FIRST LETS FIRE ALL THE MANAGERS

By: Gary Hamel

Morning Star, a leading food processor demonstrates how to create an organization that combines
managerial discipline and market centric flexibility- without bosses, titles or promotions.

Is management the least efficient activity in an organization? Hierarchy, bosses, bureaucracy, layers
of executives - are these really significant in running an organization? These are the questions posed
by the author in the article as he digs deep into the top-heavy management model and self-
management model. Hierarchy of managers increases the burden of cost on the company. This may
be explained as follows:

1. The average salaries incurred by managers at every level are almost thrice their
subordinates.
2. Due to disconnect between ground realities and perceived realities, decisions taken by
managers may create risk of calamitous decisions.
3. Tall hierarchical structures may create a barrier in approvals and slow responses.
4. Managers tend to exercise favouritism towards their vested interests and may skew
decisions.
5. Tyrannical structure usually disempowers lower-level employees.

The author compares hierarchies and markets where he discusses the necessity of corporations and
managers who bring together thousands of disparate contributions into a single product or service.
But according to Alfred D. Chandler they constitute the visible hand which is often inefficient and
incompetent. This gives rise to two important questions:

1. Can we achieve high level of coordination without supervisory control structure?

2. Can we get the freedom and flexibility of an open market along with control and
coordination of a tightly knit hierarchy?

In order to stress his point the author gives an example by comparing Open-source Software Project
with Boeings Dreamliner Project. He states that the former needs less managerial control with total
freedom to the programmers while the latter requires specialists and strict coordination between
the units else it may fail to deliver a finished product. The question arises whether we can have a
decentralised and synchronised organization?

This brings us to an organization, Morning Star that defies the conventional way of running a
business. Morning Star, founded in 1970 by Chris Rufer is the worlds largest tomato processor
based out of Woodland, California. It is a large capital intensive corporation with 400 full time
employees with revenue of $700 million per year in the food processing industry.
Morning Star is an organization where:

No one has a boss

Employees negotiate responsibilities with their peers
Employees have the freedom to spend the companys money
Employees are responsible for the procurement equipment required for their work
No designations and no promotions.
Appraisals and compensations are decided by colleagues.

Let us dig deep to understand the model of this delightfully unusual company. The vision of the
company to create a company in which all team members will be self-managing professionals,
initiating communications and the coordination of their activities with fellow colleagues, customers,
suppliers and fellow industry participants, absent directives from others.

Heres how Morning Star operates without directives from higher authorities:

1. Make the mission the boss: Every employee is responsible to frame his or her personal
mission statement which is aligned with the companys goal of producing tomato products
which consistently achieve the quality and service expectations of our customers. According
to Rufer, personal mission statements are one of the most important parts of the self-
management model.
2. Let employees forge agreements: Every year, each employee is responsible to frame a
Colleague Letter of Understanding (CLOU) by negotiating with fellow colleagues. CLOUs
connect over 3,000 formal relationships among all the employees. It is an operating plan for
fulfilling ones mission. It mentions all the relevant activity areas and performance metrics. It
keeps on upgrading depending upon the competency and interests of employees. CLOUs
give a structure to the organization and create a voluntary agreement among employees to
produce effective coordination. Also, customer- supplier agreements are done in the same
manner.
3. Empower everyone truly: Morning star empowers its employees to an extent that they
have the flexibility and the freedom to take managerial decisions pertaining but not limited
to purchasing, staffing, financing on their own for the company. The periodic discussions
ensure coordination among the departments and the employees.
4. Dont force people into boxes: The Company provides flexibility to the employees to develop
themselves in the area of expertise and take on greater responsibilities thereby giving
newcomers a chance to display their potential. Freedom and involvement provides
innovation opportunities.
5. Encourage competition for impact, not for promotion: Since there are no titles, there is no
competition among the employees for a higher position. The only competition that exists in
the organisation is on the basis of who contributes the most for the organisation rather than
who gets a better position. The competence level determines the pay scale and the
company believes that moving up is about competency and reputation, and not about the
office we hold.