Management is the least efficient activity in your organization.
A version of this article appeared in the December 2011 issue of Harvard Business Review.
First, Let’s Fire All the Managers
Morning Star, a leading food processor, demonstrates how to create an organization that combines managerial discipline and market-centric flexibility—without bosses, titles, or promotions.
Summary.
Reprint: R1112B
Executives don’t realize it, but a hierarchy of managers exacts a hefty tax on any organization: Managers are expensive, increase the risk of bad decisions, disenfranchise employees, and slow progress. In fact, management may be the least efficient activity in any company. Yet it’s clear that market mechanisms alone can’t provide the degree of coordination and control that many companies require. Is there any way to get the flexibility of a market system and the discipline of a tightly knit hierarchy—without a management superstructure? Morning Star, the global market leader in tomato processing, proves that there is.
Morning Star, which has seen double-digit growth for the past 20 years, has no managers. That’s right—no bosses, no titles, no promotions. Its employees essentially manage themselves. Workers negotiate responsibilities with their peers, anyone can issue a purchase order, and each individual is responsible for acquiring the tools needed to do his or her work. Compensation decisions are handled by local committees elected by the employees, and pay reflects the contributions that people make—not their status. And if staffers find themselves overloaded or spot a new role that needs filling, they simply go ahead and initiate the hiring process.
Morning Star’s self-management model has two cornerstones: the personal mission statement, and the Colleague Letter of Understanding, or CLOU. In a personal mission statement, each employee outlines how he or she will help the company achieve its goals. The CLOU, which must be hammered out every year with colleagues, is an operating plan for fulfilling it. A CLOU covers as many as 30 activity areas and spells out relevant performance metrics.
The system isn’t without its challenges, and it isn’t for everyone. But it has produced a dedicated workforce with exceptional initiative and expertise. And its success shows that it is possible for organizations to transcend the seemingly intractable trade-off of freedom versus control.