Fire all the managers - a measurement solution

The development of bureaucratic management over the past 200 years has built up a whole heap of metrics, budgets, planning and other evaluative mechanisms designed to enhance performance within a functional hierarchy. A key question for me, when I read about alternative business models is how are the measurement and evaluation systems adapted so that desired behaviour is achieved in the new model. After all you get what you measure, and many a business change has failed because the measurement and reward system did not change or was not appropriate. After all you get what you measure?

"First, let's fire all the managers" is the title of management guru Gary Hamel's latest article in Harvard Business Review (citation below). It documents the practices of the Morning Star Company in California that operates 3 major fruit processing plants and is the worlds largest processor of tomatoes. With 400 staff and $700M in revenue such a company would typically have a hierarchy of 50 or so managers. At Morning Star no one has a boss, employees negotiate with their peers, everyone can spend the company's money, each individual is responsible for acquiring the tools they need, there are no titles or promotions and compensation decisions are peer based. Morning Stars vision is to create a company in which all team members "will be self managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers, and fellow industry participants, absent directives from others".

Effective measurement systems are the corner stone of alternatives to the traditional control centric bureaucratic hierarchy. So how does measurement work at Morning Star? For a start employees negotiate with each other over the services and performance levels they will provide to each other. This is similar to internal SLA's that are familiar to many IT managers, the main difference from an IT perspective is that they are reciprocal rather than the typical one-sided internal IT SLA. Morning Star calls these agreements "Colleague Letter of Understanding" and there are 3,000 of them across the company.

Secondly, separate P&L's are created for as many business segments as possible (this is critical in empowering employees so they can determine their contribution to the companies overall results and modify behaviour as necessary - in large and complex business units typical in many big companies it is impossible for individuals to quantify their contribution - and therefore cannot make empowered decisions that are consistent with overall company success) at Morning Star there are 23 separate business units with P&Ls.

Also every staff member creates a personal vision statement that shows how they contribute to the company's overall vision. This seems to me to allow much for more flexibility than the balanced scorecard when it is applied to individuals as due to its format restrictions the individual scorecard often make no sense.

It is fascinating to watch organisations such as Morning Star, Google, WL Gore and others developing alternative management models, with common themes of individual responsibility and team based measurement, I'm sure more will develop in the knowledge economy. To read this article go to hbr.org and register for free, you can download 3 articles per month at no cost. Hamel, G, 2011, "First Lets Fire All the Managers", Harvard Business Review, December 2011.

David Gwillim

Exploring the value of IT to organisations

email: david.gwillim@optusnet.com.au