Humanizing Business62

Futurework: Managing Complexity With Simplicity

Futurework: Managing Complexity With Simplicity by Doug Kirkpatrick

Doug Kirkpatrick

May 22, 2019

OverviewRelatedHighlight

The keynote will explore the lessons learned from the journey of vanguard companies as they unleash the power of organizational self-management. Is it possible to adopt an organizational model linking mission-critical processes to individual stewardship without the need for traditional management and formal hierarchy? Is it possible to slash the direct and indirect costs of bureaucracy to achieve strategic competitive advantage? Is it possible to manage great complexity with simple principles? The answer to all of these questions appears to be yes.

What you'll take away:

  • Learn How to Create a Highly Scalable Enterprise Without Bosses and Titles
  • Learn How to Drive Organizational Agility, Innovation and Resilience through Organizational Self-Management
  • Learn How Organizational Self-Management Can Create Strategic Business Advantage
  • Learn How to Slash the Costs of Management, the Least Efficient Activity of Any Enterprise
  • Learn How to Manage Great Complexity with Great Simplicity

 

Transcript

How many think that people can manage themselves according to very simple rules? How many believe that? Many of us, many of us, not all. That's great. Well, let's take a look at a quick example, shall we?

[Video plays on screen] You know how England likes to call some of its intersections 'circuses', and it doesn't make any sense? Well, here's one roundabout that actually deserves the title, even if it doesn't get it. Your first thought upon seeing Swindon's magic roundabout might be, "Man. The Brits are really off their rockers lately", but this thing, which is actually seven roundabouts in one, has been working for 60 years. In a regular roundabout traffic moves in one direction. In Swindon Circle, cars move both ways.

Also, drivers can move from point A to point B without having to drive all the way around the circle, but they do have the option to use different routes to get to the same exit in order to avoid traffic. It may look chaotic, but it's actually pretty efficient because it means less fighting for space. You just point your vehicle toward where you want to go, yield to cars already in the midst of the magic, then Brexit on the other side. Many Americans may hate roundabouts, but they can actually cut serious crashes by 30 percent. 

Swindon says it's roundabout has only seen one fatal crash in the past five years. So to celebrate a town anniversary, they paraded over 60 vintage cars through this feat of traffic engineering. Is this madness? Nope, it's Swindon. [End video]

Roundabouts are based on two simple rules: rule number one, yield to the cars already in the roundabout. Rule number two, get in the correct lane for your exit. Safety is 30 percent greater with a roundabout, pollution is lower with a roundabout. Roundabouts are 15-80% more productive in terms of throughput than a command and control intersection. It's interesting. 

Does anyone besides Evan Leybourn know what this is? Well, if you thought to yourself, this represents two bent lines, you'd be absolutely correct. But these two bent lines are very special, because when they're encoded with the right genetic material they represent the entire genetic structure of a fern. And they occur at every degree of magnification throughout the structure of a fern, known as a fractal. Whether those two bent lines transform into a single tiny leaf, or a frond, or an entire forest primeval of ferns depends on the ecosystem. Depends on the sunlight available to the leaves, the nutrients available to the root system, the moisture in the soil. It depends on the ecosystem. 

The same logic applies to human organizations, and the interesting thing about the natural world is it calls out questions to us about how we live and work and collaborate together in organizations. It calls out questions like, can we create organizations where everyone has a voice in matters that affect them? Can we create organizations where leadership and innovation can spring forward from any point at any time? Can we create organizations where women don't have to lean in because they're already in? Can we create organizations where everyone is free to thrive, and learn and grow? Can we create organizations that manage great complexity with great simplicity, like the two rules of a roundabout or the two bent lines of a fern? Can we create organizations that allow us to out-VUCA  the VUCA world? Lots and lots of questions. How many think we can? Many of us do. Some don't. 

Well, let me tell a story: in the spring of 1990 in northern California there was a small team of professionals working on a project, and this team had been called together by an entrepreneur named Chris Rouper, and the mission was to develop a state of the art high tech food processing facility. And the reason I know about it is because I was part of the team, I was the financial controller. There were about twenty four of us, in the spring of 1990, we were working out of a tiny little farmhouse in northern California developing this project. The project was called Morning Star. And one day, our founder came in to the farmhouse, into the kitchen, which was our conference room, said, "I'd like to have a meeting of colleagues, and talk about how to organize this company and talk about governance", and we said, sure. 

So we all met together with him at night in a dusty construction trailer out on the job site. We sat around in a circle on steel folding chairs. He handed out a document called the Morning Star Team Principles. The principles boil down to two things. The first principle was human beings should not use force or coercion against other human beings. If you think about that, it's the foundation of all law everywhere in the world, whether you're in Austria or Australia, Russia, Brazil, China, the United States - doesn't matter. Every law against assault and battery, and theft and burglary, and kidnapping and murder and all the rest is predicated on the foundation that human beings should not use force against other human beings. And the second principle - was people should keep the commitments they make to each other. What a concept. Also, the foundation of law, especially civil law, particularly contract law, which would be meaningless if parties didn't do what they said they were going to do. So we sat around in a circle and discussed and debated these simple principles for a couple of hours. At the end of the evening, we just looked at each other and said, "we have no counterarguments. There's no reason not to adopt these principles", and so we did. And we walked out into the night air as a self-managed organization. 

So we had a lot of work to do. We had vital equipment arriving on ocean cargo freighters from Italy out in the middle of the Atlantic Ocean. We had to hire hundreds of people to operate the factory and drive the trucks. We had hundreds of contractors on the job site constructing, fabricating, welding, pulling wire 24 hours a day, seven days a week. We had to spend twenty seven million dollars to build a state of the art factory, in a very short period of time. We had thousands of hectares of tomatoes coming up out of the ground, up and down the state of California for hundreds of kilometers. 

Finally, on July 16th of 1990, we threw the switch, and we produced 90 million pounds - forty five million kilograms - of industrial tomato concentrate for the world market, and we changed the cost structure of an entire industry, and we did it without a single human boss. 

The company went on to grow. Customers liked what we did. We built another factory, and then another factory. We expanded operations up and down the supply chain toward our customers in remote warehouses across North America, and toward the supply chain in terms of farming and harvesting and transplanting and trucking. 

We became the largest tomato processor in the world. And I believe every one of you in this room is eating our product, because it goes into thousands of products in the grocery store, from ketchup to salsa, pizza sauce, barbecue sauce, spaghetti sauce and all the rest. And we did it all without a single human boss. No bosses, no managers, no supervisors, no titles. No command authority. People found this interesting for some reason, and so we found people calling us up to find out what's going on. Are you guys crazy? Are you communists? What is going on here? So in 2010, well-known business writer Gary Hamel came out and spent a day with us, and then in 2011, December 2011, Harvard Business Review published an article about us. We were the cover story, described on the cover as the world's most creatively managed company. 

So how can this possibly work? It just seems fantastic in some respects, and I think some keys here are that we start with principle. Everyone wants to jump into tools and systems and practices, and games and all the rest, which is all great and it's all fun. There are millions of those things. We think it's foundational to start with principle, you have to have a worldview. We started with two key principles. We think these are the most foundational principles of human interaction. Don't use force: imagine a world where everyone aligned with the principle of not using force. We wouldn't need armies or navies or police, or locks on our doors. We know that's not realistic, we understand that's not reality, but that's not the point. The point is, the closer we approach that ideal state, the more space we open up for happiness, harmony and prosperity. Take the second principle: imagine a world where everyone did what they said they were going to do. What an amazing world that would be. Incredible. We know that's not realistic. But that's not the point. The point is the closer we get to that ideal, the better off we are as human beings. So our space we open up, for human happiness, harmony, teamwork and prosperity. 

If you don't start with principle, it's like building a house without a foundation. She's going to blow away or fall down. 

We see human beings as the ultimate reality. Teams are concepts, business units are concepts, companies are concepts, countries are concepts, human beings are real. Why? Human beings make decisions. Human beings take actions. Human beings are the ultimate reality, and every business that's ever existed, or ever will exist, is set up to serve one of eight human commercial needs. There's only eight of them. Once you get past food, clothing and shelter, communication, transportation, entertainment, personal security and health care - and that's it. It's all about human beings. 

We align with tech and social drivers. Generation Z, the Millennials, are not willing to work for years on end doing trivial work without purpose and meaning. If you want to engage people and engage hearts and minds, you must provide purpose and meaning. The tech is disconcerting today, watching an artificial intelligence, virtual reality, nanotechnology, robotics, artificial - artificial intelligence. We have 4D printing now, not 3D printing, 4D printing. Does anybody use that? It's already here. It's amazing. 

So we have to figure out how to manage complexity with simplicity. We figured out how to boil the governance of an enterprise down to two simple principles, just like the two bent lines of a fern, or the two rules of a roundabout. Dee Hock, the founder of Visa said, "Simple rules allow for complex, intelligent behavior. Complex rules cause simple, stupid behavior." Which side of the ledger would you prefer to be on? 

We believe we can slash the management tax and create strategic competitive advantage. How many have heard of the management tax? Few of us. Gary Hamel wrote about it in HBR. With an average span of control of management of 1:10 around the world, and managers are always paid more than the people they manage, imagine a little startup with 10 people each making thirty thousand dollars a year. Well, every one of those people is already a manager in his or her own personal life. They're making life altering decisions without a boss. They decide who to date, who to marry, where to go to college, what to do for a living, whether to buy a house or car, take out a mortgage or have children. It's only when they enter the workplace, they're considered to be too stupid to do anything without a boss. Why is that? 

If you imagine a startup, 10 people making thirty thousand dollars a year, they have a boss probably making ninety thousand dollars a year. The opportunity for organizational self-management, is you can recognize the existing management, talent and leadership talent of the 10 people, give them all a five thousand dollar a year raise and you don't need the boss, or you can redeploy that person to be more strategic - and you've just saved yourself forty thousand dollars a year. If the company scales by a factor of 10, you have one hundred people. How many bosses do they need? At a ratio of 1:10, they need 11 because once you have 10 bosses, the 10 bosses need a boss. So you've added another layer of management. That person probably makes two hundred thousand dollars a year. The opportunity is you can take the existing management talent of the 100 people, amplify it in a commercial sense, give them all a five thousand dollar a year raise, and you can redeploy the 10 bosses and the boss of the 10 bosses, you've just saved yourself a lot of money. And over 10 years, it's about net present value of about three and a half million dollars. All things being equal, two companies in the same space, same strategy, which one is going to win? One's going to slouch the management tax, that one's going to win. 

We instantiate organizational self-management by horizontal agreements between peers. We call them Colleague Letters of Understanding. We figure out, what is your purpose? Why do you come to work here every day? How does what you do support the overall mission, vision, values and principles of the enterprise? What does excellence look like in your role. If you need six months to fully identify your purpose so that it resonates with yourself and the people with whom you work, that's fine. Perfectly fine. Get very clear on purpose. And then what is the content of your work? What are the processes for which you agree to own, and execute? And what are the decision rights, what is the scope and quantum of your decision making authority for each one of the processes that you agree to own? We want clarity, transparency and accountability. We want commitment from individual contributors. And we call our KPI's 'stepping stones' because we consider them stepping stones to perfection. We don't benchmark other companies, other industries, other sectors, we benchmark perfection. Perfection for a cost metric is zero. Perfection for an efficiency metric is 100 percent. Perfection for a risk metric, or quality metric, is zero defects. And we express these in two dimensional line graphs showing trends, and we publish them transparently across the enterprise and we trigger thousands of conversations between peers. How can I help you turn things around? Extremely powerful concept. 

Morning Star's not the only company that's going down this road, how many have heard of the Haier Group? Yesterday, I saw a white paper out front about the Haier Group. Haier's the world's largest appliance manufacturer based in Qingdao, China. They have seventy five thousand employees worldwide. They've created four thousand self managed teams, most of them are support teams: legal, HR, I.T., but several hundred are customer facing innovation teams, and then they have incubator teams. And they are launching innovations in industry after industry, including health care, cattle ranching, video games, and other things. They're so good, it's scary. And I think their competition is rightly concerned about how good they are, and how Agile they are as an organization. Four thousand self managed teams. 

Self-management plays well with Agile. The principles of Agile flow right down with the principles of organizational self-management, plays well with Lean, Six Sigma, TQM, SPC. There's no discipline it doesn't play well with. That's why it's so flexible and strong and Agile. 

This is Morning Star's org chart. We digitized the Colleague Letters of Understanding, and took them to a computer lab at the University of California and they projected them in three dimensional space. Looks very much like a spider web. Spider silk, by weight, is five times stronger than steel. It's extremely robust, extremely agile, extremely resilient and strong., If a few people leave, it doesn't matter. Other people automatically reallocate, renegotiate roles and responsibilities. This would be in constant motion, if it were a time lapse video. 

So my challenge to organizations is this: if a sprawling, boring, noisy, dusty, dirty, heavy machinery-oriented company like Morning Star can figure out how to organize like this, and grow from zero to become the largest company in the world in it's industry based on two simple principles, why would any startup or tech company want to organize the way we organized one hundred and fifty years ago, based on command authority, when we pushed information around via Morse code. It's a rhetorical question you don't have to answer it right now. 

This is my book, should be out in about five or six weeks, the No-Limits Enterprise. Should be available very soon, and there's my contact information - and thank you very much for your time.

 

About Doug Kirkpatrick

Doug Kirkpatrick

US Partner @ NuFocus Strategic Group

On the first day of first grade, our teacher asked us to color a picture of a buffalo in brown crayon. Feeling creative, I used black and brown crayons, earning a reprimand. Ever since, I’ve been fascinated with the tension between organizational freedom and accountability.

After college, I was privileged to serve as the first financial controller for Morning Star, now the world’s largest tomato processing company. Our founder introduced the startup team to the core principles of self-management, which we adopted immediately. At Morning Star, I learned that organizational self-management is real, it works and it drives superior business performance.

In 2008, I co-founded the Morning Star Self-Management Institute, with the mission of instantiating organizational self-management principles with effective education, tools and practices.

As a partner in NuFocus Strategic Group, I now speak and consult on self-management throughout North America and around the world. I also share the message of organizational innovation through my best-selling books ("Beyond Empowerment" + "From Hierarchy to High Performance"), TEDx talk and numerous articles and posts. Gartner Research Director Mark McGregor wrote that “Doug is a leading expert in the field of organizational design.”

NuFocus is a full-spectrum international consulting firm born in Canada, delivering client solutions for business strategy, marketing, operations, finance, international trade, infotech, entrepreneurship, HR, leadership, learning systems and organizational innovation (my personal calling).

I also work with Great Work Cultures, Work Revolution and the Center for Innovative Cultures to co-create the organizations of the future.

I'm always happy to connect with anyone who wants to learn how to make organizations thrive with engaged, innovative and self-directed leaders.

Specialties: Organizational Design, Talent Development, Culture, Leadership, Speaking, Consulting, Self-Management @Redshifter3

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