How To Organize A Large Company Without Middle Management
In early 2018 I took on a new challenge. After two years in the popular management world I decided to take a leap into academic life. I started a part-time PhD program in Business at the VU University Amsterdam. Since then I have researched how large organizations (with thousands of employees) can scale and organize without the need for middle management. It’s time to share what we’ve learned.
Warning: This note has turned out to be a long read. As the mathematician Pascal once famously wrote; "I have made this longer than usual because I haven’t had time to make it shorter". I'm sorry about that.
After reading the academic literature on the topic we discovered two main things:
- The literature on 'companies organizing without middle management' has been of interest to academics for years,
- And, the current debate revolves predominantly around a limited amount of real life cases.
- GitHub (American IT company with ~900 employees. Owned by Microsoft.)
- Valve (American IT company with ~400 employees. Owned by founder Gabe Newell.)
- Morning Star (American food company with ~600 employees. Owned by founder Chris Rufer.)
- Zappos (American online retailer with ~1,500 employees. Owned by Amazon.)
These four are often mentioned as having 'departed radically from formal hierarchies' and having 'eliminated the role of middle-management completely'.
They also have been labelled in different ways over the years:
- 'Non-hierarchical organizations' (by Herbst in 1976),
- 'Boss-less organizations' (by Puranam et al. in 2014),
- 'Self-managing organizations' (by Lee & Edmondson in 2015).
The academic status quo
We have visited many examples of this kind of organizations. And there are two easily observed issues with the academic status-quo:
The first is a minor one. We think that the proposed names for the phenomenon of 'companies organizing without middle management' are incorrect. This is because all the companies studied still have a top management team (CEO, founder and/or owner) in place that enjoy the ultimate decision-making authority. This means these companies are not without hierarchy, nor bosses, and therefore are not completely self-managed.
This also means the proposed names don’t capture the specific phenomenon we observe. Accordingly, we propose a new name for this phenomenon: 'middle managerless organizations', or MMLOs for short.
The second issue is more important. The four cases above are not only exclusively American, but also relatively small companies (up to 1,500 employees). This 'smallness issue' leaves room for sceptics to question whether MMLOs can be scaled to, say, organizations of >10,000 employees.
Indeed, many academics would argue that all start-ups initially look like MMLOs but tend to switch to managerial hierarchies (with the introduction of middle management) as they grow and increase coordination, control and communication. Accordingly, many doubt the feasibility of MMLOs at scale.
This second issue is the one I want to address in this post.
Three inspirational cases
Despite the scepticism of some scholars, and after visiting progressive workplaces for our Bucket List, we are certain large organizations can organize without the need for a middle management layer.
Indeed, we have seen this with our own eyes. Three inspirational cases show you can organize thousands of employees without the need for middle management. We select these cases from three continents (America, Asia, Europe) to ensure a worldwide view. They are:
- W.L. Gore (American manufacturer with ~10,000 employees. Owned by founders' family and employees.)
- Buurtzorg (Dutch not for profit, health-care organization with ~15.000 employees.)
- Haier (Chinese white-goods manufacturer with ~75.000 employees. Collectively owned.)
The 5 problems of organizing
Before describing 'how' Gore, Buurtzorg and Haier organize without middle-management, we first need to agree on what exactly we mean by 'organizing'.
For this, we look at the work of scholars like Lawrence & Lorsch, Mintzberg, Burton & Obel, Birkinshaw, Puranam, Lee & Edmondson. Informed by these scholars, we argue that any functioning company (of two or more employees) should solve three intertwined problems:
- Strategy (organizing the direction of the company)
- Division of Labor (organizing 'vertically' in the company)
- Integration of Effort (organizing 'horizontally' across the company)
The latter two can be divided into four sub-problems. 'Division of Labor' can be divided into 'Organizational Structure' and 'Task Allocation'. 'Integration of Effort’ can be divided into 'Coordination' and 'Motivation'.
This leaves 5 fundamental problems of organizing that any company, by definition, must solve:
This is the problem of defining the company's strategic direction and related objectives. This is traditionally done by a top management team that defines short-term (mostly monetary) goals.
2. Organizational Structure
This is the problem of separating the objectives set by top-management into tasks and roles. This is traditionally done by the introduction of a hierarchy (often with functional departments).
3. Task Allocation
This is the problem of mapping tasks and roles to employees. This is traditionally done by middle management who allocate tasks and roles to employees.
This is the problem of providing employees with information they need to coordinate actions with peers. This is traditionally done by a middle management layer via rules and formalized procedures to guide and control employees.
This is the problem of monitoring the performance of employees and distributing rewards for the tasks they have performed. This is traditionally done by a middle management layer that monitors employee performance and decides the allocation of rewards.
Looked in this light, 'organizing' can be regarded as a set of solutions to these five problems. It also gives us five dimensions with which to analyse and compare solutions developed by different kinds of organizations.
Large 'Middle Managerless Organizations'
Now that we have defined with what we mean by 'organizing', we move on to our next question. How do large MMLOs solve these five fundamental problems of organizing?
To answer, we need to go back to the three cases: W.L. Gore, Buurtzorg, and Haier.
We analyse and compare solutions developed by these three companies on the five dimensions we introduced above and explain how large companies can successfully organize themselves without middle management.
Strategy in large MMLOs seems predominantly the domain of small, top management teams who define, promote and guard long-term organization-wide objectives and culture norms.
Small top-management teams
All three companies have small top-management teams with formal authority and responsibility for overall company performance. These teams ultimately decide about employment contracts in the company (often on the recommendation of other employees).
At W.L. Gore this is the so-called Enterprise Leadership Team which consist of only four people. At Buurtzorg there are only two directors, both of whom are founders of the organization. And at Haier, a small top-management team is headed by founder and CEO Zhang Ruimin. Apart from the members of these top management teams, all others in the three companies are employees with no assigned formal authority.
Long term objectives
The strategy at all three companies is defined by long term objectives. W.L. Gore's objective has not changed since 1958, when founder Bill Gore stated their mission was "to make money and have fun doing so". Buurtzorg’s mission is “to deliver good quality care”. This hasn't changed since the founders started—to simplify and improve the Dutch health care system. Haier’s mission is “To become the world leader in smart appliances”.
These long-term objectives guide all employees in the judgments they make about the commitments they make for themselves and colleagues. By highlighting a desired future, top-management teams create a beacon for employees: a beacon to contribute to in a freer manner. Strategy is founded on a single mission rather than a lengthy and complicated description.
Strategy at all three companies is guided by internal norms and traditions - the "how we do things here" - that fills much of the void left by the absence of hierarchical management. Those culture norms are simple rules that ensure all decisions are aligned with company strategy and priorities.
For example, employees at W.L. Gore are expected to live by four explicit, widely shared, guiding principles. These are freedom, fairness, commitment and waterline. At Haier and Buurtzorg, there are widely shared cultural norms as well. However, these are not documented but transmitted informally by members of the top-management teams and the more experienced employees.
Strategy in large MMLOs is the domain of small top-management teams who define, promote and guard long-term organizational-wide objectives and internal culture norms.
2. Organizational Structure
The organization structure of large MMLOs is based on a 'network of teams' structure. Employees self-organize into teams around tasks with end-to-end responsibility. New self-organizing teams are initiated by groups of entrepreneurial employees.
Modular organizational structure
The structure of all three companies is flexible and modular and consists of self-organizing teams. Employees enjoy the freedom to organize into teams to perform tasks and activities. In the teams, employees can organize however they think is best for themselves and their customers. These teams have far reaching decision-making power but are also accountable for their performance.
Haier has pushed this concept of radical decentralization to the extreme. Their self-organizing teams are run as independent companies (some even as separate legal entities) with employees sharing ownership, and being responsible for all kinds of decisions like contracting, recruitment and budgeting.
Small self-organizing teams
The self-organizing teams in these companies are often small. They take one of two shapes: ad-hoc teams (W.L. Gore) and permanent teams (Haier & Buurtzorg). At W.L. Gore ad-hoc teams emerge around interactions and commitments between groups of employees. All employees can team with others to get their jobs done, and employees can be in multiple teams. Thus, W.L. Gore’s numerous small, ad-hoc teams emerge as new tasks are initiated, and dissolve once the task is done.
On the other hand, Buurtzorg organizes around >1,000 permanent, self-organizing teams, with employees being in only one team. The teams are geographically defined, each choosing their 'territory'. When a team grows beyond 12, a rule says it must split to maintain its small-scale team structure.
Similarly, Haier has split the company into >4,000 permanent teams, internally referred to as "microenterprises". The size of teams varies quite a bit, but most consist of ~10 to 15 employees. All are connected to a dedicated online platform, with platforms grouping about 50 teams.
New teams at all three companies emerge in an organic manner, initiated by entrepreneurial employees. New teams only start when a group of employees gets excited about pursuing an opportunity or solving a specific problem. A new team is only launched when a group of employees is convinced that there is a demand for it. Thus, new teams emerge and grow in a free-flowing, bottom-up fashion.
At W.L. Gore new teams emerge only when at least two employees are convinced there is a real demand for the proposed idea. When the new idea needs serious investment, the employees must first pitch their idea to a committee of peers in order to get resources.
A similar thing happens at Buurtzorg, as the organization doesn't set up new teams. It relies on new teams emerging organically when a group of entrepreneurial employees sees the need for services in an area not yet served. However, new teams can only be initiated when there are at least four potential team members willing to join.
At Haier, new teams are typically initiated by groups of entrepreneurial staff via their online platforms. Employees are encouraged to share ideas online and invite others to join them in pursuing an entrepreneurial adventure. A new team only emerges when there is a minimum of three individuals willing to start the new 'microenterprise'. Like W.L. Gore, when launching investments are needed, new teams pitch their ideas to a committee of peers to request resources.
However, top-management teams hold an important role in this regard. They hold the ultimate authority to terminate or dissolve teams that are, for example, not performing up to organization standards in terms of productivity and/or client satisfaction. They also approve, or not, additional resources to teams that move beyond the existing company boundaries; for example, teams that want to explore new products, services or geographical areas.
The organizational structure of large MMLOs seems to be based on a 'network of teams', around self-organizing teams with end-to-end responsibility.
3. Task Allocation
The process of task allocation in MMLOs seems defined by the nature of the work the teams need to do. Employees in the teams allocate tasks and roles based on voluntary, self-selected commitments and consensus decision-making. Employees emerge to fill natural leadership roles.
Customer-facing and support teams
The task allocation process in all three companies is influenced by the work team members must execute daily. A rough distinction can be made between two kind of teams; customer-facing teams (in direct contact with customers) and support teams that enable the customer-facing teams to deliver products and services in the best possible way.
At Buurtzorg, most teams are customer-facing and offer services to customers. They also have a small number of support teams at headquarters for tasks related to finance, legal and administration. Note that no group holds any formal authority over the others.
By way of contrast, most of Haier’s teams are support teams. Only a small number are in direct contact with end-users of their products. Most offer services for back-office functions like HR, legal and administration, or deliver services in designing, manufacturing and distributing Haier products. Any team at Haier can be dissolved or go bankrupt (most are separate legal entities) when they do not provide a competitive service or product – much like any start-up would in the marketplace.
Self-selected task commitments
In all three companies, employees allocate tasks and roles within their own teams. This is based on voluntary, self-selected task commitments and consensus decision-making. These commitments define decision-making roles in the team and assign accountability to the employees that take on those commitments.
At W.L. Gore, employees commit as individuals to the tasks and activities they wish to perform. These are called ‘self-commitments’, which means employees can join and leave teams based on their own needs and interests. However, once employees make commitments, they are expected not to break them, unless due to exceptional circumstances. And if an employee feels they are making a commitment that could threaten the organization’s survival, they are expected to review this with more experienced employees before they commence.
At Buurtzorg, all self-organizing teams must fulfil 7 roles. One of these is the main one (being a nurse) which must be shared by every member. All other roles (like administration, finance, collaboration, leadership and HR) must be distributed amongst team members. They do this in the way they think makes good use of the skills of all members. All major team decisions are by informal consensus. Team members collectively share responsibility for these commitments and decisions.
Likewise, at Haier, team members enjoy formal authority over their internal task allocation process. This means that teams define their own working relations and decide how to allocate task and roles within their teams. Teams make collective commitments to other teams in the form of contracts which often take place on their online platforms. Any contract can be renegotiated after a year.
Natural leadership roles
All three companies focus on natural leadership roles. That is, roles are often allocated to employees best positioned to do them. Again, there are roughly two kind of leadership roles: those within a team and those across several teams. Note that none of these roles include any responsibility for managing other employees, nor do they have any formal authority over others.
At W.L. Gore there are many leadership roles, with employees selecting leaders amongst peers based on credibility and their ability to attract followers. It is expected employees with the right expertise take on relevant decision-making responsibilities. This is internally referred to as ‘knowledge-based decision-making’. These leadership roles can take many different forms. For example, there are team leaders, business leaders and plant leaders. There is also a group of self-selected leaders referred to as sponsors. Sponsors offer feedback on performance, guidance in personal development, participation in the compensation process, and how to identify new ways of contributing.
A similar kind of leader can be found at Buurtzorg where all teams select their own informal leaders into ‘mentor’ roles. These mentors take care of things like onboarding and coaching. A small group is referred to as coaches. Each supports a group of teams with things like problem solving, network building, starting up new teams, and sharing best practice. These coaches are dedicated to a certain region and focus on facilitating solutions rather than providing them. This also means that leaders in Buurtzorg have no formal authority over other employees.
At Haier, teams formally select their own leaders who act as CEOs of microenterprises. These leaders are chosen by a consensus of team members. They can be replaced if the team is underperforming. These leaders act much like leaders of a start-up within a bigger company, and do not need any approval from top management for decision-making. There is also a group referred to as platform leaders. They support and promote collaboration between different teams on the same platform. However, once again, these leaders do not hold any formal authority over employees or teams.
Employees in large MMLOs allocate tasks and roles based on voluntary and self-selected commitments and consensus decision-making, often supported by natural leaders.
Coordination of activities and tasks in large MMLOs happens mostly via direct person-to-person interaction and digital tools. Top management has established clear “rules of the game” to coordinate all activities and tasks as efficiently as possible.
Direct person-to-person interaction
In all three companies any employee can talk to anyone, an no-one tells another what to do. This means that all employees can interact freely with every other employee in the company with no intermediary (like a middle manager) necessary to coordinate this formally or informally. All three companies keep teams small on purpose, so team members can coordinate informally and in an efficient manner. It is for this reason that employees are expected to meet face-to-face regularly. Not surprisingly, perhaps, employees in natural leadership roles play an important part in the coordination process.
Since every employee at W.L. Gore needs to find and make their own task commitments, it is important to build an extensive personal network. Employees bear the responsibility to do this. This why most new employees at W.L. Gore spend their first few months building relationships and networks across the company, by working in several teams.
At Buurtzorg, team members meet at least one day every week in the office to coordinate work. The organization runs regular conferences and regional meetings to bring employees from different teams together, so they can get to know colleagues from other teams and learn from each other. In addition, teams at Buurtzorg are strongly embedded in the local community. Therefore, they coordinate their work locally with other stakeholders (like clients, doctors, families of clients).
All three companies have developed digital tools to facilitate coordination, especially for employees that are not physically close. This promotes high levels of connectivity throughout the company. This helps employees in sharing knowledge, experience and ideas. It also gives employees tools to coordinate and communicate with other stakeholders, like clients and suppliers. They exchange information in order to develop joint solutions to problems.
At Buurtzorg, a digital tool called BuurtzorgWeb aims to simplify the execution of day-to-day work activities, allowing employees to concentrate on face-to-face interaction with clients. It provides increased levels of transparency about all kinds of real-time information related to team-based and individual performance, client information, organizational strategy and financials. At W.L. Gore, for example, the top-management team shares financial results through digital tools with all employees, monthly.
At Haier, digital tools are used extensively to coordinate with customers and other partners. They use an online platform, called Haier Open Partnership Ecosystem, to communicate and collaborate with stakeholders. These are also used to get customer feedback on the design, development, production and use of their products. In this way Haier uses technology to engage with thousands of people in collaborative interactions and information-sharing in a cost-efficient manner.
Rules of the game
Although employees at all three companies have far reaching decision-making authority to coordinate work with others, they still need to observe organizational ‘rules of the game’. These are often established by the top-management team. All are expected to respect and enforce the rules of the game—to coordinate work efficiently, to resolve disputes fairly and to prevent new activities that would make the company less efficient. These rules of the game provide day to day guidance for teams to collaborate efficiently while trying not to compromise the independence of the teams.
At W.L. Gore, for example, there is a rule that restricts the size of any facility to a maximum of 300 employees. At Buurtzorg, there are rules that restrict teams from becoming larger than 12 employees. Plus, teams must meet an internal productivity target of 60%, meaning that 60% of their hours must be billable. Moreover, rental costs of accommodation cannot exceed 1% of team turnover, and 3% of an employee’s time must be devoted to training and education.
At Haier there is an extensive set of rules related to coordination between microenterprises. These cover internal contracting, performance standards and target setting. For example, all teams should set themselves ambitious growth and profitability targets, based on global market growth rates. These targets must be externally benchmarked and broken down to quarterly, monthly and even weekly goals for each individual and team.
Employees in large MMLOs coordinate work mostly through direct person-to-person interaction and digital tools. These coordination efforts are bounded by clear “rules of the game”.
Beyond being intrinsically motivated to perform, motivation in large MMLOs is the domain of employees via transparent peer rankings of performance. Based on these, rewards are distributed for individual short-term compensation (like salary) and long-term compensation (like bonuses and dividends).
Transparent performance rankings
In all three companies some form of transparent peer-ranking is used to assess performance of peers. The performance of anyone in the organization is centrally monitored on a few metrics with real-time performance of employees or teams being visible to all in the organization. This creates a reputation system of peer-ranking that allows for self-monitoring and for peer-control. These systems are also used to encourage internal collaboration and competition based on performance and reputation.
W.L. Gore uses a peer-ranking system to assess individual performance, while Buurtzorg’s and Haier’s peer-ranking systems are based on team performance. At Buurtzorg and Haier, all teams are measured on a few key metrics, often related to productivity, profitability and customer satisfaction. This enables teams to compare themselves with others in a fair and straightforward way.
Individual short-term compensation
At W.L. Gore and Haier, short-term individual rewards, like salaries, are based on transparent performance rankings, with the goal of ensuring internal competitiveness and fairness. Both companies make sure that rewards are regularly benchmarked against functions and roles at other companies to ensure external competitiveness.
At W.L. Gore the internal performance peer-ranking system is used to determine the level of individual salaries, with all employees being peer-ranked about twice a year. The salary of every employees is decided and assigned by a committee of colleagues who are often from the same location. At Haier, short-term compensation is rather defined by the performance of the team as most microenterprises are legally independent entities with employees holding shares. This means employees at Haier are rewarded more like entrepreneurs rather than employees.
At Buurtzorg, it is a different story, as all employees at Buurtzorg are paid a salary under a union agreement according to education level, with a standard annual increase based on the number of years working for the organization. Employees of Buurtzorg seem to be more motivated by the organization’s ideology rather than by financial gain. This is also visible in that performance peer-ranking systems are solely for intrinsic, short-term rewards (like pride and status), and the organization does not distribute monetary incentives based on these rankings.
Collective long-term compensation
Next to individual rewards, the three companies distribute long-term collective rewards to all employees depending on whether goals and overall profitability targets are reached. These collective rewards are based on profit-sharing, distribution of dividends or employee ownership plans. Buurtzorg has the simplest practice. Depending on the profitability of the organization an annual bonus is distributed collectively to all employees in an equal manner.
At W.L. Gore profit-sharing typically takes place twice a year. The share of the profits that each employee receives is relative to their salary and years of service. Besides profit-sharing, each employee of W.L. Gore becomes a stockholder after one year of service. For each employee, W.L. Gore purchases stock equivalent to 12% of salary and contributes this to individual accounts. Employees get ownership of their account after three years of service.
At Haier, ownership of the microenterprises is shared between the company and employees that are part of that team. The members of the team can collectively hold a maximum of 30% stake in their own microenterprise. In some cases, when extensive capital is needed, outside investors share part of the ownership. Via this practice, long-term compensation at Haier is tied to the number of shares an employee owns and the profit of the team he or she is part of.
Beyond being intrinsically motivated to perform, employees in large MMLOs are motivated by profit-sharing and shared ownership.
Having analysed and compared the solutions to the five problems of organizing that the three large MMLOs have implemented, we conclude that they show remarkable similarities in how they approach strategy, the division of labor and the integration of effort.
However, there are also two notable differences to obverse. The first difference is related to the division of labor (organizing 'horizontally'). On the one hand, some companies do well by dividing the company into thousands of dynamic ad-hoc and temporary teams, as W.L. Gore is structured. On the other, companies like Buurtzorg and Haier depart from this idea and swear by dividing the company into hundreds or thousands of stable and permanent teams.
The second difference is related to the integration of effort (organizing 'vertically'). On the one hand, W.L. Gore and Haier have clearly introduced certain market mechanisms to streamline the coordination and motivation of all teams and employees. On the other hand, Buurtzorg stays apart from market mechanisms and relies much more on the intrinsic motivation of employees to establish a culture of collaboration between all teams and employees.
But how this exactly works in detail is something I will explain in a future blog post. For now, I'm curious what your thoughts are about this concept of MMLOs. Please drop them below.
Many thanks to the co-workers in my academic adventures;
- Dr. Nicolas Chevrollier (Assistant Professor at Nyenrode Business School),
- Prof. Dr. Svetlana Khapova (Professor at VU University Amsterdam),
- Dr. Brian Tjemkes (Associate Professor at VU University Amsterdam),
- Ken Everett (Adjunct Professor at Chinese University of Hong Kong).
Download a free sample chapter of our book. Subscribe to the newsletter.
This looks mostly attractive once it is running. But how to start with it in an existing company intoxicated by several hierarchical levels. These middle managers surely will sabotage by all means any attempt to realise some change that threatens their position.
And how to cope with employees who don’t perform according to the norms or who don't take their tasks seriously due to lack of maturity. (playing, wasting time, messing up things, bullying fellow workers, theft, scam, etc)
First of all, people that don't perform up to the organisational standards will not survive long in this kind of organizations. This is mainly because of the radical transparency applied, and because the teams have end-to-end responsibility. Not many people want to work with colleagues that don't perform well, especially when you are collectively responsible for the end result.
Second, there are many examples of companies that have succesfully transformed towards a MMLO, including Haier. But there are many more to be found on our Bucket List....
This is a great article, thanks Joost! The academic foundations are so often lacking in the New Work/Agile scene - and it's a great idea to lift the discussion out of the realms of pop culture. I agree with most things, yet I couldn't help to raise some issues to progress the discussion, as I feel your post is an important waypoint for the Corporate Rebel Mission.
I do not think the term MMLO is adequate to express what is going on in these organizations. First, I suggest keeping the term "Self-managed Organizations" is not necessarily applying that there is no hierarchy left here and there- there is no need to overly correct. Second, the bashing of middle management is such a popular theme, as if these "enlightened" leaders at the top are somehow superior to other human beings. They are clearly not. The problem is rather to fix the power differentials between people, by whatever checks and balances can be devised as shown by economists such as Elinor Ostrom, who wrote about systems of government which are neither hierarchy nor self-management. Or, if you think that applying Ostrom's theory is too far fetched, have a look at Neoinstitutional Organizational Theories (Scott/Zucker): There is more than a dichotomy of Hierarchy and Self-management. It is not a scale on which an organization needs to find a position; it's a whole new space of new organizational possibilities that encompass many more dimensions than just hierarchy or self-management. Using the absence of the "middle" part of hierarchies to define progressive organizations is slightly beside the point, I think.
to 1.Strategy/Cultural Norms: I think you are understating the importance of Norms. These are not only (often) fluffy values "promoted and guarded by top management". More important are, in my opinion, the norms embedded in the work practices that companies use. You can't build norms by "rolling them out" to people or "enlisting them". They must be part of the way decisions are taken, transparency is practiced, meetings are conducted etc.
to 2.Organizational Structure: "End to End" responsibility is a rather hollow consulting term. Take that from a consultant who has used and discarded this term for being BS. No one knows what "End to End" that really is.
Plus: Why not mentioning Nils Pfläging's "Peach" or "Circle" Organizations here? Each of the three companies compared has specific layers of organizations than can well be described by such terms.
to 3: Task-allocation: Self-allocation of people and teams to tasks is a great way to describe whats going on in these organizations en masse - fully agreed.
to 4: Coordination: To say that coordination "happens mostly via direct person-to-person interaction and digital tools" is a bit meaningless. What else if left if coordination is not done personally or via digital tools? By handing out slips of paper?
I completely agree on the "Rules of the game" that you mention. For me, the number of these rules and the extent to which they are enforced are even higher than in hierarchical organizations, as the freedom of people to "self-assign" them to tasks must be bounded by checks and balances that secure sufficient coordination and focus of action and resources. What's your view on the sheer number of rules- is it higher in self-managed organizations than in hierarchies?
to 5: Motivation: You start this paragraph with "beyond being intrinsically motivated to perform..." and focus on extrinsic motivation, aka money. While money is always important, I think it is more critical to elaborate on the ways progressive organizations harness the intrinsic motivation of coworkers. The impression I am left with is that motivation is still mainly an "extrinsic" game of incentives - handing out sums of money more intelligently. I am perfectly sure if I read the fabulous "8 Trends" https://corporate-rebels.com/trends/ that you share this view, though.
That's my five cents. As said, thanks for sharing these marvelous, conceptualizing insights, Joost! Can't wait to read more
Thanks for your extensive feedback on the article. I'm glad it resonated with you.
To clarify a few points and to answer some of your questions posed;
First, I have no intention and no interest to "bash middle management". I'm just describing the phenomenon of MMLOs as accurate as I can.
Second, and therefore, the points I make in this article are all based on what I could verify by academic articles and case-studies. This also means that I didn't (nor want to) use popular management concepts like the Circle Organization or our own 8 trends.
Last, the question about the sheer number of rules is spot on. This is something I couldn't find much about in the academic literature. That's also why I haven't a clear answer for you (yet) and something our research will reveal sooner or later (I hope).
Stay tuned, I hope to write a follow-up article in the upcoming weeks!
This is an excellent article, and I really enjoy reading your work - I recently wrote a piece on leadership - and archetypes I derived from Eastern Mysticism and Activism
Leadership – Two archetypes of a leader for complex world
Do you know Stafford Beer´s Viable System Model (from systems thinking/cybernetics)? I think it might capture more precisely what you are describing in your 5 elements (1. Strategy 2. Organizational Structure 3. Task Allocation, 4. Coordination, 5. Motivation).
In Beer´s model which describes any system which is able to adapt to survive, he defines 5 elements/functions it needs to have:
System 5 Purpose/identity, - roughly your 5. motivation.
System 4. Outside - Future , - your 1. Strategy.
System 3. Inside / in - less clear which one of yours - this is the decision making/allocating function
System 3* - sporadic audit / review - you don´t have it named specifically here
System 2. Coordination - (4. in your case).
System 1. Operations - less clear which one of yours
I did a very short write up about VSM on my Fedwiki page here:
http://vincent.proto.institute/view/welcome-visitors/view/viable-system-model which is somewhat simpler than the good Wikipedia article: https://en.wikipedia.org/wiki/Viable_system_model
First I enjoyed the article...
My concern is that simple a search of W.L. Gore on Linkedin shows a number of Manager, Leader, Senior and Director titles within the company. Are these being categorized as "bottom management" to allow WLG to say they don't have middle management???
Good point. In my opinion that can mean two things:
First option; WL Gore has been reverting back into a more traditional state with middle management over the last year. I don't think that is not the case.
Second option; people at WL Gore use self-invented 'traditional job titles' only to communicate to the outside world in order to fit into the status-quo of the traditional business landscape. I think this is what you see happening on LinkedIn regarding the job-titles of WL Gore employees.
In fact, this is something we see happening in almost all MMLOs that got rid of official job titles. Often employees in MMLOs do 'invent' their own job title because for outsiders the absence of job titles is often confusing as it is less clear who is responsible for what. However, that doesn't mean that this self-invented job titles mean anything within the MMLOs...
Thanks for this article. I appreciate the on-going efforts of the Corporate Rebels to review the available real-world cases where organizations innovate around new approaches to self-management. I have two basic concerns that remain unaddressed in this article and would argue for more work going forward:
1. The analysis assumes that the goal model is the applicable model for organizational effectiveness; in other words, top management sets long term objectives (or goals) and these directives become mandates that cascade down to lower levels. This is still top-down, management by objectives; the only difference is that middle management is being replaced with software, while the goals continue to emanate from the top. The goal model has been shown to be invalid for two reasons: (a) it accepts arbitrary goals that often focus on the wrong things, and (b) it does not supply an objective referent to verify effectiveness in the field. Please see my book, "Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness" (Chandler, 2017) for a new model of organizational effectiveness.
2. Because the real world is a complex environment, it is doubtful that we can derive predictive models from available cases. A complex environment is always evolving and has no memory. Instead, causation is non-linear, intertwined, and interdependent in a complex environment. The work of Stafford Beer is instructive, as others have mentioned here. Please see his book, "A Platform for Change" (Beer, 1975). Since available cases are not necessarily predictive in a complex environment, we must rely primarily on theory to find new models. The ‘Cynefin Framework’ of Dave Snowden is also helpful in determining the characteristics of the environment (there are many YouTube videos in which he explains Cynefin).
Instead of ‘command and control’, however benign, I believe that we need something else – what could be called ‘release and serve’ (release the workers from top-down mandates and charge small teams with serving the external environment in innovative ways based on agreed principles). Think of installing an autopilot in an aircraft -- the pilot does not go away, but the workload is reduced.
Fantastically helpful summary. Thank you Joost! We have just been talking about how we scale our way of working at Mayden (https://mayden.co.uk). We are currently 80 with no middle managers (just 3 director). What if we were 100, 200? 2000? Whilst it's great to realise we have arrived at much of what you've written about by ourselves over the last 5 years, you have given us a very helpful checklist here, and practical inspiration for things we'd need to think about as we continue to scale up. Thank you so much! If you'd like to hear more about Mayden, we'd love to tell you our story.
Hi. It was really long read ). But it was very interesting. The model is simply but deep. I like that motivation is base of all story ))) it was last point but for me it look like as foundation. I think that you can explain some different ways of these 3 companies by motivation: "Purpose or Money". And it is not the question of or-or that is the question what to put first.
Hi Joost, great article, nice long-read. Great to see our Dutch Buurtzorg listed as it's truly an exponential organization after just 12 years of existence.
We made an assessment tool to measure the score of organizations in terms of Exponential transformation for those who seek help in switching their current organization in something that we call Organizations led by Massive Transformative Purpose (MTPs). We have been researching over 150 of the fastest growing companies since the internet and published the book Exponential Transformation not so long ago to help organizations become a Unicorn with attributes that are adding on extra help to all of your points.
Please try out our self-assesment tool for organizations: http://f100.exponentialorgs.com/exq-score
While this book is co-written by over 300 contributors we believe in co-creation of more knowledge so would like to invite you to join our open source community of practitioners so you can meetup 100+ organizations led as MMLO's (self-steering autonomous teams that pursue a Massive transformative purpose). We believe that Autonomy is the grand rule in gaining successful on-going innovations. We would invite you to use our canvas we share publicly to help you out on discovering and prospecting more businesses. You can use knowledge about the Post-normal era: https://www.slideshare.net/ilkkakakko/new-book-ilkka-kakko-oasis-way-and-the-postnormal-era-how-understanding-serendipity-will-lead-you-to-success that explains why we are getting more of such organizations as also check out how transition researcher redefines leadership with the 'verandering van tijdperken/change of era's' see this presentation: https://www.slideshare.net/AnkeSiegers/presentatie-nl-kantelt-transitietheorie-jan-rotmans-en-anke-siegers
Let me know if you want some more help in understanding the top 100 of the Exo Organisations list, they all score high on autonomy, and managers can still exist, but booking.com also has self-steering teams and managers cannot interrupt them because they have their own priorities in place. They use a red-card once a year to get a management priority on the first priority in a team. This is remarkable to see as 99.9% still work as traditional businesses and never believe that this is possible, so enough to do for all of us to sustain this planet with training self-steering autonomous teams and DAO (decentralized autonomous Organizations) who are restoring our current broken system into a circular economy.
The middle management brings the orderliness in a large organisation. Probably want is written above can work in an ideal world.
As Human Beings I am sure there will be differences of opinion, differential goals, jealousy and infighting. MM is not only there to resolve these but also to bring the best out of the absence of orderliness.
Communicating by a small group of leaders to a large organisations who have workers at different level of understanding is a definite challenge.
We can optimise MM but not eliminate it..
Thanks for this fine article. I shall certainly continue to follow your progress.
One aspect seems to be a bit out of your scope - compliance. Be it financial, legal, safety, product safety or specific customer requirements (aviation, medical devices, automotive and so forth) most business is heavily regulated. My notion is that most people that get things done ('operators', if you will) have a tendency to not know or rather neglect this part of the game.
So how does an MMLO tackle this issue? How is responsibility organised? Is it included in the mentioned "end-to-end" responsibilty? Are the team members aware of it and capable (knowledge and capacity) of executing their responsibility? How do MMLOs act upon fatalities and their legal consequences?
And now for something completely different: How does the MMLO-concept resonate in large scale industries such as chemistry operations e.g.? I have the feeling that when a lot of money is involved investors usually want to see control. Can we imagine running organisations such as an integrated chemical park (Geleen e.g.) with MMLOs? How would that be?
Great piece. And encouraging to that read that more companies, besides Zappos, Semco, and the like, have successfully adopted self-steering organizational strategies.
Just a small error (IMHO) at the beginning:
"Strategy (organizing the direction of the company)
Division of Labor (organizing 'vertically' in the company)
Integration of Effort (organizing 'horizontally' across the company)"
It is the other way round. The Division of Labor is horizontal (focused on individual productivity), while the Integration of Effort is vertical (= integrated organizational effort).
On the latter: "It is the task of the senior managers to ensure that the pieces of the integration "puzzle" are in place and that their own behavior communicates to employees, customers, and shareholders what is important to the organization" (Source: 'Integration of effort : the key to high-performance organizations').
Well, all three examples (Buurtzorg, Haier and Gore) are working in regulated industries. Buurtzorg is in health care which is highly regulated in the Netherlands. Gore develops materials for the medical industry which is just as much regulated (if not more)...
Besides, both Gore and Haier operate manufacturing sites. Gore, in particular, operates chemical plants so that seems to be possible with a MMLO configuration as well.
I find that hard to judge as I did not empirically compare a MMLO versus a traditional one (yet).
But off course, I have my ideas about it. I do think, indeed what you suggest, that employees of MMLOs take more responsibility, and they seem to be fully aware of the consequences that come with it.
I also think that top management teams of MMLOs provide teams with more responsibility compared to traditional ones because they seem to trust their employees to make the right decisions. This responsibility goes hand in hand with a culture of radical transparency in order for peers to be able to control each other. This means that top down control is replaced by peer control in MMLOs.
Still, however, top management teams of MMLOs bear the same end responsibility as top management teams of traditional ones. So, in fact, it are the top management teams of MMLOs that seem to take the biggest risk
I'm eager to learn when/where the Division of Labor and the Integration of Effort were indeed peer-reviewed as a management practice.
The two differ in that the first intends to raise productivity (by focusing on an individual level, i.e., laterally) while the second intends to raise performance (on an organizational/operational level, cross-structure and cross-silo).
Of course, I might have misinterpreted relevant management theory all together, and if I am, I'm more than happy to admit it.
Thanks for sharing, Joost!
I like the way you combine organization science insights with obervations in the practice of three cases.
To me it brings op some questions about the functioning of self-organized teams: how do self-organized teams in these companies deal 1) with not-so-well-functioning colleagues, 2) with (long) absence/sickleave of colleagues, 3) with the sourcing/sharing of scarce expertise/skils for multiple teams and 4) with choices/actions with consequences for other teams or the whole company?
About the concluding figure: is it me or should the puzzle pieces be attached to coordination (integrating seperate parts) and the wrinkled arrow to strategy (direction)?
Very interesting examples, analysis and suggestions.
You’ve spent more time with them but based on your and other data I don’t think Gore does operate as a 'network of teams' but rather a network of individuals who can do work in teams and other groups (which is why it uses a peer-ranking system to assess individual not team performance).
It is interesting that your follow-up post links Buurtzorg’s organisation form to collaboration and community. As we have previously discussed on Twitter, I think Buurtzorg organises as communities not teams (which is why it stays apart from market mechanisms and relies much more on the intrinsic motivation of employees).
So although you suggest that Haier’s small self organising teams are similar to Buurtzorg’s I would suggest they are completely distinct, as they are actually teams and definitely not communities.
Therefore, for me, there are other, even more notable differences between these organisations and the related forms (that they are actually examples of networks, communities and platform based]
However, the main thing is that we help these examples become better known so that more organisations can draw insights from them. So thank you for sharing more on them.
Jon Ingham, The Social Organization
we've been discussing the pains of middle layer fat in our product management meet up group for some time lol.. the article is definitely something we will look into.
We also had some other ideas when dealing with legacy orgs: https://medium.com/@mryitch/terrorism-within-corporate-walls-aa680be3d886
Joost, I think your research question has already been answered.
See the BetaCodex Network resources on www.BetaCodex.org, and this particular paper on Cell Structure Design, for example: https://www.slideshare.net/npflaeging/special-edition-paper-turn-your-company-outsidein-part-iii-a-paper-on-cell-structure-design
Cell Structure Design is also an open source social technology. You can find more about it here: https://www.redforty2.com/cellstructuredesign/
What do you think?
Nice article Joost! I've read the book Reinventing Organizations by Frederic Laloux a couple years ago and there I read the story of Buurtzorg. And it's nice to have it read in your article from a different perspective.
I think the biggest challenge of this whole managerless thing is persisting the company's vision and invision that to the people in the company. Another challenge is to practice good leadership. Specially in this day and age where (almost) everything is valued by money.
Thanks for sharing the story.
interesting read. I am glad that you spent the time to summarize a pretty complex thing. I am in the sw industry and I have experimented a while with focus on the teams and having servant leaders. I have manged to avoid any departments in our 300+ employee org. Instead we focus on building very strong teams and work items are possible to move around and all teams are helping each other to meet deadlines and fix issues.
Now however I am struggling when some teams need extra time to focus in very technically challenging tasks not customer related. How do I organize them so that they do not become distant to the other teams and an invisible department get created ?
I think you encountered an interesting challenge, because indeed, how do stimulate people in MMLOs to put effort and time in innovation?
One way to solve this challenge is to create an internal market place where the people that have to solve "very technically challenging tasks" are highly rewarded by the other teams. In other words - teams that face customers directly must purchase the services of teams that solve technical tasks. If they don't pay for those services they have simply no product to sell.
Another way to solve this challenge is to make teams not only responsible for their own work but also party for the work of other teams in their 'supply chain'. In this way teams that face customers can only receive rewards when the complete 'supply chain' is successful. At the moment Haier is experimenting/pioneering this particular route, and we will soon write about it. Stay tuned!
In 2012, Haier gave 12,000 managers a choice: "you can leave, or join our new structure." Some left, many stayed and joined one of 4,000 small independent companies within Haier—the so-called 'microenterprises' (MEs). Many academics, management gurus and other companies were amazed with how the ME structure stimulated entrepreneurship. So why the hell would Haier fiddle with it's structure, again?
Yash Pakka is a compostable tableware manufacturer in Faizabad, Uttar Pradesh. Their products are made from sugarcane waste and are 100% compostable, and the factory is even powered by its own power grid that uses rice husk as fuel. But they’re innovative not just in terms of what they make, but how they organise.