Self-managed Organizations: Who Is Doing It?

Self-managed organizations with no bosses - brilliance or nonsense? Is anyone doing this successfully at scale? Yes. And with the right ingredients self-management results in increased productivity, better customer outcomes, and improved employee engagement.

Self-managed teams aren’t new. Japanese quality circles in the 1970’s kicked off a revolution and by 2004, 79% of the Fortune 1000 and 81% of manufacturing firms deployed some self-managed teams, according to MIT Sloan. By now, most companies have employed self-managed tiger teams or task forces. Technology market researcher IDC said in 2020 that 85% of the companies they work with use Agile methods, such as Scrum, and the 2023 State of Agile Marketing Report reports that 41% of marketers surveyed use Agile marketing. The Agile manifesto values self-management stating, “The best architectures, requirements, and designs emerge from self-organizing teams.”

What is self-management?

Self-managed teams make day-to-day decisions and solve problems without going up the hierarchical chain of command.

The first modern self-managed team was observed in 1949 when a group of English coal miners spontaneously ignored the management-mandated “best practice” of “longwall” mining. This assembly-line-type process used industrial-era methods developed by Fredrick Winslow Taylor and Henry Ford. Longwall mining seemed ridiculous to the miners, so they formed multiskilled teams and organized work the way they thought would work best. Productivity skyrocketed.

Can self-management be implemented company-wide?

While its one thing to form a tiger-team or an Agile marketing group, many dismiss the notion that a whole company could run with self-organizing teams. Executives I’ve talked to about self-managed teams in marketing and sales often say something like “That could work for small companies, but it doesn’t scale.”

While it’s true small companies can be naturally self-organizing networks, an increasing number of large companies have benefited from operating without the restrictions of traditional hierarchies, using methods, structures, technologies, and culture that increase agility, improve business and customer outcomes, and provide employees with rewarding work environments - all while avoiding chaos.

Here are three examples of self-management success at scale.

Zappos

Online shoe and clothing retailer, Zappos uses holocracy. Developed in 2007 by Brian Robertson, holocracy distributes authority and decision-making to fluid “circles” and explains governance via a detailed constitution. Holocracy.org claims that 1000+ organizations use this structure.

Former Zappos CEO Tony Hsieh originally envisioned no job titles and no management when they adopted holocracy in 2014.  While Zappos remains committed to holocracy’s principles, they have modified the original concept for their evolving situation. For example, Zappos added a few managers, as well as customer-accountability metrics.

In 2020, Zappos operated 460 circles (small businesses), each with a market-driven P&L, that transact with one another at market rates for goods and services. Each circle keeps 50% of the revenue they earn beyond their targets and uses this money for experimentation. Circles have wide latitude to try new things so long as they respect the company’s culture and core values, deliver the highest customer satisfaction possible and ensure healthy team-level financials.

Role definitions are essential for self-management success. Traditionally, job descriptions bolt a list of responsibilities to a positional title (i.e., Director of Digital Marketing). In contrast, roles are fine-grained descriptions of work and accountability. Roles transfer fluidly and team members hold multiple roles. In 2020, Zappos listed 4700 roles.

Haier Group Corporation

Headquartered in Qingdao, China, this maker of home appliances and consumer electronics is on the Fortune Global 500 list and is one of Fortune’s World’s Most Admired Companies. Group SVP and CEO of Haier Smart Home, Huangang Li says, “The most important success factor has been our continuous focus on human value maximization, or what we call rendanheyi (the word combines three Chinese words). Ren means employees. Dan refers to user value. Heyi means integration. This means every employee gets to create value for users.”

Rather than top-down management, the company utilizes a bottoms-up, customer-centric model requiring horizontal collaboration. When the company completes a M&A deal, such as acquiring GE Appliance, instead of sending headquarters executives to mandate a corporate way, Haier requires local managers to implement four rendanheyi values: encouraging employees to innovate to meet customer needs, creating win-win situations with eco-system partners, creating equal opportunity and motivating employees to be at their best, and maximizing enterprise value. Under rendanheyi employees form micro-enterprises that avoid silos by collaborating with other micro-enterprises in an eco-system community.

Buurtzorg

Situating nurses in Dutch neighborhoods has been a common practice since the 19th century. Throughout the 20th century, these groups absorbed industrial-era methods such as organizing by skill specialization and hierarchical control. In 2006, the pioneering healthcare organization, Buurtzorg, was founded with a radically different approach – self-management.

Buurtzorg’s “onion” model centers around self-managing clients (patients) supported by a self-managed neighborhood team of 12 nurses. Each team collectively organizes, shares work, and makes decisions on everything from administration and finance to customizing and delivering healthcare. As Buurtzorg scaled to 850 nurse-led community teams, the corporate group has stayed small, providing coaching, training, and support rather than what would typically be called management.

The company has achieved outrageously positive results. It is more efficient – a 2009 Ernst & Young study estimated that the Dutch system would save 40% of costs if all healthcare were delivered in this model of care. In other studies, client (patient) satisfaction was 30% higher than average, and improved employee satisfaction as measured by lower absenteeism and turnover.

What makes self-managed organizations successful?

In researching self-managed teams and organizations, I’ve noted a few themes:

Balanced Mindset: Self-managed organizations understand that their fantastic outcomes require increased organizational freedom for agility and fostering human potential, yet order is required for efficiency and reliability. As they grow, large organizations tend to bend too far to the order side, leaving them rigid, exposed to disruptive risks, and less human. But too much latitude doesn’t work either.

Balanced Accountability: Balance can be measured with (often contradicting) metrics that triangulate achievement in three areas: customer satisfaction/outcomes, employee potential (self-management requires entrepreneurs who bring their whole, best, self to work), as well as financial success (the mission may customer-centric, but the company must be well-run). Balance inoculates against surrogation.

Willingness to invest in long-term infrastructure: Payback for required infrastructure (i.e., “hard” systems like technology and “soft” systems such as education, services, and methodologies) is rarely realized within a typical quarterly/annual financial timeframe. Change takes time and resources but self-management doesn’t work without sufficient infrastructure.

Before the pandemic, few could imagine companies functioning with everyone working from home. But it happened.  Self-management at scale may seem outrageous. But every day, more companies navigate in this direction by constituting the right values, implementing teams, and investing in hard and soft infrastructure. It’s the early adopters that are now gaining advantage.