Self-Management At Vagas: Zero Functional Hierarchy, No Targets, And Powerful Consensus
At Corporate Rebels we share stories of progressive organizations from all corners of the world. Which is how we find ourselves in Brazil, and in vibrant São Paulo. Here we meet with Mario Kaphan, founder of Vagas. Vagas, which means jobs in Portuguese, was founded in 1999 and rapidly grew to become Brazil’s market leader in e-recruitment, with half a million site-visitors each day.
Through this success, the organization has grown to 150 employees, who work in 30 self-managing teams to serve 3000+ clients. Mario shared their journey with us, and how they constantly experiment with their model to keep improving it. Their goal is to be able to adapt to the changing needs of a fast growing company.
So, this is a journey of continuous invention and reinvention. It has led Vagas to develop an uniquely progressive model which they dub Horizontal Management. Here's what it's like.
The term Horizontal Management seems to have been around for only a few years. “In the start-up years our team was small. Hierarchy was simply out of the question. Everyone was genuinely engaged with our mission to make a difference, and was proactive in taking responsibility. Plus, we shared strong values. As a result, consensus decision-making, for example, became an important and enjoyable part of our culture.”
Vagas’ strong focus on entrepreneurship, without being constrained by a fixed organization model, worked wonderfully well. They operated successfully in a highly competitive market, and without any marketing budget, they still grew rapidly due to word-of-mouth.
The smothering hierarchy
Then, when they grew beyond thirty, the first signs of bureaucracy appeared. “At this particular moment we started to try to structure the organization, and decided to appoint the first generation of managers. But this centralization of decision-making, and the use of hierarchical authority, started to affect the performance of the team. They started to lose connection to the company’s mission, and we slowly lost the entrepreneurial spirit of the early days.”
The centralization of decision-making, and the use of hierarchical authority, started to negatively affect the performance of the team.
They came to realise they had made a mistake by introducing a layer of hierarchy. “We wanted to go back to the old environment—one based on freedom and autonomy, where everyone could have an active voice, and where responsibility for decisions was shared.
So, we decided to go back to a minimal management structure and stripped the managers of their hierarchical decision-making authority. It was at this time we started using the term horizontal to describe our newly-formed model.”
Zero hierarchy policy
By 2010, when Vagas now consisted of 70 employees, they really started to understand what they want to build to last, inspired by the works of Philip Kotler (author of Marketing 3.0), Gary Hamel (author of The Future of Management) and Ricardo Semler (author of Maverick).
“We wanted to be a values-oriented organization. By this we meant a professional environment where individuals can live their own values, together with others that share those values. But values have to ‘live’. They should be there day by day as you make decisions. Because it’s one thing to identify yourself with values, and it’s another to live them.”
This is the moment the model becomes radicalised. All remaining leadership authority is abolished for good. They introduce a zero hierarchy policy—a truly horizontal (or flat, or self-managed, whatever you prefer) philosophy in which team-members completely regain their responsibility for decision-making. “We felt the need for such a philosophy to be able to work effectively together towards our relevant mission. Our mission is to realize a world where people choose companies better, and companies choose people better.”
Freewheeling vs. structure
For a couple of years, different areas at Vagas experimented with the zero hierarchy policy. They structured the company in self-managed teams responsible for different functional areas like sales, R&D and HR. The members of different self-managing teams are connected to each other by so-called multidisciplinary and temporary commissions. There are no rules, but it’s common that an employee spends around 75% of their time within their functional area.
“It was just our engineering intuition taking over. We would try something and if it didn’t work we would try something else. We did lots of experimenting. Each area interpreted horizontal management in its own way. Thus, we conducted plenty of experiments, some successful and some not so successful. We compared all the experiments and bench-marked them against similar experiments at other companies.”
“It was just our engineering intuition taking over. We would try something and if it didn’t work we would try something else. We did lots of experimenting. Each area interpreted horizontal management in its own way.
After a long period of experimentation, discussion and refinement they finally created a common methodology. In 2013, this methodology was implemented across the entire organization. “It needed to be simple, practical and efficient.” So, what kind of structure are we talking about? Here are three important pillars.
1. Regular meetings
The first important pillar is the regular cadence of meetings of self-managing teams. How does this work in practice? “The teams hold two-hour meetings twice a month where most strategic decisions are made. There are a few clear guidelines:
- During the meeting the complete team is supposed to be present. But there are always a few empty chairs. These are to be used by anyone interested in contributing to the discussion at this particular team.
- The meeting begins with an analysis of the graphs showing the team’s performance. Then, ideas that may lead to better performance are discussed.
- The graphs show the performance of all teams, functional areas and committees, and are published for all employees to see on Vagas’ intranet.”
2. Consensus-based decision-making
Another important pillar is consensus-based decision-making. “Decisions that are made are always based on consensus and should be made with respect to our mission. To be clear, this is not a democracy in the sense that decisions are made based on the majority of votes. Instead, we strive to ensure all participants will agree with the intended decisions.”
How does this work in practice? “A couple of important principles:
- First, all employees are expected to be open to so-called controversies within and outside their working areas. (Other methodologies call these tensions or sparks.) This means all are obliged to share their ideas (or concerns) and to then engage in the process of building a consensus solution to the raised controversy.
- Building consensus does not mean that large groups have to meet and discuss every decision that needs to be made. Minor decisions can be made by individuals. But the process must be transparent and reversible. Experience teaches Vagas that the average group consists of 3 to 5 employees.
- Depending on the complexity and consequences of decisions, they are made by smaller or larger groups of people. The greater the uncertainty posed by a matter, the more people with experience should be involved to achieve a better result.
- It may happen that a discussion reaches an impasse. Then the group will usually invite new participants. The most desirable are people with expertise in the matter. If there is still no consensus the decision gets postponed, waiting to mature until it is be possible to reach consensus. This is normally not a problem.”
3. No predefined targets
While teams are strongly result-driven, there are no predefined targets. Not even the sales teams have predefined monetary goals. Instead, teams measure and analyze their progress against key indicators that reflect their progress towards keeping their ‘business’ healthy. “We believe that the focus should be on process, not on the results. Results will be harvested when the process is right.”
Teams are responsible for improving their own performance and raising their achievements. “Improvement within Vagas is about the pleasure of debating ideas, and the satisfaction of either winning or losing a good discussion. We like to describe this environment as a place where individuals are empowered to do whatever they want but everyone has everything to do with that.”
The model seems to work just fine for Vagas right now. But that doesn’t necessarily mean that the model is fit for the future. Remember that there is simply no one-size-fits-all solution. “We always try to do things that make sense, and to provide everyone with the freedom to rethink and redo anything, and the ability to experiment. We were very fragile at the beginning, but we have always managed to grow, more than many companies with fixed traditional structures.
We like to describe this environment as a place where individuals are empowered to do whatever they want but everyone has everything to do with that.
The scalability of the model is certainly a challenge. Our belief is that it is adequate, without significant modification, for a two to three times larger company, and that addressing this question is not yet a priority. But let’s be clear. Horizontal management is not the end-of-the-line. It is a constant journey of discovery.”
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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.