems with the top-down hierarchical paradigm. They know its limitations and its unhealthy consequences, and hence they attempt to “liberate” and “empower” their employees. In fact, business consultant Marcus Buckingham, whose extensive research with the Gallup Organisation involved more than 80,000 managers, contends the one key quality sets truly great managers apart is the ability to “release” people – so that “the unique contribution, the unique needs, and the unique style of each employee can be given free rein.”

It’s hard to argue with this approach, and within a traditional hierarchy, a truly empowering “servant-leader” is the very best boss one could hope for. However, there’s a fundamental irony in this paradigm. How empowered are we if we are relying on someone else to empower us? How liberated are we if our freedom must be bestowed by someone else? No matter how noble the boss’s intentions, the system is still fundamentally disempowering to all but those on top.

Self-managing organisations have the potential to truly empower and liberate, because the “rules of the game” grant each person authority to play their part and freedom to fill their roles without needing anyone else to give them permission. When the structure and processes of an organisation are designed to hold space for everyone to have and use power, and do not allow anyone to co-opt that power, then we no longer need to rely on bosses who empower others.

Better than a boss

“Give someone monarch-like authority, and sooner or later there will be a royal screw-up,” writes management professor Gary Hamel. In our political and social systems, we’ve long since learned that certain powers are better held by a process such as a legal system than a single dictator. As Thomas Macauley wisely noted, “A good constitution is infinitely better than the best despot.” It’s high time our organisations took this lesson to heart.

The promise of self-management is that organisations can avoid the inevitable fallout of vesting power in fallible, limited, and occasionally ego-driven individuals (as even the best of us can be at times). To deliver on this promise, however, these new systems cannot casually throw out all structure and leave people to figure out how to navigate in a bossless wilderness. They need to recognise and respect the critical functions that traditional managers serve, and create robust, well-thought-out systems to perform these functions better than even the best boss could do alone.

A version of this article originally appeared in the Spring 2017 issue of Talent Quarterly.