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More thoughts on participative management
Dec 5th, 2013 by Joca

By the end of October I went to Business of Software conference, an interesting conference about, well, the business of software. Many interesting speakers and interesting people in the audience to chat.

One of the presentations was given by Scott Berkun, who was team lead at WordPress.com from 2010 to 2012. WordPress.com has over 10 billion page views per month, fewer than 200 employees and everyone gets to work from home making it a very interesting environment to think about the future of the workplace. He told us about the advantages and challenges of a distributed work environment, what we can consider as an innovation in management. His presentation was very interesting but when he got to the Q&A session, he got the inevitable question about Yahoo! and their move back from the remote working policy. His answer was very straight forward: since Yahoo! is in a crisis, they cannot afford the management innovation, it is natural that they revoked this policy and returned to traditional management practices, in this case, co-location of workers.

So this got me thinking, whenever a company faces a crisis, it should stop innovation management and should go back to traditional management?

Participative management in a crisis environment

Today I had again the opportunity to join a conversation with Clóvis Bojikian and Heiko Fischer. This was the third or forth encounter we had and, as always, the conversation was very interesting, full of ideas, examples and how-tos related to participative management.

Heiko    Clovis

At a certain point Clóvis told about a crisis at Semco, during the Collor president years, where the market was abruptly opened to foreign companies. That impacted Semco and forced them to do a downsize, which is always painful. Clóvis discussed with the workers how they wanted to do it and the workers told that they would provide a list of people that should not be laid off either because of age or personal issues and they said to the managers that, preserving the people in that list, the manager could select who should be laid off based on technical criteria. Two things we can pick from this episode:

  • Even in a crisis there’s no need to abandon management innovations such as participative management. It’s a good test for the management innovation, to see if it’s capable to cope with the crisis at hand. In this case, participative management was able to cope with the need for lay offs due to a crisis in the market.
     
  • There are a lot of numbers between 0 and 1, i.e., it’s not a matter of participative management or non-participative management. There are options in between, there are decisions that workers are willing to cope with and others that they don’t want to cope with and each issue will require a different mix.

It takes a tyrant to sustain participative management

Back in 2008 I read a very interesting article entitled “Sometimes It Takes a Tyrant to Support Collaboration“. We were in the initial steps agile implementation at Locaweb and this article showed that even though one of the outcomes of agile implementation would be self managed teams, this was not a natural outcome, and it requires a constant push from leaders to move into that direction.

Now I have the impression that the same happens with participative management. Even though this is an outcome appreciated by many workers, this is not a natural outcome. It requires that someone forces and sustains the move into this direction. Clóvis and Ricardo Semler did that at Semco. Heiko did that at the largest video game maker in Europe. I did that with my teams at Locaweb. We need to force and reinforce this behavior until it is imprinted in the company’s or team’s culture.

Heiko told about a decision they made in a company facing an economic crisis where the options where to either lay off people or cut 20% of the salaries of everybody so there won’t be any lay offs. Obviously the team preferred the second option. I said to Heiko that in Brazil that’s not an option since we can’t reduce salaries. He told that this is not possible in Europe either, but they figure out a way to do it. Employees would deposite 20% of their salaries in a company fund. At this moment Clóvis told that they also did that at Semco, in agreement with the Union.

Another exemple given by Clóvis was about employee time tracking. In Brazil it is required to have time tracking of all employees but at Semco they wanted to free up the workers from this hassle and show them they trust them. Even though they were subject to a fine if they didn’t do time tracking, they decided to pay the fine but keep off the time tracking to show workers their trust. So they found a way to support participative management even if it has costs.

This is an interesting paradox: in order to implement participative management you need to force it’s implementation, it doesn’t just happen. You need to force and sustain the movement into this direction, even more in crisis.

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HR, participative management, democracy in the workplace and leadership
May 6th, 2013 by Joca

Readers of this blog already know Clóvis Bojikian, former Semco’s HR director. Back in 2009, when I met Clóvis, I wrote a long post about Clóvis experience in participative management.

One month ago I received a Linkedin invitation to connect with Heiko Fischer:

Salut Joaquim,
I follow your blog and love it! My team made HR redundant at Europe’s largest videogames company. We called it the Way of Resourceful Humans, basically democratic entrepreneurship. I was wondering if you could get me in touch with Clóvis Bojikian. I would love to invite him! Thank you!

Doing some research I was able to find this TED presentation:

It’s easy to see that Heiko’s ideas are in synch with Clóvis experience. I instantly put them in contact and arranged for them to meet over Skype. This meeting occurred last week and it was a pleasure and an honour to be part of the conversation between those two top HR professionals so ahead of their own time. The conversation could certainly generate many posts, but I’d like to write specifically about the beginning and the end of the conversation.

In the beginning of the conversation, Heiko told a bit about his history. He told that his father worked in HR at HP and there democracy in the workplace was a value brought by the founders, so Heiko thought this was common place. Following the steps of his father, Heiko decided to work in HR as well and to his surprise, companies were far from democratic and HP was much more an exception than the rule.

At this moment, Clóvis congratulated Heiko for following his father’s steps. Normally children tend to go the opposite direction of their parents, just for the sake of opposing their parents’ opinion. Heiko replied that actually he went in the opposite direction of his father. While his father believed that in order to maintain democracy in a company it is needed a strong HR department, Heiko’s view is that the perfect democratic company is one where HR is no longer needed.

After that, the conversation followed with Heiko and Clóvis exchanging experiences, telling each other how they implemented participative management and democracy at workplace and their motivation to do so.

At the end, after Heiko hung up, I was walking with Clóvis on his way out when I mentioned how interesting Heiko’s view on HR that the perfect democratic company is one where HR is no longer needed. Then Clóvis completed “and managers are no longer needed as well”.

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Leading is similar to being a doctor
Apr 27th, 2011 by Joca

Those who has been following my posts know that I like to borrow ideas from medicine and relate them to software development an management. Below are two posts that make comparisons between medicine and software development and management:

The surgery

By the end of February/2011 I was submitted to a cervical spine disc replacement surgery like the one shown below (it’s just an animation with no actual blood):

The result is in the x ray images below:

frontal x ray

frontal x ray

x ray side view

x ray side view


The doctor did the surgery on February, 25th. However, the healing process will take months. According to the doctor, it can take one year until all the symptoms that motivated the surgery disappear.

The comparison

What caught my attention is that the surgeon only did an intervention but all the healing process is done by the body. The same happens when a doctor prescribes a medicine, which is also an intervention, but again is up to the body to actually heal itself.

Leading a team is quite similar. The leader should do some interventions when necessary but is up to the team to do the work in order to get to the goals.

Agile leadership

Leadership is topic that I really enjoy studying and discussing. It’s one of my top topics in this blog with more than 40 posts so far. And I already discussed about agile leadership in some of these previous posts:

In one of my reading session on leadership I found an interesting comparison between leadership and gardening made by Jurgen Appelo, who writes frequently about agile management:

I often compare managers to gardeners. An unmanaged garden is typically full of weeds, not beauty. From a biological perspective, there’s no difference. Either way, the ecosystem in the garden is self-organizing. It takes a gardener (authorized by the owners of the garden) to turn an anarchistic garden into something that the owners will enjoy. Likewise, it takes a manager (authorized by shareholders) to steer self-organizing teams in a direction that delivers value to the shareholders.

Even though I like this comparison, it considers that the gardener/manager has to constantly interfere, which I don’t believe is an appropriate behaviour for a manager. In my view, a manager’s interference should be done only when needed and, after the interference, the team should work by itself to solve things out with little or no intervention by the manager. Hence my comparison to a doctor who interferes only when needed by prescribing change of habits, medicine, physical therapy and / or surgery and who let the body do the work and be in charge of the healing process.

Next time you are in a team, either as part of the team or playing the role of leading the team, think about the leadership role similar to the doctor and the team work similar to the healing process carried out by the body. It helps understand the roles and responsibilities.

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The three ways of getting things done (hierarchy, heterarchy and responsible autonomy)
Sep 20th, 2009 by Joca

I just finished reading a very interesting book named “The Three Ways of Getting Things Done“:

3_ways

by Gerard Fairtlough.

gerard_fairtlough

It is about hierarchy, heterarchy and responsible autonomy in organizations.

Gerard main thesis is that the human being is addicted to hierarchy and, because of this addiction, we are unable to consider other options for getting things done. He says that people organize themselves into groups (organizations) in order to get things done and since we are addicted to hierarchy, we believe this is the only way to get things done.

The first paragraph of the book:


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The book explains not only why we are addicted to hierarchy, but also that there are other option to hierarchy besides chaos. He introduces two concepts:

  • Heterarchy: “is the divided, supported or dispersed rule where control shifts around depending on the project and the personality, skills, experience and enthusiasm of those who can make things happen. Much of the project work that is becoming common in large technology companies fits this kind of arrangement.”
  • Responsible autonomy: “an individual or a group has autonomy to decide what to do, but is accountable for the outcome of the decision.”

Hierarchy, heterarchy and responsible autonomy form the Thriarchy. Gerard says we should use a mix of the three forms of getting things done, instead of sticking to only one:

There are three ways of getting things done in organizations and the combination of the three is called triarchy, which means triple rule. The Three Ways of Getting Things Done: Hierarchy, Heterarchy and Responsible Autonomy in Organizations.When I was young I thought hierarchy was the only way to run organizations. Although in those days I’d barely heard of the great sociologist Max Weber, I unknowingly shared his belief that an organization couldn’t exist without a hierarchical chain of authority. Now, after over fifty years working in organizations of many different kinds, I’ve come to realise there are two other, equally important, ways of getting things done and that it’s vital for us to understand these other ways. We also need to understand why hierarchy always seems to trump the others.

Today almost all the organizations use hierarchy almost all of the time. According to Gerard:

There is good evidence to suggest that, in the 21st century, organizations are significantly changing the way they get things done. The result, triarchy theory suggests, will be a gradual move away from hierarchy in organizations.

Thiarchy has strong links to sociocracy, Peer-to-Peer theory, complexity theory and Spiral Dynamics.

It is a must read book on the participative management subject.

For those willing to read its first 2 chapter, you can use Google Books:

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Clóvis Bojikian, former Semco's HR director, on how to implement organizational democracy
Aug 9th, 2009 by Joca

I believe this will be one of my longest posts but the topic really deserves a lot of attention.

Two weeks ago I had the opportunity to talk to Mr. Clóvis Bojikian. He was Semco‘s HR director since early 1980’s. He worked with Ricardo Semler in the implementation of the participatory management framework that made Semco one of the most famous successful Brazilian company in the world.


clovis

1. Setting context – Semco

Clóvis started giving some context. Fisrt, about Semco, already a successful company 25 years ago.

logosemco

Their main product was naval hydraulic pumps. The main concern was diversification away from the struggling shipbuilding industry, which was done through:

  • new licenses: in order to produce and commercialize other products such as mixers and agitators.
  • acquisition of Brazilian companies from multinationals: refrigerators and cleaning machines are examples.
  • joint ventures: that’s how Semco entered into services business. Industrial maintenance, buildings conservation, inventories are some examples.

In 20 years the company grew from 300 to 4000 employees.

2. Setting context – Clóvis Bojikian

Clóvis master was in pedagogy. Some time later he studied business administration.

bojikian

He first worked as director of the “Colégio de Aplicação da USP” an experimental school very famous during the 60’s where new teaching methods were experimented. One of the most advanced schools of its time. He left due to some pressures during the military dictatorship started in 1964. He then joined Ford, at the time with 4,000 employees, as HR manager. Ford was acquiring Willys, a 16,000 employees car maker. There was little freedom for the HR professional to work (“in a wining team no one wants to makes changes”) so he decided to leave and joined KSB Hydraulic Pumps where he was able to try out some ideas he has. But due to a CEO change, the freedom diminished. At that time, Clóvis went to talk with Ricardo Semler, “many hours of conversation” as Clóvis pointed out. Ricardo was only 22 years old at the time and just assumed as CEO of Semco. He was looking for an HR professional who could help him implement the participatory management concepts he was thinking about. Clóvis, 48 years old, loved this conversation and the synergy with Ricardo and decided to accept the responsibility to run Semco’s HR.

3. The roots of participatory management

Semco is a factory and, as any other factory, workers didn’t enjoyed going to work. Every week they counted the hours until the next weekend. That was Clóvis’ main challenge: “how do we get people motivated?” Some simple facts:

  • No one motivates anyone.
  • Motivation comes from the person.
  • We need to create conditions so people can feel motivated.
  • The people who demonstrated more interest in the work were the ones “in charge”.

And one simple conclusion:

The most motivated people
are the ones who participate more.

That was easy to understand. The ones “in charge” are the people who participate more in the business making decisions and watching the results of their decisions. More participation means more interest and more motivation.

4. Exercising participation

In order to exercise participation Clóvis recommended simple, non core business related situations. He gave two examples from Semco:

Employees restaurant: employees normally complained about the restaurant to the HR people. Normally the complain was documented and analyzed by the HR but not always an action was taken. One day the Hr decided to return the complain in a question: “what would you do to change it?”. The complainers got dazzled and, by recommendation of the Hr people, they formed a commission to study what could be done better. The commission end up wit very good ideas, and came back to the HR people who asked: “did you talk to the restaurant people about your suggestions?” and they didn’t. They went to the restaurant, discussed the suggestions, and again they came back to the HR people who just said: “ok, move forward and implement your suggestions”. Since then, the restaurant was run by the restaurant, with support of the employee commission, with no interference of the HR people.

Employees uniform: the stock of employees uniform was running low and a new purchase was due. Instead of just placing an order with the supplier for more uniform, they decided to run an election with employees so they would decide the color of the uniform. Some directors didn’t like the election idea because it would take time and probably would be a mess, but the fact that the democracy was being exercised in a non core business related situation gave run for the experiment. Two colors come very close at the end of the election, and the employees themselves proposed to run a second election, only with those two colors. Finally one was chosen.

As Traci Fenton, from WorldBlu, mentions:

We are talking about distributing leadership, distributing decision making in a way that makes sense. So maybe, the decision making process can sometimes, depending, be slower. But execution is so much faster. And the reason it is faster is because people have a buy-in, because they have been a part of the decision. They have ownership in that decision. They wanna see it succeed. and that’s what make execution so much faster. And that’s were most of the companies fail, on the execution.

5. The next step – closer to the core

Some time later, the employees started to decide their own production targets, and they were normally higher than the ones defined previously by t the executives.

This shows how, when we start exercising participatory decision making with non core business related issues, it is easy, even natural to start moving into more core related decisions.

In Brazil there are holidays on Tuesdays, Wednesdays and Thursdays that people like to connect to the weekend so they have a longer holiday. Normally is the company decision to define who will connect the holiday and who will work on that holiday to compensate a previous holiday connection. After participatory decision making process was experienced the employees themselves decided on the holiday connections.

The next step at Semco was the design of the new roles, responsibilities and compensation plan. It was completely written by the employees with the facilitation and help of the HR people. When the plan was finally implemented, not only everybody knew everybody else’s salaries, but everybody understood why those salaries were paid and were in total agreement with that.

Another interesting example of participatory decision making was the hire of a new manager. Instead of being interviewed only by the HR people and the demanding director, the manager was also interviewed by other managers and by the team he or she would lead. The chosen manager had a great start, since he was not only known by his or her director but also by all the people he or she would work with. Semco also used 360 evaluations in order to have employees analyzing their leaders.

All issues were dealt with by temporary groups.

In order to let employees understand more of the whole business, they decided to change from assembly lines to small cells responsible for the whole piece.

At that point Semco had a framework of participatory management and decided to move to the next step.

6. The final step – a stake in the results

And Semco was ready for the final step, profit sharing. The owners decided to give twenty something percent of the profit to the employees and all the rest was decided in a participative manner. The employees created a set of principles. One of the main principles read more or less like this: “It is not enough to be transparent, we need to educate”. The idea is that not only all numbers of the company be open to all employees but all the employees must be trained to be able to read those numbers. Income statement, P&L and cash flow require some background in order to be read and understood. This is the basis of the Open Book Management:

  • Give employees training to understand the financial information.
  • Give employees all relevant financial information
  • Give employees responsibility for the numbers under their control
  • Give employees a financial stake in how the company performs

Every month they run a meeting at Semco to discuss results and some very interesting situations happened during those meetings. One day an employee questioned why the executives had to always stay in five star hotels. Wouldn’t it be possible to stay at four stars hotels once in a while? At another monthly report review another employee noticed that Semco spent money on painting the factory in a month that the employees had some free time and they could have painted the factory themselves.

At that point Semco implemented flexible hours and flexible workplace, even allowing work to be done from home. Now that everybody has a stake in company success it is possible to implement such a policy. Of course it should be adopted where it makes sense. For instance, it doesn’t make sense for a receptionist to work from home. But if there are two receptionists to cover a certain amount of time, they could and should decide among themselves when each one should be there.

7. Conclusions

At end of our conversation, Clóvis mentioned that it only takes courage to implement participatory management in a company. Errors will happen and we should learn from them, but the end result, a company full of employees happy to come to work everyday is worth all the risks.

I asked him to tell us about an error or a moment they thought that maybe this whole participatory decision making process could not be a good idea.

He told us a very interesting story about the payroll time clock system. All employees had to checkin when arriving to work, checkout and checkin during lunch and then checkout again at the end of the work day. But this was a control for what is regular, and what a company really needs to know is what is irregular (extra hours, delays, absences). HR decided to change the time clock system so the employee only had to inform extra hours, delays and absences. And what was most important, the employee should inform directly into the system. She didn’t need to explain anything to her boss. The first month everything went quite well, but in the second month there were frauds, people were not informing the working hours irregularities correctly. They were taking advantage that no one was checking the information. Very concerned, the HR people discussed the issue with a group of employees who were in charge of this new system. The answer was: “leave it to us”! After that conversation the system worked very well with no frauds ever reported or noticed. Clóvis mentioned that the employees understood that “the more freedom we have, the more responsible we have to be”, and they acted accordingly.

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Guia de referência sobre a cultura da Netflix
Aug 6th, 2009 by Joca

A Netflix, empresa americana que tirou a Blockbuster do mercado com seu modelo inovador de aluguel de DVD, publicou há alguns dias o guia de referência sobre sua cultura organizacional:

Culture

View more presentations from reed2001.

É uma leitura rápida, mas com um conteúdo muito interessante. Vou listar abaixo alguns slides só para atiçar a vontade de vcs em o ler por completo.


netflix_1

netflix_2

netflix-keeper-test

netflix_3

netflix_4

netflix_5

netflix_6

netflix_7

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netflix_9

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Sobre Zappos, seu excelente "customer care", gestão participativa e a importância da cultura de uma empresa
Aug 5th, 2009 by Joca

A Zappos é um site de venda de sapatos nos EUA que foi recentemente adquirida pela Amazon. Vendem US$1Bi de sapatos por ano e tem uns 1300 funcionários. Foi fundada em 1999.

zappos

É uma empresa que se destaca pelo seu “customer care”, conhecido no mercado por ser surpreendente, e essa foi uma das razões pelas quais Jeff Bezos decidiu comprar a Zappos.

Além disso, a Zappos é reconhecida por ser uma empresa democrática. E a democracia vai até o ponto da liberdade com que o pessoal de atendimento tem para resolver problemas de clientes.

“As many democratic and decentralized companies have realized, the key to offering fantastic support is to enable employees to rely on their instincts and to trust them to make their own decisions. At Zappos, customer service call center reps are not required to read from scripts. Instead, they are encouraged to use discretion in making their own decisions without seeking approval from their supervisors.”
fonte: http://workplacedemocracy.com/2009/07/27/investors-benefit-from-zappos-democratic-work-environment/

Eles reconhecem que investir em cliente satisfeito era melhor do que investir em mkt, mesmo pq no começo eles não tinham dinheiro para mkt:

“Because the company could not afford to spend money on marketing, the sales strategy involved making customers so happy that they bought again or told their friends or both.”
fonte: http://www.inc.com/magazine/20090501/the-zappos-way-of-managing.html

E a história abaixo mostra um exemplo de como a soma de “foco em cliente satisfeito” com “gestão participativa” pode ser poderosa:

“In his speeches, Hsieh [Zappos’ CEO] likes to point out that Zappos does not have specific policies for dealing with each customer service situation. He claims that the company’s culture allows it to do extraordinary things. I saw him make this point earlier this year in New York City, when he told a story about a woman whose husband died in a car accident after she had ordered boots for him from Zappos. The day after she called to ask for help with the return, she received a flower delivery. The call center rep had ordered the flowers without checking with a supervisor and billed them to the company. “At the funeral, the widow told her friends and family about the experience,” Hsieh said, his voice cracking and his eyes tearing up ever so slightly. “Not only was she a customer for life, but so were those 30 or 40 people at the funeral.”

Hsieh paused to compose himself. “Stories like these are being created every single day, thousands and thousands of times,” he said. “It’s just an example that if you get the culture right, then most of the other stuff follows.””
fonte: http://www.inc.com/magazine/20090501/the-zappos-way-of-managing.html

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Organizational Democracy
Jul 4th, 2009 by Joca

Check out this video from Traci Fenton, WorldBlu CEO, on organizational democracy:

A brief summary of the above video:

The motivation

According to the Gallup Organization, 73% of the American workforce is disengaged at work.
In Japan is 91% of the Japanese workforce is disengaged at work.

The solution

We are talking about distributing leadership, distributing decision making in a way that makes sense. So maybe, the decision making process can sometimes, depending, be slower. But execution is so much faster. And the reason it is faster is because people have a buy-in, because they have been a part of the decision. They have ownership in that decision. They wanna see it succeed. and that’s what make execution so much faster. And that’s were most of the companies fail, on the execution.

At the WorldBlu website, we can find the principles:

The WorldBlu 10 Principles of Organizational Democracy™

1 :: Purpose and Vision
A democratic organization is clear about why it exists (its purpose) and where it is headed and what it hopes to achieve (its vision). These act as its true North, offering guidance and discipline to the organization’s direction.

2 :: Transparency
Say goodbye to the “secret society” mentality. Democratic organizations are transparent and open with employees about the financial health, strategy, and agenda of the organization.

3 :: Dialogue + Listening
Instead of the top-down monologue or dysfunctional silence that characterizes most workplaces, democratic organizations are committed to having conversations that bring out new levels of meaning and connection.

4 :: Fairness + Dignity
Democratic organizations are committed to fairness and dignity, not treating some people like “somebodies” and other people like “nobodies.”

5 :: Accountability
Democratic organizations point fingers, not in a blaming way but in a liberating way. They are crystal clear about who is accountable to whom and for what.

6 :: Individual + Collective
In democratic organizations, the individual is just as important as the whole, meaning employees are valued for their individual contribution as well as for what they do to help achieve the collective goals of the organization.

7 :: Choice
Democratic organizations thrive on giving employees meaningful choices.

8 :: Integrity
Integrity is the name of the game, and democratic companies have a lot of it. They understand that freedom takes discipline and also doing what is morally and ethically right.

9 :: Decentralization
Democratic organizations make sure power is appropriately shared and distributed among people throughout the organization.

10 :: Reflection + Evaluation
Democratic organizations are committed to continuous feedback and development and are willing to learn from the past and apply lessons to improve the future.

And the lessons learned:

1. The more complex the product or service your company is developing the more democratic the process should be.

2. Accountability — where everyone knows what he or she is responsible for and what everyone else is responsible for as well — is the best antidote to the entitlement mentality that plagues many companies.

3. Freedom takes discipline. It expects the best of each one of us.

4. Being democratic isn’t always easy. We’re all still learning and sometimes it can be really, really hard.

5. Sometimes even democratic leaders throw a fit. But just know that if they do, they feel really bad about it. 🙂

6. Being a democratic leader is all about tough love. Command and control or authoritarian leadership is easy. Democratic leadership – which requires heart and backbone — isn’t for the weak.

7. Running a company democratically is about changing people’s lives – as well as the world – for the better.

8. Try to take personality out of the equation. Develop robust democratic systems and processes based on principles, not personality.

9. The role of a CEO in a democratic company is to see the big picture, rally people around that vision, and make sure they have the tools they need to get it done. A democratic CEO must be an evangelist.

10. It’s all about positive peer pressure rather than creating a police state. Transparency creates the positive peer pressure on everyone.

11. Every company should have a VP of Transparency.

12. Democracy isn’t just great internally; it’s a great way to engage your customers and build brand loyalty too.

13. As long as people feel like there’s open communication, they don’t feel like they have have a ton of meetings.

14. When hiring for a democratic company, you have to look for people who can recover quickly. When the spotlight of transparency is always on — no matter your ups and downs – you have to be able to recover quickly and with grace. Not everyone can handle that, so chose your team wisely.

15. There are trade-offs to running a company democratically. You’re going to get noise, passion and confusion at times. The result, however, is more innovation, less turnover, a high quality product, etc. It’s worth the trade-offs.

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Managing without managers
Jun 13th, 2009 by Joca

Maybe you already heard about Ricardo Semler:


ricardosemler

CEO and majority owner of Semco SA, a Brazilian company best known for its radical form of industrial democracy and corporate re-engineering. Under his ownership, revenue has grown from $4 million US in 1982 to $212 million in 2003 and his innovative business management policies have attracted widespread interest around the world. TIME featured him among its Global 100 young leaders profile series published in 1994 while the World Economic Forum also nominated him. The Wall Street Journal America Economia, the Wall Street Journal’s Latin American magazine, named him Latin American businessman of the year in 1990 and he was named Brazilian businessman of the year in 1990 and 1992. Virando a Própria Mesa (“Turning Your Own Table”), his first book, became the bestselling non-fiction book in the history of Brazil. He has since written two books in English on the transformation of Semco and workplace re-engineering: Maverick, an English version of “Turning Your Own Table” published in 1993 and an international bestseller, and The Seven Day Weekend in 2003.

I’ve just read his 1989 Harvard Business Review article entitled “Managing Without Managers”.

It is worth reading. Even though it as about the experience if a manufacturing company, it talks about management issues that many companies have, independently of the type of the organization:

  • How to empower people?
  • How to build trust in the management team and the employees?
  • How to conduct a company transitioning into business unit organization?
  • How to implement a profit-sharing program?
  • How to give access to all relevant information?

And many of his ideas are in sync with the Open-Book Management ideas I mentioned earlier in this blog.

I’ll highlight some parts of the article in order to motivate you to read it! 🙂

Profit-sharing

Lots of things contribute to a successful profit-sharing program: low employee turnover, competitive pay, absence of paternalism, refusal to give consolation prizes when profits are down, frequent (quarterly or semiannual) profit distribution, and plenty of opportunity for employees to question the management decisions that affect future profits. But 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. The reports contain about 70 line items (more, incidentally, than we use to run the company, but we don’t want anyone to think we’re withholding information).

Hierarchy

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.

….

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.

Business units

When we made the decision to keep our units small, we immediately focused on one facility that had more than 300 people. The unit manufactured commercial food-service equipment—slicers, scales, meat grinders, mixers—and used an MRP II system hooked up to an IBM mainframe with dozens of terminals all over the plant. Paperwork often took two days to make its way from one end of the factory to the other. Excess inventories, late delivery, and quality problems were common. We had tried various worker participation programs, quality circles, kanban systems, and motivation schemes, all of which got off to great starts but lost their momentum within months. The whole thing was just too damn big and complex; there were too many managers in too many layers holding too many meetings. So we decided to break up the facility into three separate plants.

To begin with, we kept all three in the same building but separated everything we could—entrances, receiving docks, inventories, telephones, as well as certain auxiliary functions like personnel, management information systems, and internal controls. We also scrapped the mainframe in favor of three independent, PC-based systems.

The first effect of the breakup was a rise in costs due to duplication of effort and a loss in economies of scale. Unfortunately, balance sheets chalk up items like these as liabilities, all with dollar figures attached, and there’s nothing at first to list on the asset side but airy stuff like “heightened involvement” and “a sense of belonging.” Yet the longer-term results exceeded our expectations.

Within a year, sales doubled; inventories fell from 136 days to 46; we unveiled eight new products that had been stalled in R&D for two years; and overall quality improved to the point that a one-third rejection rate on federally inspected scales dropped to less than 1%. Increased productivity let us reduce the work force by 32% through attrition and retirement incentives.

I don’t claim that size reduction alone accomplished all this, just that 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.

Information

A few years ago, the U.S. president of Allis-Chalmers paid Semco a visit. At the end of his factory tour, he leafed through our monthly reports and budgets. At that time, we had our numbers ready on the fifth working day of every month in super-organized folders, and were those numbers comprehensive! On page 67, chart 112.6, for example, you could see how much coffee the workers in Light Manufacturing III had consumed the month before. The man said he was surprised to find such efficiency in a Brazilian company. In fact, he was so impressed that he asked his Brazilian subsidiary, an organization many times our size, to install a similar system there.

For months, we strolled around like peacocks, telling anyone who cared to listen that our budget system was state-ofthe- art and that the president of a Big American Company had ordered his people to copy it. But soon we began to realize two things. First, our expenses were always too high, and they never came down because the accounting department was full of overpaid clerks who did nothing but compile them. Second, there were so damn many numbers inside the folder that almost none of our managers read them. In fact, we knew less about the company then, with all that information, than we do now without it.

Today we have a simple accounting system providing limited but relevant information that we can grasp and act on quickly. We pared 400 cost centers down to 50. We beheaded hundreds of classifications and dozens of accounting lines. Finally, we can see the company through the haze.

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Open-book management
Jun 2nd, 2009 by Joca

Similar to the open source concept used in software development and distribution, there’s a management concept known as open-book management.

The idea is quite simple: the financial reports (the company book) must be open to all employees in order to help them make informed decisions.

The basic rules are:

  • Give employees training to understand the financial information
  • Give employees all relevant financial information
  • Give employees responsibility for the numbers under their control
  • Give employees a financial stake in how the company performs

We cannot apply open-book management from one day to another. People need to be taught on financial book reading and interpretation, but I believe this concept makes sense for any company.

For further reading:

http://en.wikipedia.org/wiki/Open-book_management
http://www.greatgame.com/

Some additional information:

In its simplest form, Open-Book Management is a way of running a company that gets everyone focused on helping the business be successful. Employee goals and accountabilities are tied directly to the success of the company. It teaches all employees what is critical to success and how they can make a difference – both individually and as part of a team. Employees know and understand how they each contribute to the financial performance of the company, in such a way that they truly understand how the business works.

The Great Game draws from the successes and failures of thousands of open-book management practitioners to show how any company can teach its employees:

  • How to think and act like owners
  • How to promote continuous learning at every level of the organization
  • How to fire up employees’ competitive juices
  • How to broaden the concept of leadership
  • How to delegate responsibility for the business
  • How to drive innovation and build value in the business
  • How to improve financial results for the company and themselves

I really like this concept and I’ve been using it for a long time, even without knowing its name. It is easier to do anything if we know the reason for doing it, and open-book management makes the reason very explicit.

Please checkout my other posts on leadership.

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