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Episode Transcript
Lisa: So Doug, you’ve been working with self-management for quite some time now, first as one of the original team members of the now famous Morningstar and more recently with your work consulting and teaching and speaking. So I thought maybe we could start by you saying something to listeners about what self-management means for you.
Doug: Self-management for me quite simply means the absence of control by others. So in an organizational setting, it means the absence of command authority, typically called command and control, and the direction of oneself in alignment with one’s personal mission in the overall mission, vision, values, and principles of the enterprise itself. So it’s directing oneself, directing one’s own activities while weaving one’s talents together with colleagues and other people in the organization.
Lisa: And what is it about self-management that for you continues to be such a passion, such a topic of interest?
Doug: Well, I find that it’s very elegant in the fact that it’s all about managing potential enormous complexity with great simplicity. So in the version of self-management that I grew up in and became very familiar with, we organized around very simple principles. In fact, we had two principles, and the principles were: don’t use force against other people and keep your commitments. When you think about it, those are the foundational principles of human interaction. All law everywhere in the world is based on those two key principles. If you imagine a world where everyone aligned behavior with those principles, we wouldn’t need armies or navies or police or locks on our doors. We know that’s not reality, but that’s not the point. The point is the closer we get to that ideal, the better off we are as human beings.
And in an organizational setting, the benefits can be enormous. It can allow an organization to pivot on a dime and agility and flexibility and adaptability aligned to new strategic opportunities, avoid threats, maximize human potential, and do great things in the community and for the stakeholders in the enterprise. So it’s a powerful set of principles. It’s aligned deeply with the deepest principles of human interaction, and it has been proven to work in an organizational setting. So to me, the elegance of the simplicity of principles managing great complexity is what’s attractive.
Lisa: Yeah, I like what you say about elegant. So I guess in some ways organizations are so unnecessarily complicated and bureaucratic, and it kind of constrains rather than enables people.
Doug: Yeah, and Gary Hamel writes very eloquently about what he calls the management tax, which is the burden of bureaucracy, and it’s an economic and financial burden. It’s also a human burden. He talks about permission steps between layers of bureaucracy that impede efficient and effective decision-making by individuals who have access to information because of technology but aren’t able to act on it because of bureaucracy.
And we also have just the outright financial cost of bureaucracy. So in a traditional company, if you have a span of management control of one to ten, that means you have ten workers and they probably have one manager. Managers always make more than the people they manage, so that person may make two to three times more than the individuals being managed. And the reality is that everyone is a manager already in his or her own personal life. So we all make life-altering decisions all the time without a boss. We decide who to date, who to marry, where to go to college, what to do for a living, where to live, whether to buy a house or car—all these things we decide on our own without a boss.
So it begs the question: if we know what to do at work and how to do it, why do we need a human boss as long as we know what to do? And if everyone’s a manager, you could take, say, a startup company with ten workers and one boss or manager, you could give each one of the ten workers a raise reflecting the fact that each one of those individuals is already a manager, and you may find you don’t need the boss at all, which could be quite a cost savings.
Especially as an organization scales and grows, and it grows by a factor of 10, that means that you have 10 bosses, but now at a ratio of 1 to 10 span of control, the 10 bosses need a boss, and you’ve got three layers, and you have lots of bureaucracy. But if all of the workers know what to do and how to do it and they don’t need the bosses, and then don’t need the boss of bosses, all of a sudden the cost savings become somewhat extraordinary. So the economic potential for coming-of-age democracy is huge, and that’s one of the benefits of self-management.
Lisa: Yeah, it’s amazing when you spell it out like that—the management tax. It seems so obvious that we would find something else, that we would leave behind this paradigm that’s obviously not working anymore. And yet the dominant model in most organizations still tends to be this kind of top-down traditional hierarchy. I think to some degree that’s because there are lots of misconceptions or misunderstandings about self-management. In your experience, what are some of the common myths or misconceptions that people share with you about self-management and their understanding of it?
Doug: Well, I think one of the big ones is that people fear they will “lose control.” So they feel that traditional hierarchy and bureaucracy provides them a measure of control that they would then be losing if they were to transition to a self-managed model. And I try to argue that in a well-constructed self-management model, you actually have more control than you would in a traditional organization. Because in a traditional organization with a boss, say the boss is in a factory, and he or she walks through a work area a few times a day and makes observations and takes notes and provides feedback.
Well, in a self-managed organization, everyone is free to deliver feedback at any time. Any time someone notices a threat, an opportunity, a process improvement, a strategic possibility, a conflict, a dispute, any kind of issue in the workplace, they’re free to speak up or not as they choose. So my argument is: who’s more likely to notice a problem or an opportunity in a workplace? A boss who wanders through a work area a few times a day taking notes, or people who are working side by side with each other all day long? And I think the answer is somewhat self-evident.
Now, it does require people to speak up, and that is a key self-management competency. People do have to address issues that they observe that come into their scope of awareness. But the idea of losing control because you don’t have a boss is absolutely a myth, and it’s one of the biggest concerns I hear from people that are thinking about self-management.
Lisa: You mentioned about one of the competencies of self-management being to speak up. What are the competencies which you say are required? Because I think a lot is spoken about and written about in terms of self-management regarding structure and processes, and I think less is known or understood about the softer side, the skills and the communication and things like that.
Doug: Yeah, so I actually wrote a piece about this. I think I called it “Twelve Keys to the Workplace of the Future.” And one of the things I talked about is initiative. We absolutely need people who are willing to take initiative, and that includes speaking up and addressing issues, but also includes taking actions that are required as people become aware of them.
We want people to be humble. Humility is a huge benefit in the self-managed enterprise. We’re not perfect, we’re not always right, and we need to be able to listen to others’ opinions and incorporate those into our decision-making processes.
We look for curiosity. Curiosity is a great indicator of initiative and interest in problem-solving and process improvement. So curiosity is huge.
It requires a certain amount of tolerance of ambiguity. Self-management can be messy. There’s no clear chain of command. It’s not always clear necessarily, initially, who to talk to about a particular issue. And so sometimes it takes some research and communication to figure those things out. And so autonomous self-managers need to be able to tolerate a certain degree of ambiguity in the workplace.
It requires a certain amount of what we call a contribution mindset. And Peter Drucker wrote about this in his great book “The Effective Executive.” It’s the idea of looking for ways to add value to your colleagues throughout the workday. And it’s just this sense of generosity—you know, what can I do to help you get through your workday more effectively? If everyone did that, it would be an amazing world. And so we like that kind of generosity in terms of the mindset.
We want to have people who are not particularly sensitive to power distance, and that means that we like people to be willing to talk to anyone at any time about anything as they become aware of issues. I think that’s really important. We don’t want people to shy away from addressing small issues and then they turn into big issues later on. So willingness to talk is very important.
We like non-cognitive skills like perseverance, what we call in the U.S. “grit.” This is one of the big success factors, and the ability to persevere despite obstacles, despite setbacks, is really a crucial skill because not everything necessarily goes smoothly in a self-managed environment. In terms of lining up stakeholders and helping people buy into ideas and innovations, it can take time and effort, and so people need to be willing to put in that time and effort.
We like people that are willing to nurture their networks and develop their networks. So people generally form teams around process areas in organizations, and ideal teams probably have between two and eight people, but they could be up to 25 people or so where individuals can negotiate kind of the terms of engagement with their peers and identify process accountabilities and stewardships and the scope and quantum of decision-making authority around those processes. After that, it becomes a little cumbersome. So then we need people who are willing to follow the paths of communication laid down before through the process of stigmergy and identifying opportunities as they become aware of them to the best of their ability. So nurturing one’s network is really important.
And we look for individuals who have an internal locus of control in the sense that they are responsible for themselves, they do not engage in blaming behavior, they take responsibility, they’re personally accountable, they make choices, they’re responsible for the choices they themselves make. And so they have this internal locus of control where they don’t feel like they’re being buffeted by outside forces beyond their control, and you know, nothing is their fault. People have to be willing to accept responsibility.
So those are kind of the high-level items that I’ve sort of been identifying over the years, and I kind of keep a running list. And so I invite anyone listening to share their ideas with me as well. And I’m curious what other people think. But those are some of the things that I’ve sort of been identifying over the years and observing in self-managed environments.
Lisa: So something like internal locus of control, for example—is that something that people have or don’t have? Or some of those competencies, are those trainable, would you say?
Doug: Well, they’re trainable. One can make a decision to have an internal locus of control. So certainly one can adopt that. I don’t think it’s necessarily a permanent trait or state, but it does take an awareness and understanding and at least an internal declaration of intent to change and to adopt that. Because people are the kinds, through their internal choices and how they choose to view the world, is a choice. And so that’s an opportunity that’s available, I think, to everyone. And they choose to have an internal locus or an external locus depending on what they think is the best thing to do. And so it’s obviously better to have an internal locus of control, especially in a self-managed environment.
Lisa: If you’re working with a team that’s looking to transition from a more traditional makeup, you know, hierarchical, bureaucratic way of working, and then looking to transition to self-management, there are clearly lots of things that people in teams and organizations have to unlearn from their previous paradigm of doing things. How do you support groups and individuals in doing that?
Doug: Yeah, what I’d like to do is, if an organization’s interested in transitioning, I invite the leadership group of that organization to create the scaffolding necessary to replace a traditional hierarchical org chart. And that really has to do with identifying agreements between leaders, between peers, where individuals identify their personal purpose or mission in alignment with the mission of the enterprise. And then get very, very specific about the long-term commitments that they’re making to each other in terms of what they do and what are their process accountabilities, stewardships, and responsibilities.
Okay, so now I know why I’m here, why do I come to work here every day, what does excellence look like in my role, how does what I do support the overall mission in the enterprise? And now I need to know what I do, you know, in a very granular, specific level. And oftentimes, we find that there are misunderstandings between individuals and a team about exactly what an individual is doing to contribute value to that team. I actually had a leadership group with a leader who described her process stewardships, and the other team members said, “Wow, I had no idea you did that.” So it’s quite amazing what can come out of these discussions.
And I call them negotiations because people are really shading their roles and responsibilities with each other around the work of the business. And so we identify very specifically what individuals are doing, and that’s all subject to negotiation. And then we want people to figure out what is the scope and quantum of their decision-making authority with respect to each of those processes.
So is an individual the decision-maker for a given process? Or does that individual require input from others prior to making the decision for a given process? Or does that person provide input to another decision-maker before that person makes a decision for a process? Or does this person make a decision for a given process when the regular decision-maker goes on vacation? It’s very helpful to know exactly what is the scope and quantum of decision-making authority around the work of the business. And again, this provides lots of opportunity for clarification and an opportunity to clear up sometimes long-standing misunderstandings about who’s responsible for deciding what.
So we try to work through that at a very specific level. And then we try to identify how do you measure progress, how do you know if you’re doing a good job? And frequently this has to do with KPIs. At Morningstar, we would call them “stepping stones” because we consider them stepping stones to perfection because performance was always benchmarked against perfection. So perfection in an efficiency metric would be 100%. Perfection in a cost metric would be zero. And realizing that frequently or probably most of the time, we would never reach perfection, but at least we know what perfection is, and we shoot for it and we try to turn working into a game and gamify it as much as possible so that people have these scorecards and they measure themselves.
And they have to measure themselves in a self-managed ecosystem because there’s no boss walking around to tell people that they’re doing a good job or not. People have to be able to measure themselves, just like watching the speedometer in your car when you’re driving a car. So what are the KPIs that pertain to these processes for which people have agreed to be accountable to their peers?
And then ultimately, who do you sign these agreements with? Because they are like contracts. You’re really signing contracts with your peers. And so for your individual contract, who are your accountability partners with whom you execute this agreement, such that they have every right to rely on you to uphold the commitments that you have identified in your agreement? And you have every right to hold them accountable for what they’ve agreed to do. And so ultimately, we sign these agreements.
And they are like contracts. They’re negotiable. They can be renegotiated at any time. So for example, if an individual develops expertise in developing strategy and feels that they can contribute to the strategic decision-making processes of the enterprise, they have every right to raise their hand and request a negotiation with the people that already hold those processes and those decision-making rights. So they’re very important, very serious contracts that are dynamic and subject to negotiation and renegotiation at any time based on new information. And to the degree that people take these seriously—and they should—these agreements really provide the scaffolding, the infrastructure that completely replaces a traditional top-down command and control hierarchical traditional management.
Lisa: I love that. It’s funny because another misconception of self-management is often, “Well, isn’t it chaos? Doesn’t it mean that everyone gets to do whatever they want?” But what you’ve described so beautifully illustrates how self-management done well, it is all about—as you say, it’s that balance between freedom and accountability and a real emphasis on commitment and agreements with one another.
Doug: Yes, and I do hear that word tossed around—chaos. And you know, it is a paradox because I do argue that when properly executed, of course, it’s the exact opposite of chaos. It’s greater control, it’s peer control. Peers are exposed to more in the workplace than a subset of traditional bosses. And when they are empowered to speak up and address issues directly, it can be a very powerful form of alignment and control that aligns very well with the overarching mission, vision, and values of an enterprise. So it’s the exact opposite of chaos.
And I like what you said about balancing freedom and accountability. There’s a great book by Peter Block and Peter Kestenbaum called “Freedom and Accountability at Work.” And the entire book is all about the philosophy of addressing that very paradox. And understanding polarities in the workplace, recognizing them, and then accepting them and dealing with them in an intentional way is one of the great tasks of effective self-managers. And balancing freedom and accountability is right at the top of the list.
Lisa: I also really wanted to talk to you about Haier, the kind of amazing Chinese self-managing company about which not that much is written—more and more so nowadays, but I think a lot of people still don’t know too much about them. And I know you’ve written about them a couple of times. Are there some insights or examples of how such a large organization—how they are, they have a particular remarkable model for self-management—could you share some things that you’ve learned about Haier?
Doug: Well, what I love about Haier is that they have a very visionary CEO and founder, Zhang Ruimin. And he is one of the most extraordinarily well-read CEOs on the planet and is widely regarded as the finest business strategist on the planet. And so he reads everything from Clay Shirky to Immanuel Kant to Thomas Jefferson and Simon Sinek and everything in between. And he is extraordinarily well-read. He presented at the Drucker Institute four years ago, and he was deeply influenced by the book I mentioned earlier, “The Effective Executive” by Peter Drucker.
And so Zhang Ruimin’s vision is in continual update mode. He’s always thinking ahead. It’s been said that wherever you go in management, Chairman Zhang has already been there and left. Probably he right now is creating a massive entrepreneurship platform out of his company. A few years ago, he had 80,000 employees worldwide. Haier is the world’s largest appliance manufacturer, by the way—one of the few companies from China that’s recognized worldwide. He slimmed down. He laid off or let 10,000 middle managers go, and then he created this incredible innovation platform where he has now some 4,000 self-managed teams of, you know, about 15 to 20 people each. And many of these teams are multidisciplinary, so they have production expertise and marketing and sales and finance and research and development, etc.
And his basic premise is, look, if you’re a Haier employee and a member of one of these self-managed teams, and you come up with an idea that you can sell to the mothership in any industry, we will fund it. And you can develop your idea, and if it takes off, you’re free to seek outside venture capital and spin it off into an entirely new company. So he’s created this incredible innovation platform for entrepreneurs, and he calls it “rendanheyi.” And the customers of Haier are “users,” and he really wants to create what he calls “zero distance to the customer.”
So the concept is based on the Internet of Things and Haier selling appliances obviously, which is washers, dryers, refrigerators, dishwashers, TVs, air conditioners, things like that. And these devices are sending back terabytes of data back to Haier’s computer system, where it’s being analyzed. And they are taking this data and using it to develop new products and services on a continuous basis.
So refrigerators that order food, even specific kinds of food—for example, for diabetics. Wine cabinets in restaurants that automatically order wine without requiring a middleman. Zero distance to the customer, massive data flows based on the Internet of Things, a gigantic innovation and entrepreneurship platform, and 4,000 self-managed teams make up the company. And it’s an incredible model.
So I encourage people to take a look at it. There have been a few books written about Haier. I’ve written a couple of articles in the Huffington Post about them, and they are a phenomenal company and one that people should pay attention to. They recently purchased GE Appliances in Louisville, Kentucky. And they don’t come in and just upend the culture overnight. They have a very humble and soft approach to implementing their vision of what they call rendanheyi, which is the idea of zero distance to the customer. And they’re just a very incredible, visionary company, and I encourage people to take a look at them.
Lisa: That’s amazing. What is your sense of the current landscape of work at the moment? Because sometimes I worry that I live in a bit of an echo chamber, and I get excited and feel like we’re on the cusp of something, and things are gaining momentum. But I’m also cautious to get too excited because I know that there are still a large number of organizations who very much aren’t in that world. What is your sense of what’s going on and what the future holds?
Doug: That’s a great question, Lisa. I’m seeing accelerating interest as I travel around the world. I see more and more leaders, founders, CEOs, entrepreneurs, directors, C-suite executives that are developing a keen interest in innovative management. And so there are more and more conferences every year, more and more companies are doing their own research, sometimes independently, sometimes through a consortium or a group.
But I see the level of interest accelerating, and that’s creating a demand for individuals to teach and speak and present and write and consult. And so on the supply side of things, there are consulting companies starting out, existing consulting companies are looking at developing practices in this area. But obviously, it’s a big world, and it’s not gonna change overnight. So the marketplace is vast. It’s global, it’s every sized company and every conceivable sector of the economy—vast, almost infinite network of possibility. And the interest is definitely accelerating. There’s no question about it.
I think in the next couple of years, we’re gonna see some big companies begin to make commitments to radical transition of management systems. And as that proceeds, at some point, we’ll reach a tipping point where it will seem more normal to be a self-managed company than a traditional command and control company. That’s a few years away, but it’s definitely accelerating.
Lisa: And where do you draw your inspiration from currently? Are there any fields or thought leaders at the moment that are particularly exciting to you that are emerging?
Doug: Well, yes, I draw much of my inspiration from a name I have already mentioned earlier, and that’s Peter Kestenbaum, who co-wrote the book “Freedom and Accountability at Work.” And I take great inspiration from him. He was a young man growing up in Nazi Germany in the 1930s. He remembers seeing Hitler on parade as a young boy. His family fled to Venezuela in the late 1930s, and when he was 16, he went to Stanford. And he ended up getting advanced degrees in philosophy and physics and religion and a number of other things.
And he taught philosophy at Santa Clara University for decades and was widely regarded as one of the best professors in the United States. And he came to a symposium that I was involved with a few years ago, and we became friends. And so I began spending time with him and learning about his ideas and freedom and accountability at work and the philosophy behind those ideas. And it’s very powerful.
So, you know, his notion on motivation is it’s nobody’s job to motivate other people. Everyone is a walking, talking freedom, and people will choose to motivate themselves or not. And if you are a traditional manager and you’ve grown up believing that it’s your job to motivate your people, you know, that can be a very liberating thought. So it fits perfectly with self-management, and Peter is a great advocate of self-management. He still does workshops for CEOs around the world. He’s 90 years old. He still works several hours a day from what I can tell, and he is a passionate advocate coming for the workplace of the future and for self-management. And I speak to him as often as I can, and we share ideas and information and connections. He’s been a great inspiration to me.
Another inspiration has been Fernando Flores, who is the godfather of commitment-making and commitment-keeping. And as I described earlier, the commitment-making is probably at least half the foundation of organizational self-management as I understand it. And Fernando Flores is the great former Chilean finance minister who was thrown into prison for three years and wrote “Computers and Cognition,” which is the Bible of artificial intelligence.
But he also spent a great deal of time on the idea of what he called “speech acts,” which commitment-making is one. And from Fernando Flores, we learned that commitments have structure, they have a life cycle, they have very specific beginnings, endings, and performance middles. And when they’re properly executed, they can be a powerful driver of effective self-management. And the problem with most organizations is that commitments are often made in a very sloppy way that results in frustration and disappointment. So to the degree we can boost the commitment-making, commitment-keeping muscles of individuals, we can greatly affect the probable success of self-management organizations.
Lisa: Great, I’ll definitely check both of those out. Sounds really interesting. And finally, what advice would you offer to listeners who are either thinking of embarking on a journey of self-management or maybe they’re in the midst of creating a self-managing team or transitioning to self-management? What words of wisdom could you give them?
Doug: Great question. I would say, decide how far you want to go with it. Are you just running an experiment to see where it ends up, or do you have kind of a desired future state in mind where you want to be at the conclusion of your efforts? So I would encourage people to get very clear about what that desired future state looks like and then backfill and figure out what steps you need to take in order to get from here to there.
If you need help, don’t hesitate to ask for help. If you need additional information, don’t hesitate to reach out and find sources for that information. Feel free to look at other models and find bits and pieces of those models that fit your particular culture because every organization’s culture is different, and make sure that it adapts to your culture. Make sure that what you’re doing fits what you’re trying to do in terms of your marketplace and your stakeholders and customers or suppliers, the community and the environment, employees, and every other stakeholder that would be affected by a transformation project.
And then I encourage people to start small. I mean, if you’re in charge of General Motors, I wouldn’t advise trying to do everything all at once. I would have it start with a department or a division or a business unit or a work team. And as I was describing earlier with leadership groups, just try it there.
I had a great experience with the University of Phoenix. They had a business unit leader there named Stephanie Gladden, and she just brought in a copy of my book and started a little book club in her business unit. She had about 50 people, 10 or 12 leaders, and they just worked through, you know, how they would implement self-management, how long it would take, what each person would have to do, and what were the steps, what were the elements. They worked through it. She said it took them about 12 months, and they were completely successful.
And I got to meet with her and her leadership team last year, and it was just great to hear them tell the story of their transformation from command and control to self-management. And they described that as they incorporated these elements, these simple principles—don’t use force, keep commitments—and they incorporated these principles into their work lives, they found that they began to incorporate the principles into their personal lives as well. And they said that ultimately, adopting self-management made their lives better.
So I would encourage people to hang on to the promise and the benefits of self-management and don’t let go of those, even if you run into difficulties. Persevere, exhibit some grit, work through it, and I think you can be successful if that’s your desired future state.
