Managing Without Managers

Guest post by Dr. Paul ZakThis piece is the first of what will be monthly contributions to the Drucker Exchange by neuroeconomist Paul Zak, our colleague at Claremont Graduate University. For those who might dismiss some of our thinking as the “soft side” of management, Paul puts “hard science” behind it.

The cover story of last December’s Harvard Business Review investigates a maverick company without job titles or promotions. “Yeah, yeah, some Silicon Valley start-up with a bunch of 20-somethings working and living in a rented mansion,” you think. Nope. How about the largest tomato products company in the U.S. with $700 million in revenue? Oh, and two-thirds of its “colleagues” are seasonal employees who drive the trucks and sort the tomatoes. All without job titles.

The company is called Morning Star, and the folks there invited me to visit three of their facilities in California’s Central Valley last fall. I wanted to find out how they manage without managers.

Beyond the cacophony of moving trucks and production lines whisking tomatoes around with water and steam, one thing jumped out at me: Every colleague I spoke to seemed engaged and happy.

Morning Star’s founder, Chris Rufer, has designed a self-management system where everyone drafts an annual Colleague Letter Of Understanding (CLOU) and presents it to his or her work group. The letter states how each colleague will create value for the group and support the group’s goals. Then, colleagues receive feedback from those around them on how well they are meeting their goals. Anyone can order equipment or materials they need at any time, but must present the bill to their work group and justify the purchase when each group’s profit and loss calculation is done. In fact, Rufer pays colleagues to attend a basic accounting course so they can understand the company’s finances.

Here’s the secret: When no one carries the title of “manager,” every colleague becomes a manager of his or her peers–and a manager of oneself. Self-management works for the same reason that there is not a police officer on every corner: As social creatures we constantly monitor others and ourselves for appropriate behaviors. Rufer and colleagues have harnessed our social nature to empower employees by cutting out layers of management. This lets him pay a premium to colleagues who fit into the company’s self-management model.

It sounds simple, but my laboratory experiments reveal why putting self-management into practice can be difficult. Self-management depends crucially on trust. My work shows that the neurochemical oxytocin is the brain’s trust signal. Hierarchy, high stress and fear inhibit the release of oxytocin, and Morning Star has eliminated much of these. Interestingly, moderate stress (like when one needs to meet a production goal) increases the release of oxytocin when the action occurs as a group.

Does it work? In the last decade, Morning Star has had double-digit revenue growth, and its annual colleague turnover rate is close to zero.

The last article Peter Drucker wrote for the Harvard Business Review was provocatively titled “Managing Oneself.” The colleagues at Morning Star have certainly taken Drucker at his word and put his ideas into practice.

–Paul Zak

You can also check out Paul’s popular TED Talk below.