Co-Management: Screw the Traditional Hierarchy

matt_perez
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- 6 min read

Roberto Martinez and I founded Nearsoft in early 2007. We were tech nerds and had no sales skills to speak of. So our plan was not to try and “sell” anything, but to listen to people who might eventually become our clients. This plus our culture has resulted in a scalable and defensible strategy for us.

What we offered was pretty simple: to help companies grow their software development team with engineers in Mexico. Developers working side-by-side with each other, able to talk at any time, able to collaborate in real time throughout the day.

Screw the traditional hierarchy

From the start, we knew that we didn’t want that traditionally fiat hierarchy. From the start we wanted to create a place where people could be themselves, have serious fun, and contribute in innovative ways. We knew that traditional fiat management was painful and inefficient. Fiat hierarchies are a tax on business that most companies continue to pay, mindlessly, in exchange for perceived control.

By contrast, we wanted to build a company that, in Roberto’s words,, “worked for everybody, not just us.” But we had no idea how to go about it.

Then we read Ricardo Semler's Maverick. And it changed everything!

It was our head-exploding moment. Somebody had done this before and had written a book detailing how they went about it. It was amazing and timely, and very welcome..

A side-effect of the culture that resulted, most of our growth has come by way of referrals. When people leave one of our client companies, it doesn't take long for them to call us. They “loved working with the Nearsoft people” and want to bring that along to their new gig.

Besides paying clients, we needed people. Good technical people who embraced our values, including teamwork, leadership, and commitment. Again, our culture gave us the upper hand.

It's all about culture

The more people learned about our culture, the easier it got to attract and keep them. People loved the fact that we treat each other as adults.

The association with GPTW and WorldBlu have also helped us tremendously. Particularly in the beginning, it gave us the credibility we needed to attract the people we needed, people who yearned for meaningful work not just a way to make a living.

It may sound strange, but we've never had much competition. Prospects can easily decide from the first call whether or not they want to work with a “weird” organization like ours. Not every company is ready, but for those that are, it creates a very strong bond between the people in each company.

Our freedom centered culture is also the thing that makes Nearsoft memorable and attractive. Not just because it is different, but because of the effect it has on every Nearsoftian. “They speak up, self-direct, and show initiative.” People feel it and they want it, whatever “it” is.

Caveat: Co-managing a company is a lot more work than a traditional fiat business.

Without an all powerful boss, you have to find other ways to align with each other and come up with ways to make decisions quickly and fairly. There is no such thing as an MBA in co-managing. Each company has to figure out what works best for the people who embody the company, at a given stage in its development.

Co-management

article photo

This is what we found to be the basics of it,

  • No fiat hierarchy, as a given
  • Meaning and belonging, as foundations
  • Transparency and decentralization, as commitments

The first is prescriptive and uncompromising. With a fiat hierarchy in place all talk of self-management is but lip service. If you have a boss who can fire you, or demote, or otherwise punish you, you will measure what you say. Your ability to make decisions and take action will be very, very restricted. “Elect your boss” and the like are just scary fantasies.

The second is foundational: if people 1) can't make sense of what they do and 2) they feel that they have to conform or be isolated, then all talk about fun and happiness is so much fantasy. People must come first and these are basic people needs. Together provide the foundation for everything downstream.

The third, commitment to Transparency and Decentralization are not end points. They are a never ending path, an ongoing journey. Don't use them to make a judgement, use them to have conversations about where your company is on these particular dimensions. Even noticing centralized or opaque actions is an ongoing, difficult thing to do, our fiat habits are so ingrained in us.

You have been deciding on budgets a certain way and then somebody asks, “but why didn’t you ask me?” And then you decentralize the whole budget making process. Or somebody makes a decision that increases overhead. “But we never knew about the impact on overhead!” And then you publish the appropriate data (and train people on how to interpret it). Are we moving towards or away from decentralization and transparency?

In addition, you have to create alignment tools. At Nearsoft we create a Mission every five years. And by “we,” it means all of us. There were around 300 people involved in creating the 2017-2022 Mission.

Whereas the Mission defines the how, you can also benefit from defining the Impact (what) that you want to see in the world and the Purpose (why) for doing it.

As I’ve said, co-management is not easy. It’s a lot of work, a lot of experiments that don’t turn out the way you hoped.

But it is also very rewarding. On the personal side, it’s hard to explain how simple, and powerful, things get when you treat each other as adults—but it’s very satisfying. It makes your business more robust and flexible—this became most obvious during the COVID pandemic. Bottom line, you end up with a better business all around.

Just the Facts, Ma’am

  • Nearsoft, Inc a California C Corporation.
  • Founded in 2007.
  • Acquired by Indecomm in 2017.
  • As of April 2020, 380 People.
  • Offices in: Hermosillo, Sonora; Chihuahua, Chihuahua; Mexico City; San Luis Potosi, San Luis Potosi; Merida, Yucatan.

This guest blog is written by Bucket List pioneer Matt Perez. Matt co-founded Nearsoft with Roberto Martinez and currently lives in San José, California. He is about to publish a book on co-management, titled Radical.

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Replies (14)

Anita

Anita

Could you tell more about Nearsoft? HOW exactly are you operating?

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Hendele

Hendele

Matt, could you share what is the biggest challenge you have encountered lately in such a co-management company?

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John

John

I would also add to Anita’s question, how do your employees gain professional progression in this type of enterprise? Usually, an employee is given more responsibilities as he/she progresses in the company and gains a better salary in exchange.

| | 0 | Flag
Dorie

Dorie

Such a great article. It leaves me hopeful in prioritizing valuing people first and creating belonging will make all the difference in the long run. You also see Nearsoft applying David Marquet's elements of pushing authority to information. Can't wait to read Radical.

| | 0 | Flag
Matt Perez

Matt Perez

Could you tell more about Nearsoft? HOW exactly are you operating?

Anita

We don't have any management. Leadership is very abundant, but people decide who's the leader on a particular subject by following. It doesn't work perfectly, but we keep trying.

| | 0 | Flag
Matt Perez

Matt Perez

Matt, could you share what is the biggest challenge you have encountered lately in such a co-management company?

Hendele

Learning to get out from our FIAT habits is an ongoing challenge. For example, we've been so thoroughly taught to "protect yourself" that being transparent, being vulnerable feels downright scary. When you do notice, the reaction is to be coy. This is an ongoing challenge.

From the operations point of view, we still deal with salaries in the traditional way and that's been a slow moving train wreck.

| | 0 | Flag
Matt Perez

Matt Perez

I would also add to Anita’s question, how do your employees gain professional progression in this type of enterprise? Usually, an employee is given more responsibilities as he/she progresses in the company and gains a better salary in exchange.

John

You might be talking about mastery or a title recognized by the job market.

A title is what your boss gives you. Or not. It is a not-so-subtle form of control. We don't give out titles (who'd do it?). For market recognition, people can make up their own titles. Yes, they can lie and claim something they're not. In that case, they'll have to deal with it when their title does not reflect their skills. But that is what happens today anyway.

Mastery is something that we all aspire to. Once I learn to do X, then I want to learn how to do pre-X or post-X. And once I've learned that…. As people grow, they take on more responsibilities and others look to us for leadership. That's the way we tick.

Of nearly 400 folks at Encora/Nearsoft, only two have left because they didn't get the title. More have left because the company couldn't offer the kind of growth they were looking.

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Jorn Verweij

Jorn Verweij

Thank you for sharing. There is no arguing with such success.

I would like to raise two points:
1) Hierarchy is not the problem. In many cases (based on environment/organisational purpose/geographical spread) it is simply practical and comes with many advantages. The problem is hierarchical decision making (ability to make choices based on position, choices which don't have to be substantiated and often without possibility of recourse). You say something similar (or the same) by referring to "fiat hierarchy". But the slogan "Screw the hierarchy" misses the greater point.

2) The greatest challenge, as has been shown in practice, is not building such a successful company (despite the hard work that goes into it), but sustaining its culture once the founders/those who have lived through the "lessons learned" leave. In this context I find the three basic points... basic. With this I only mean to say that they require quite a bit of context to be as powerful as they clearly are in your particular environment, pursuing your particular organisational goals. This may limit its applicability in other environments.

Wishing you continued success and hope to read more some other time!

Jorn

| | 1 | Flag
Pim

Pim

But the slogan "Screw the hierarchy" misses the greater point.

Jorn Verweij

That's on me, Jorn. I spiced it up a little ;)

| | 0 | Flag
Jorn Verweij

Jorn Verweij

That's on me, Jorn. I spiced it up a little ;)

Pim

Great to point that out.

On a different note, I had never come across the term "fiat hierarchy" before. As hierarchies go, a "fiat hierarchy" sounds like a benign version.

I always contrast "hierarchical decision making" with "hierarchical approval". The former has the person in the hierarchy make the decision, the latter has the workers substantiate their preferred course of action which is merely to be "approved" if the substantiation is sound enough (the manager or whomever understands it).

This may not be the most efficient way of doing things (bit slow), but it already takes out a lot of risk out of the organisation and may resolve quite a few workplace frustrations. It also puts the onus on the employee to make his/her proposal transparent within the organisation's context.

A "fiat hierarchy" sounds a lot like "hierarchal approval" to me, but I get the feeling something else is meant.

(Note to no one in particular: Unfortunately I don't generally get an update when a reply is added, despite me selecting the appropriate box).

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