What Is Self Management? How Self Managed Teams Operate Without Hierarchy

As I’ve been speaking to more and more people about Outseta, I’ve found that the conversation tends to linger much longer on how we want to build the company as opposed to focusing on what the software we’re building actually does. That’s OK by me; the “how” and the “why” are what I’m most interested in. I very quickly find myself talking about creating the best possible employee experience and how we’re planning to embrace self management principles.

“Self management, huh…” I can almost hear it, judging from the half-perplexed look on the face of the person I’m talking to.

“Self management” sounds accessible enough; most people get that it concerns some aspect of self responsibility, rather than relying on an outside person or force for “management.” But what does that actually mean; how does self management manifest itself within a self managing organization? This post serves to give specific examples of self management processes in action—my goal here is to make self management come alive and be that much more real for you. These are also processes that we’d like to use or borrow from at Outseta.

What is self management?

We wrote on our About Us page long ago that we’re planning to embrace the principles shared in Frederic Laloux’s Reinventing Organizations as we build Outseta. Self management is one of three principles that Laloux’s book emphasizes; our definition of self management is derived from his book.

In short, self management simply means “no bosses”—although that's not really what the idea is all about.

What Laloux argues is that you can run an organization without the need for hierarchy. There’s absolutely no real reason or need for a boss; but in order to operate without hierarchy, there must be well defined structures or processes to help with the things that bosses usually do.

It’s around this time that I usually get one of two responses. The first is “that’s a recipe for chaos.” The second is, “what type of socialist/communist company are you trying to run?” To be honest, I very much understand both reactions (I felt both). Before I even reply to these quips, the person I’ve been chatting with has already turned these thoughts over in their head a few times and has a new take.

“I like the idea conceptually in some ways, I do. But it’s too aspirational. How would that ever work in the real world?”

Read on!

Why we care about self management

Let me start by saying my reaction to the “too aspirational” comment is “that’s exactly the point!” If you’re going to spend 40 hours per week doing something…. heck if you’re going to spend your life doing something, shouldn’t it be something aspirational? If it wasn’t aspirational, could you possibly be doing your very best work?

Think about that for a minute…

When you chase something aspirational and find the practical means of making it happen, I’d argue that’s when great things happen. That’s when people effectively bring their full passion, energy, and abilities to the workplace. And that’s just starting to scratch the surface of why we (and a growing number of other organizations) care about self management.

So what is the promise of self management? Why would you try it when building a business is already difficult enough? It starts with a belief that top down control within an organization can never produce the best possible outcomes. As additional layers of hierarchy are added to a business, the more disconnected the limited number of people making the key decisions become from how to best deploy the resources at their disposal. Self management puts the onus on everyone to understand the needs of the organization, and how their own unique skill sets and passions can best be leveraged to meet the organization’s needs. People more often find themselves on projects and in roles that they think are the best fit them, and as such are more likely to feel fulfilled and empowered.

While Laloux’s book provides evidence that self management can produce superior business outcomes to a traditional, top down management approach it’s also worth noting that that’s not the primary driver for us embracing self management at Outseta. We have a strong instinctual, intuitive sense that this is how work should be done. It’s certainly how we’d prefer to work if we were joining a new company.

Necessary assumptions and prerequisites for self management

While that may sound all well and rosy, there are some conditions that need to exist, some assumptions that need to be fully believed and adopted within an organization for self management to be practiced successfully.

1. The company has figured out the principles which will guide it. In different contexts this is often referred to as a mission, a set of core values, the why, or the brand promise. Regardless of what you call it, the company must have a clearly defined sense of its reason for being and the values on which it won’t compromise.
2. A belief in trust over control. The organization intrinsically believes that employees are reasonable people who can be trusted to do the right thing, and as such are able to relinquish control that’s typically provided by some form of hierarchy in a traditional organization.
3. A belief in personal ownership and responsibility. Without a boss to “manage” people, people are expected to bring their unique skill sets to the table, as well as a sense of personal ownership and responsibility for their work. A lack of hierarchy is not intended to make everybody equal—it’s fully expected that everyone has different skills, and different levels of skill, which they bring and contribute to the organization’s work.
4. A belief in earned authority over positional authority. People actively seek the advice of others because of their experience and expertise—not because of their position or title—with a full understanding that doing so is in their best interest.
5. A long term view. If you’re interested flipping a business or looking to build a company for a few years, self management is probably not for you. Self managed companies believe the best decisions tend to be made when acting in the best interests of the company over the long haul.
6. The company shares all information, including financial information, with full transparency.

How self managed organizations handle operational decisions

With the aforementioned conditions met, almost any business regardless of size or industry can practice self management successfully. Here are real world examples from Laloux’s book highlighting how self managed businesses tackle operational decisions that traditional organizations typically rely on hierarchy or bosses to handle.

Team Organization

Self managing companies typically consist of self organized and self governing teams. Each team is responsible for figuring out things like how large it needs to be, which geographies or territories it will cover, which customers it will serve. Tasks typically assigned to bosses like performance reviews, planning, and even finding office space are distributed amongst and owned within each specific team. Teams are collectively responsible for their own performance, operating procedures, and contributions to the company at large.

Meetings

Rather than having predefined times and agendas for meetings, self managed organizations emphasize calling ad hoc meetings as needs arise. Every meeting is assigned a facilitator, whose sole job is to solicit feedback on items that the group would like to discuss in that present moment. From there items are prioritized and discussed in the context of the group.

Meetings are typically broken down into either tactical or governance meetings. Tactical meetings focus on the “what”—what’s our strategy? What’s our timeline? What progress are we making against our objectives? Governance meetings instead focus the “how” and the “why”—why does this team exist? How will we work together? How will we staff and operate this team effectively?

Say for example a particular team felt that their objective and team structure was no longer appropriate and was interested in disbanding the team into two separate teams with newly defined objectives. With no boss in the room this proposal could be discussed, refined, and put to a group decision (more on decision making shortly). In a traditional organization such a decision could often takes months to make happen.

Budgeting & Forecasting

Self managed organizations also advocate for keeping budgeting and forecasting activities to a minimum. Sure, budgets are a reality and must be operated within—but with everyone in the organization operating with a full understanding of the company’s financial standing, self managed organizations appreciate the agility that they have to operate within those financial constraints without adhering to or spending a lot of time putting together rigid budgets.

Likewise, forecasting and even to some extent goal setting aren’t stressed and are seen to an extent as an attempt to control the future. For example, a company that’s short of its quarterly revenue target might feel compelled to do something that’s not in its best long term interest in the vain of hitting that artificially set target—maybe it’s selling to a customer that’s not yet truly ready for your product, or maybe it’s making a short term investment in lieu of a long term one. Self managed organizations emphasize that if you always act in the best long term interest of the company, you’re ultimately putting yourself in the best position to hit your performance goals.

Vacation Time

If you were managing yourself, how much vacation time would you give yourself? Unlimited vacation, of course! Take-what-you-need vacation policies have become popular in recent years, particularly in tech companies—this is simply one of the first self management principles that’s become mainstream or at least popularized in recent years.

The basic concept here is simple—people need time off! To recharge the batteries. Because of illness. Because of accidents. Whatever it may be. Who are you to say each person needs 10 days of vacation per year? Every person’s needs are different, and every person’s needs may vary from year to year. As an employer it’s in your best interest to support your employees’ needs, which will in turn result in them doing a better job in their professional life. Employees are expected to act like adults and take what they need, but also get their jobs done and done well in cooperation with their co-workers.

While these policies are great, it's a frustration of ours that these policies are often either A) adopted for the wrong reasons, or B) are the only aspect of self management that an organization adopts. It's perhaps the least important item on this list; self management has so much more to offer than unlimited PTO.

Compensation

OK, OK… vacation time is pretty easy to figure out. But without a boss, how do you figure out who gets paid what? There are few topics more sensitive or difficult to get right than compensation.

There is not one “right” way to handle compensation in a self managed organization, but there are a bunch of different approaches that have been practiced successfully. One that seems to be among the most promising is, unsurprisingly “Everyone sets their own compensation rate.” Here’s a recommended process for rolling out this sort of policy.

Once per year, every employee writes a letter to all of the other employees in the company highlighting the contributions they’ve made to the business over the course of the last year. They also specifically reference how much they think they should be paid the upcoming year based on their contributions relative to those of others. Prior to doing so, they receive anonymous performance reviews from at least 5 other people that they work with so that they have that feedback in hand when they set their compensation rate. All of the compensation letters and the anonymous reviews are made public.

From there, there is a “compensation committee” whose members rotate every year. The committee is supposed to provide a recommendation, some advice on how appropriate your salary ask was. “Hey, you did some great things last year - you should ask for a slightly larger raise” is just as appropriate as “Hey, you asked for a 25% raise when the rest of the company asked for closer to 10%. You should probably dial it back a bit.”

Every employee then has the ability to change their salary as they see fit - they can choose to follow or ignore the advice of compensation committee. Want a raise? Take it. Organizations who have adopted this approach speak to it being liberating; office politics, posturing, and raises going to the loudest voices are trends that tend to melt away when you’re granted the ability to set your own compensation rate.

Of course, to make this actually work in practice there needs to be some structure. It’s particularly important here that all information, financial and otherwise, is shared with full transparency. As a result, every employee goes into the process of setting their salary with full information. They know how much the company can afford to spend on employee compensation and how their ask will impact the business.

Second of all, because all of the employee salary letters and performance reviews are public there’s no place to hide for employees who consistently ask for more than their peers, yet under-deliver compared to others and ignore the advice of the compensation committee. These people are consistently abusing the process and are clearly not acting in the best interests of the business; there are formalized ways for exiting employees that abuse the liberties these policies provide.

Last but not least, self managed organizations emphasize profit sharing programs as a way to deliver financial rewards to employees. Profit sharing programs provide enormous benefits in terms of alignment, as employees can expect that working together in the best interest of the business will ultimately deliver the best financial return for all parties.

Decision Making

“90% of business is making decisions” - someone must has said that at some point. But in an organization with no bosses, no hierarchy, how do decisions get made? What are we going to spend money on? What strategy will we employee? Who are we going to hire?

The key pillars of decision making in a self managed organizations are that you do not rely on hierarchy to make decisions, nor do you need consensus (everyone in agreement) on which decision to make. Both processes have very familiar flaws - when hierarchy is tasked with making decisions, people often feel like they have little ability to impact or influence the decision - it’s outside of their control. When you strive for consensus, it’s all too common that opposing sides talk the issue to death, with both sides ultimately feeling frustrated and exasperated to the extent that they simply care that a decision, any decision, is made. Instead, Laloux advocates for the use of what he calls the “Advice Process” to make decisions in a self managed organization.

Simply put, advice process means that any employee can make any decision (including spending company money) as long as two conditions are met.

1. They seek the advice of experts
2. They seek the advice of the people that will be most directly impacted by their decision

That’s pretty much it - do your diligence, be informed, act with empathy, and good things will happen. Generally speaking the bigger the impact of the decision, the larger the group that should be consulted prior to making the decision. Again, those who serially abuse or disregard the advice process have nowhere to hide so people take the advice process seriously. And when everyone’s interests are aligned, and everyone is operating with all of the relevant info, this becomes much more practical and not just aspirational to put into practice.

Conflict Resolution

Within every organization regardless of management styles or structures, conflict will happen. Decisions need to be made, and we’ve all experienced scenarios in the workplace where opposing sides just can’t agree on the path forward. Self managed organizations take a very deliberate approach to conflict resolution. To start, all employees are trained on both group decision making processes and conflict resolution - this is done proactively, rather than waiting until there’s a specific problem at hand.  

With decision making conflicts, nobody is allowed to veto a decision simply because they prefer a different path or decision. As long as nobody has a principled objection - an objection on the basis that the suggested decision flies in the face of the company’s mission, values, or leading principles - then a team can make a decision collectively and move forward with it without the need for consensus.  

Whether the conflict at hand is a technical decision, an interpersonal problem, or a breach of company values a recommended process for conflict resolution goes like this…

1. Employees are first asked to bring the conflict to light and sort it out privately, striving to reach an agreement that’s acceptable to both parties.
2. If the conflict can’t be resolved in private, a colleague that both parties trusts will be asked to step in as a mediator. Again, this colleague can’t impose a resolution but helps both sides work towards an accepted agreement.
3. If both sides are still stuck, a panel of relevant people is assembled to help the parties shape an agreement.

When group decision making and conflict resolution training is proactively done and this process is followed, it typically is able to resolve the vast majority of conflicts. All parties involved in the conflict are expected to respect confidentiality before, during, and after the conflict to discourage water cooler talk and either side making any attempt to bring others onto their side of the conflict.

Conclusion

Hopefully sharing some specifics on the processes self managed organizations use to handle operational decisions helped make self management a little bit more tangible. I know that the above examples probably left you with just as many questions as answers, and there are many more processes that need to be employed to make self management work in any organization.

Being part of a self managed organization is probably not for everyone - and there will be plenty challenges associated with running a self managed organization just in the sense that so few people have ever worked in one. From a business perspective there’s a growing mountain of evidence that embracing self management can drive better business outcomes, as measured by metrics from employee churn to revenue. From a personal perspective, there’s a spark that comes from following your intuition and embracing a way of doing things that just feels right.

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