MANAGING MODESTLY
The fox knows many things but the hedgehog knows one big thing.
[Achilochas, circa 650 bc]
So – what to do about all this? Well – how about managing more modestly? More thoughtfully, more sensitively, but especially more modestly. People can manage modestly in all kinds of ways, as the readings point out. They can simply come to understand what gets in their way (for example, about being the deputy quartermaster in India, in our first piece); they can refuse obscene pay packages for the sake of teamwork, so that people really can become ‘a company’s greatest asset’ (as in our second piece, a fantasy letter by a CEO to the board); they can let everyone have ideas (our third piece). Overall, they can simply manage quietly. And they can even consider what managing would be like without managers (our last two pieces).
Yee gods, what do I do now?
by Ian Hamilton
… In 1896 I was Deputy Quartermaster-General at Simla; then, perhaps still, one of the hardest worked billets in Asia. After a long office day I used to get back home to dinner pursued by a pile of files three to four feet high. The Quartermaster-General, my boss, was a clever, delightful work-glutton. So we sweated and ran together for a while a neck and neck race with our piles of files, but I was the younger and he was the first to be ordered off by the doctors to Europe. Then I, at the age of forty-three, stepped into the shoes and became officiating Quartermaster-General in India. Unluckily, the Government at that moment was in a very stingy mood. They refused to provide pay to fill the post I was vacating and Sir George White, the Commander-in-Chief, asked me to duplicate myself and do the double work. My heart sank, but there was nothing for it but to have a try. The day came; the Quartermaster-General went home and with him went the whole of his share of the work. As for my own share, the hard twelve hours’ task melted by some magic into the Socialist’s dream of a six hours’ day. How was that? Because, when a question came up from one of the Departments I had formerly been forced to compose a long minute upon it, explaining the case, putting my own views, and endeavoring to persuade the Quartermaster-General to accept them. He was a highly conscientious man and if he differed from me he liked to put on record his reasons – several pages of reasons. Or, if he agreed with me, still he liked to agree in his own words and to ‘put them on record’. Now, when I became Quartermaster-General and Deputy-Quartermaster General rolled into one I studied the case as formerly, but there my work ended: I had not to persuade my own subordinates: I had no superior except the Commander-in-Chief, who was delighted to be left alone: I just gave an order – quite a simple matter unless a man’s afraid: ‘Yes,’ I said, or ‘No!’
Source: Sir Ian Hamilton, The Soul and Body of an Army, E. Arnold & Co., 1921, pp. 235–236. © by kind permission of the Trustees of the Estate of Sir Ian Hamilton.
A Long Overdue Letter to the Board
by Henry Mintzberg
Dear Members of the Board
I am writing to you with a proposal that may seem radical. In fact it is conservative, for my primary role as Chief Executive Officer of this corporation is to ensure its conservation as a healthy enterprise.
I am requesting that you reduce my salary by half and that you redesign my bonus system along the lines outlined below. From now on, I wish to take increases (or decreases for that matter) in the same proportion as our operating employees.
I have talked a great deal about teamwork during my tenure in this job, that we are all in this together, all of our people. Yet I am singled out by virtue of my compensation. How can I foster real teamwork when a disproportionate share of the benefits comes to me? (Lately, as more and more of our people become aware of my compensation, I have been getting increasing amounts of hate mail about it. This is certainly disconcerting, but most troublesome is that I have no reasonable reply to it.)
The assumption these days seems to be that the CEO does it all. I certainly lead, but only by respecting the contribution made by others.
My job is to release the energy that exists within our people. What makes true that old adage about leadership – that people will say they did it themselves – is that they really do. Real leaders know that. CEOs who have to fix everything are all too often succeeded by organizations that collapse. We will all have been successful if this place is as profitable after I am gone as it is now.
And that brings me to my second point. We talk a lot in our meetings about the long term health of this company. Well then, why then am I being rewarded for short term gains in the stock price? And why always those narrow numbers? We all know that I have all sorts of ways to cut spending at the expense of our future. If you want to reward me on the basis of those numbers, then save it – until five years after I retire. Then you’ll know!
Ever since we started this shareholder value business, our culture has gone to hell. Our frontline employees tell me it gets in the way of serving customers: they are forced to see dollar signs out there, not real people. And more and more of them just don’t give a damn any more: we don’t count, they tell me, so why should we care. All of us shall pay dearly for these short term gains, I assure you. In fact, I wonder if this productivity surge being experienced in America is nothing more than the gains from short term cost cutting – at the expense of real productivity. After all, it doesn’t take geniuses to close things and cut things. Building things is the hard part; are we doing enough of that?
I have always prided myself on being a risk taker. That is one of the reasons you put me in this job. So let’s take a look at my compensation scheme. I cash in big time when the stock goes up, but pay out nothing when the stock goes down. I don’t even have to give back a penny of what I gained last year if the price turns around and drops this year. Some risk taker! You know what: I’m tired of being a hypocrite.
And why just me? Why not all of us equally? I propose that I receive no higher bonus, in proportion to my salary, than anyone else in this company. We claim to be a sophisticated ‘network’ of ‘knowledge workers’ marching into the third millennium. Isn’t it time we brought our practices in line with our rhetoric?
Now I know the line we have been using all along: that I am only being compensated to keep up with others in my position. Enough of this complicity in behavior we all know to be outrageous. Frankly, I don’t care if his is bigger than mine. My salary should not be some kind of external trophy. It is above all an internal signal, to tell our people what we really think about this place. Let’s stop pretending that CEOs form some kind of elite club. It is leadership we are talking about here, not status.
To be perfectly honest, I am so busy running this company that I hardly have the time to spend all this money I make, let alone to so with a conspicuousness that demonstrates how much it is. My family and I are well looked after, I assure you, even at the income level I propose. Let me concentrate on trying to manage this place as it should be managed.
I trust you have read this letter as an investment in our future. Because if our company has no future in these terms, then neither does our society.
Sincerely,
Chief Executive Officer
Source: Henry Mintzberg ‘There’s no compensation for hypocrisy’, Financial Times, October 29 1999.
Here’s an Idea: Let Everyone Have Ideas
by William C. Taylor
Like many top executives, James R. Lavoie and Joseph M. Marino keep a close eye on the stock market. But the two men, co-founders of Rite-Solutions, a software company that builds advanced – and highly classified – command-and-control systems for the Navy, don’t worry much about Nasdaq or the New York Stock Exchange.
Instead, they focus on an internal market where any employee can propose that the company acquire a new technology, enter a new business or make an efficiency improvement. These proposals become stocks, complete with ticker symbols, discussion lists and e-mail alerts. Employees buy or sell the stocks, and prices change to reflect the sentiments of the company’s engineers, computer scientists and project managers – as well as its marketers, accountants and even the receptionist.
‘We’re the founders, but we’re far from the smartest people here,’ Mr. Lavoie, the chief executive, said during an interview at Rite-Solutions’ headquarters outside Newport, R.I. ‘At most companies, especially technology companies, the most brilliant insights tend to come from people other than senior management. So we created a marketplace to harvest collective genius.’
That’s a refreshing dose of humility from a successful C.E.O. with decades of experience in his field. (Mr. Lavoie, 59, is a Vietnam War veteran and an accomplished engineer who has devoted his career to military-oriented technologies.)
Most companies operate under the assumption that big ideas come from a few big brains: the inspired founder, the eccentric inventor, the visionary boss. But there’s a fine line between individual genius and know-it-all arrogance. What happens when rivals become so numerous, when technologies move so quickly, that no corporate honcho can think of everything? Then it’s time to invent a less top-down approach to innovation, to make it everybody’s business to come up with great ideas.
That’s a key lesson behind the rise of open source technology, most notably Linux. A ragtag army of programmers organized into groups, wrote computer code, made the code available for anyone to revise and, by competing and cooperating in a global community, reshaped the market for software. The brilliance of Linux as a model of innovation is that it is powered by the grass-roots brilliance of the thousands of programmers who created it.
According to Tim O’Reilly, the founder and chief executive of O’Reilly Media, the computer book publisher, and an evangelist for open source technologies, creativity is no longer about which companies have the most visionary executives, but who has the most compelling ‘architecture of participation’. That is, which companies make it easy, interesting and rewarding for a wide range of contributors to offer ideas, solve problems and improve products?
At Rite-Solutions, the architecture of participation is both businesslike and playful. Fifty-five stocks are listed on the company’s internal market, which is called Mutual Fun. Each stock comes with a detailed description – called an expect-us, as opposed to a prospectus – and begins trading at a price of $10. Every employee gets $10,000 in ‘opinion money’ to allocate among the offerings, and employees signal their enthusiasm by investing in a stock and, better yet, volunteering to work on the project. Volunteers share in the proceeds, in the form of real money, if the stock becomes a product or delivers savings.
Mr. Marino, 57, president of Rite-Solutions, says the market, which began in January 2005, has already paid big dividends. One of the earliest stocks was a proposal to apply three-dimensional visualization technology, akin to video games, to help sailors and domestic-security personnel practice making decisions in emergency situations. Initially, Mr. Marino was unenthusiastic about the idea – ‘I’m not a joystick jockey’ – but support among employees was overwhelming. Today, that product line, called Rite-View, accounts for 30 percent of total sales.
‘Would this have happened if it were just up to the guys at the top?’ Mr. Marino asked. ‘Absolutely not. But we could not ignore the fact that so many people were rallying around the idea. This system removes the terrible burden of us always having to be right.’
Another virtue of the stock market, Mr. Lavoie added, is that it finds good ideas from unlikely sources. Among Rite-Solutions’ core technologies are pattern-recognition algorithms used in military applications, as well as for electronic gambling systems at casinos, a big market for the company. A member of the administrative staff, with no technical expertise, thought that this technology might also be used in educational settings, to create an entertaining way for students to learn history or math.
She started a stock called Win/Play/Learn, which attracted a rush of investment from engineers eager to turn her idea into a product. Their enthusiasm led to meetings with Hasbro, up the road in Pawtucket, and Rite-Solutions won a contract to help it build its VuGo multimedia system, introduced last Christmas.
Mr. Lavoie called this innovation an example of the ‘quiet genius’ that goes untapped inside most organizations. ‘We would have never connected those dots,’ he said. ‘But one employee floated an idea, lots of employees got passionate about it and that led to a new line of business.’
The next frontier is to tap the quiet genius that exists outside organizations – to attract innovations from people who are prepared to work with a company, even if they don’t work for it. An intriguing case in point is InnoCentive, a virtual research and development lab through which major corporations invite scientists and engineers worldwide to contribute ideas and solve problems they haven’t been able to crack themselves.
InnoCentive, based in Andover, Mass., is literally a marketplace of ideas. It has signed up more than 30 blue-chip companies, including Procter & Gamble, Boeing and DuPont, whose research labs are groaning under the weight of unsolved problems and unfinished projects. It has also signed up more than 90,000 biologists, chemists and other professionals from more than 175 countries. These ‘solvers’ compete to meet thorny technical challenges posted by ‘seeker’ companies. Each challenge has a detailed scientific description, a deadline and an award, which can run as high as $100,000.
‘We are talking about the democratization of science,’ said Alpheus Bingham, who spent 28 years as a scientist and senior research executive at Eli Lilly & Company before becoming the president and chief executive of InnoCentive. ‘What happens when you open your company to thousands and thousands of minds, each of them with a totally different set of life experiences?’
InnoCentive, founded as an independent start-up by Lilly in 2001, has an impressive record. It can point to a long list of valuable scientific ideas that have arrived, with surprising speed, from faraway places. In addition to the United States, the top countries for solvers are China, India and Russia.
Last month, InnoCentive attracted a $9 million infusion of venture capital to accelerate its growth. ‘There is a “collective mind” out there,’ Dr. Bingham said. ‘The question for companies is, what fraction of it can you access?’
That remains an unanswered question at many companies, whose leaders continue to rely on their own brainpower as the key source of ideas. But there’s evidence that more and more top executives are recognizing the limits of their individual genius.
Back at Rite-Solutions, for example, one of the most valuable stocks on Mutual Fun is the stock market itself. So many executives from other companies have asked to study the system that a team championed the idea of licensing it as a product – another unexpected opportunity.
‘There’s nothing wrong with experience,’ said Mr. Marino, the company’s president. ‘The problem is when experience gets in the way of innovation. As founders, the one thing we know is that we don’t know all the answers.’
Source: ‘Here’s an idea: let everyone have ideas’ by William C. Taylor, New York Times, © 26 March 2006. The New York Times. All rights reserved. Used by permission and protected by the copyright laws of the United States. The printing, copying and redistribution, or transmission of the material without express written permission is prohibited.
Managing quietly
by Henry Mintzberg
A prominent business magazine hires a journalist to write about the chief executive of a major corporation. The man has been at the helm for several years and is considered highly effective. The journalist submits an excellent piece, capturing the very spirit of the man’s managerial style. The magazine rejects it – not exciting enough, no hype. Yet the company has just broken profit records for its industry.
Not far away, another major corporation is undergoing dramatic transformation. Change is everywhere, the place is teeming with consultants, people are being released in huge numbers. The chief executive has been all over the business press. Suddenly he is fired: the board considers the turnaround a failure.
Go back five, ten, twenty or more years and read the business press – about John Scully at Apple, James Robinson at American Express, Robert McNamara at the Defense Department. Heroes of American management all … for a time. Then consider this proposition: maybe really good management is boring. Maybe the press is the problem, alongside the so-called gurus, since they are the ones who personalize success and deify the leaders (before they defile them). After all, corporations are large and complicated; it takes a lot of effort to find out what has really been going on. It is much easier to assume that the great one did it all. Makes for better stories.
If you want to test this proposition, try Switzerland. It is a well-run country. No arounds. Ask the next Swiss you meet the name of the head of state. Don’t be surprised she does not know: the seven people who run the country sit around a table, rotating position on an annual basis …
The problem is the present
… Today, today, always today. This is the voice of the obsessively analytic mind, shouting into today’s wind.
But if you want the imagination to see the future, then you’d better have the wisdom to appreciate the past. An obsession with the present – with what’s ‘hot’ and what’s ‘in’ – may be dazzling, but all that does is blind everyone to the reality. Show me a chief executive who ignores yesterday, who favors the new outsider over the experienced insider, the quick fix over steady progress, and I’ll show you a chief executive who is destroying an organization.
To ‘turn around’ is to end up facing the same way. Maybe that is the problem: all this turning around. Might not the white knight of management be the black hole of organizations? What good is the great leader if everything collapses when he or she leaves? Perhaps good companies don’t need to be turned around at all because they are not constantly being thrust into crises by leaders who have to make their marks today. Maybe these companies are simply managed quietly.
Managing quietly
What has been the greatest advance ever in health care? Not the dramatic discoveries of penicillin or insulin, it has been argued, but simply cleaning up the water supply. Perhaps, then, it is time to clean up our organizations, as well as our thinking. In this spirit I offer a few thoughts about some of the quiet words of managing.
- Inspiring: Quiet managers don’t empower their people – ‘empowerment’ is taken for granted. They inspire them. They create the conditions that foster openness and release energy. The queen bee, for example, does not make decisions; she just emits a chemical substance that holds the whole social system together. In human hives, that is called culture.
Quiet managers strengthen the cultural bonds between people, not by treating them as detachable ‘human resources’ (probably the most offensive term ever coined in management, at least until ‘human capital’ came along), but as respected members of a cohesive social system. When people are trusted, they do not have to be empowered.
The queen bee does not take credit for the worker bees’ doing their jobs effectively. She just does her job effectively, so that they can do theirs. There are no bonuses for the queen bee beyond what she needs.
Next time you hear a chief executive go on about teamwork, about how ‘we’ did it by all pulling together, ask who among the ‘we’ is getting what kind of bonus. When you hear that chief boasting about taking the long view, ask how those bonuses are calculated. If cooperation and foresight are so important, why have these few been cashing in on generous stock options? Do we take the money back when the price plummets? Isn’t it time to recognize this kind of executive compensation for what it is: a form of corruption, not only of our institutions, but of our societies as democratic systems? - Caring: Quiet managers care for their organizations; they do not try to slice away problems as surgeons do. They spend more time preventing problems than fixing them, because they know enough to know when and how to intervene. In a sense, this is more like homeopathic medicine: the prescription of small doses to stimulate the system to fix itself. Better still, it is like the best of nursing: gentle care that, in itself, becomes cure.
- Infusing: ‘If you want to know what problems we have encountered over the years,’ someone from a major airline once told me, ‘just look at our headquarters units. Every time we have a problem, we create a new unit to deal with it.’ That is management by intrusion. Stick in someone or something to fix it. Ignore everyone and everything else: that is the past. What can the newly arrived chief know about the past, anyway? Besides, the stock analysts and magazine reporters don’t have the time to allow the new chief to find out.
Quiet managing is about infusion, change that seeps in slowly, steadily, profoundly. Rather than having change thrust upon them in dramatic, superficial episodes, everyone takes responsibility for making sure that serious changes take hold.
This does not mean changing everything all the time – which is just another way of saying anarchy. It means always changing some things while holding most others steady. Call this natural continuous improvement, if you like. The trick, of course, is to know what to change when. And to achieve that there is no substitute for a leadership with an intimate understanding of the organization working with a workforce that is respected and trusted. That way, when people leave, including the leaders, progress continues. - Initiating: Moses supplies our image of the strategy process: walking down the mountain carrying the word from on high to the waiting faithful. Redemption from the heavens. Of course, there are too many people to read the tablets, so the leaders have to shout these ‘formulations’ to all these ‘implementors’. All so very neat.
Except that life in the valleys below is rich and complicated. And that is what strategy has to be about – not the neat abstractions of the executive suite, but the messy patterns of daily life. So long as loud management stays up there disconnected, it can shout down all the strategies it likes: they will never work.
Quiet management is … about rolling up sleeves and finding out what is going on. And it is not parachuted down on the organization; it rises up from the base. But it never leaves that base. It functions ‘on the floor’, where the knowledge for strategy making lies. Such management blends into the daily life of the corporation, so that all sorts of people with their feet planted firmly on the ground can pursue exciting initiatives. Then managers who are in touch with them can champion these initiatives and so stimulate the process by which strategies evolve.
Put differently, the manager is not the organization any more than [a painting of a pipe is a pipe] … A healthy organization does not have to leap from one hero to another; it is a collective social system that naturally survives changes in leadership. If you want to judge the leader, look at the organization ten years later.
Beyond quiet
Quiet management is about thoughtfulness rooted in experience. Words like wisdom, trust, dedication, and judgment apply. Leadership works because it is legitimate, meaning that it is an integral part of the organization and so has the respect of everyone there. Tomorrow is appreciated because yesterday is honored. That makes today a pleasure.
Indeed, the best managing of all may well be silent. That way people can say, ‘We did it ourselves.’ Because we did.
Source: Reprinted with deletions from Henry Mintzberg, ‘Managing quietly’, Leader to Leader, Spring 1999, 24–30.
Managing Without Managers
by Ricardo Semler
In Brazil, where paternalism and the family business fiefdom still flourish, I am president of a manufacturing company that treats its 800 employees like responsible adults. Most of them – including factory workers – set their own working hours. All have access to the company books. The vast majority vote on many important corporate decisions. Everyone gets paid by the month, regardless of job description, and more than 150 of our management people set their own salaries and bonuses …
It’s never easy to transplant management programs from one company to another. In South America, it’s axiomatic that our structure and style cannot be duplicated. Semco is either too small, too big, too far away, too young, too old, or too obnoxious.
We may also be too specialized. We do cellular manufacturing of technologically sophisticated products, and we work at the high end on quality and price … Still the merit of sharing experience is to encourage experiment and to plant the seeds of conceptual change …
Participatory hot air
The first of Semco’s three values is democracy, or employee involvement. Clearly, workers who control their working conditions are going to be happier than workers who don’t. Just as clearly, there is no contest between the company that buys the grudging compliance of its work force and the company that enjoys the enterprising participation of its employees.
But about 90% of the time, participatory management is just hot air. Not that intentions aren’t good. It’s just that implementing employee involvement is so complex, so difficult, and, not uncommonly, so frustrating that it is easier to talk about than to do …
Size reduction is essential for putting employees in touch with one another so they can coordinate their work. The kind of distance we want to eliminate comes from having too many people in one place, but it also comes from having a pyramidal hierarchy.
Pyramids and circles
The organizational pyramid is the cause of much corporate evil because the tip is too far from the base. Pyramids emphasize power, promote insecurity, distort communications, hobble interaction, and make it very difficult for the people who plan and the people who execute to move in the same direction. So Semco designed an organizational circle. Its greatest advantage is to reduce management levels to three – one corporate level and two operating levels at the manufacturing units.
It consists of three concentric circles. One tiny, central circle contains the five people who integrate the company’s movements. These are the counselors I mentioned before. I’m one of them, and except for a couple of legal documents that call me president, counselor is the only title I use. A second, larger circle contains the heads of the eight divisions – we call them partners. Finally, a third, huge circle holds all the other employees. Most of them are the people we call associates; they do the research, design, sales, and manufacturing work and have no one reporting to them on a regular basis. But some of them are the permanent and temporary team and task leaders we call coordinators. We have counselors, partners, coordinators, and associates. That’s four titles and three management layers.
The linchpins of the system are the coordinators, a group that includes everyone formerly called foreman, supervisor, manager, head, or chief. The only people who report to coordinators are associates. No coordinator reports to another coordinator – that feature of the system is what ensures the reduction in management layers …
Associates often make higher salaries than coordinators and partners, and they can increase their status and compensation without entering the ‘management’ line.
Managers and the status and money they enjoy – in a word, hierarchy – are the single biggest obstacle to participatory management. We had to get the managers out of the way of democratic decision making, and our circular system does that pretty well.
But we go further. We don’t hire or promote people until they’ve been interviewed and accepted by all their future subordinates. Twice a year, subordinates evaluate managers. Also twice a year, everyone in the company anonymously fills out a questionnaire about company credibility and top management competence. Among other things, we ask our employees what it would take to make them quit or go on strike.
We insist on making important decisions collegially, and certain decisions are made by a company-wide vote. Several years ago, for example, we needed a bigger plant for our marine division, which makes pumps, compressors, and ship propellers. Real estate agents looked for months and found nothing. So we asked the employees themselves to help, and over the first weekend they found three factories for sale, all of them nearby. We closed up shop for a day, piled everyone into buses, and drove out to inspect the three buildings. Then the workers voted – and they chose a plant the counselors didn’t really want. It was an interesting situation – one that tested our commitment to participatory management …
Employees also outvoted me on the acquisition of a company that I’m still sure we should have bought. But they felt we weren’t ready to digest it, and I lost the vote. In a case like that, the credibility of our management system is at stake. Employee involvement must be real, even when it makes management uneasy. Anyway, what is the future of an acquisition if the people who have to operate it don’t believe it’s workable?
Hiring adults
We have other ways of combating hierarchy too. Most of our programs are based on the notion of giving employees control over their own lives. In a word, we hire adults, and then we treat them like adults.
Think about that. Outside the factory, workers are men and women who elect governments, serve in the army, lead community projects, raise and educate families, and make decisions every day about the future. Friends solicit their advice. Salespeople court them. Children and grandchildren look up to them for their wisdom and experience. But the moment they walk into the factory, the company transforms them into adolescents. They have to wear badges and name tags, arrive at a certain time, stand in line to punch the clock …
One of my first moves when I took control of Semco was to abolish norms, manuals, rules, and regulations. Everyone knows you can’t run a large organization without regulations, but everyone also knows that most regulations are poppycock. They rarely solve problems …
It’s also true that common sense requires just a touch of civil disobedience every time someone calls attention to something that’s not working … so we replaced all the nitpicking regulations with the rule of common sense and put our employees in the demanding position of using their own judgment.
We have no dress code, for example. The idea that personal appearance is important in a job – any job – is baloney … A company that needs business suits to prove its seriousness probably lacks more meaningful proof … women and men look best when they feel good …
We encourage – we practically insist on – job rotation every two to five years to prevent boredom. We try hard to provide job security, and for people over 50 or who’ve been with the company for more than three years, dismissal procedures are extra complicated.
On the more experimental side, we have a program for entry-level management trainees called Lost in Space, whereby we hire a couple of people every year who have no job description at all. A ‘godfather’ looks after them, and for one year they can do anything they like, as long as they try at least 12 different areas or units.
By the same logic that governs our other employee programs, we also have eliminated time clocks. People come and go according to their own schedules … one man wanted to start at 7 A.M., but because the forklift operator didn’t come until 8, he couldn’t get his parts. So a general discussion arose, and the upshot was that now everyone knows how to operate a forklift …
Hunting the woolly mammoth
… As Antony Jay points out, corporate man is a very recent animal. At Semco, we try to respect the hunter that dominated the first 99.9% of the history of our species. If you had to kill a mammoth or do without supper, there was no time to draw up an organization chart, assign tasks, or delegate authority …
Put ten people together, don’t appoint a leader, and you can be sure that one will emerge. So will a sighter, a runner, and whatever else the group needs. We form the groups, but they find their own leaders. That’s not a lack of structure, that’s just a lack of structure imposed from above.
But getting back to that mammoth, why was it that all the members of the group were so eager to do their share of the work – sighting, running, spearing, chiefing – and to stand aside when someone else could do it better? Because they all got to eat the thing once it was killed and cooked. What mattered was results, not status.
Corporate profit is today’s mammoth meat. And though there is a widespread view that profit sharing is some kind of socialist infection, it seems to me that few motivational tools are more capitalist. Everyone agrees that profits should belong to those who risk their capital, that entrepreneurial behavior deserves reward, that the creation of wealth should enrich the creator. Well, depending on how you define capital and risk, all these truisms can apply as much to workers as to shareholders …
Semco’s experience has convinced me that profit sharing has an excellent chance of working when it crowns a broad program of employee participation, when the profit-sharing criteria are so clear and simple that the least-gifted employee can understand them, and perhaps most important, when employees have monthly access to the company’s vital statistics – costs, overhead, sales, payroll, taxes, profits.
Transparency
… Nothing matters more than those vital statistics – short, frank, frequent reports on how the company is doing. Complete transparency. No hocus-pocus, no hanky-panky, no simplifications.
On the contrary, all Semco employees attend classes to learn how to read and understand the numbers, and it’s one of their unions that teaches the course. Every month, each employee gets a balance sheet, a profit-and-loss analysis, and a cash-flow statement for his or her division …
What matters in budgets as well as in reports is that the numbers be few and important and that people treat them with something approaching passion. The three monthly reports, with their 70 line items, tell us how to run the company, tell our managers how well they know their units, and tell our employees if there’s going to be a profit. Everyone works on the basis of the same information, and everyone looks forward to its appearance with what I’d call fervent curiosity.
And that’s all there is to it. Participation gives people control of their work, profit sharing gives them a reason to do it better, information tells them what’s working and what isn’t.
Letting them do whatever the hell they want
So we don’t have systems or staff functions or analysts or anything like that. What we have are people who either sell or make, and there’s nothing in between. Is there a marketing department? Not on your life. Marketing is everybody’s problem. Everybody knows the price of the products. Everybody knows the cost. Everybody has the monthly statement that says exactly what each of them makes, how much bronze is costing us, how much overtime we paid, all of it. And the employees know that 23% of the after-tax profit is theirs.
We are very, very rigorous about the numbers. We want them in on the fourth day of the month so we can get them back out on the fifth. And because we’re so strict with the financial controls, we can be extremely lax about everything else. Employees can paint the walls any color they like. They can come to work whenever they decide. They can wear whatever clothing makes them comfortable. They can do whatever the hell they want. It’s up to them to see the connection between productivity and profit and to act on it.
Source: Excerpts from Ricardo Semler, ‘Managing without managers’, Harvard Business Review, September–October, 1989. Reprinted by permission of Harvard Business Review. Copyright © 1989 by the Harvard Business School Publishing Corporation; all rights reserved.
After all is said and done, more is said than done.
Aesop quotes, 620–560 bc