10/27/2014 02:58 pm ET Updated Dec 26, 2014

The Age of the Self-Managed Organization

Every organization optimizes on something. W.L. Gore & Associates is known as the most innovative company in America. To enjoy extraordinary customer service, customers can call Zappos and chat with a cheerful representative for hours about shoes. The Morning Star Company, the world's largest processor of tomatoes, optimizes on principle.

When people come to work for Morning Star, they are asked to embrace two core principles. First, people should not use force against others--all interactions should be voluntary. Second, people should honor the commitments they make to others. To the degree that individuals live these two fundamental principles, they generally experience greater happiness and engagement. The benefit to the enterprise: people perform better when they feel good about themselves. The rubric for this form of enterprise governance: organizational self-management.

A principle is a fundamental, primary or general law or truth from which others are derived. Human principles are not unlike physical principles (for example, gravity). Principles exist, and they're always working. People can choose to align their behavior with fundamental principles or not, but choosing to ignore principles (like gravity) can have serious consequences. Similarly, choosing to ignore human principles (like keeping commitments) can cause enormous damage. Notorious examples abound, like Charles Ponzi fraudulently promising investors unrealistic arbitrage returns.

While ignoring basic human principles carries serious costs, aligning actions with principles conveys significant benefits. The same core principles proposed by founder Chris Rufer and adopted in 1990 govern Morning Star today. The company has grown from zero to become the largest tomato processor in the world, its products sold globally and consumed by virtually everyone in North America, with over $700 millions in sales. Morning Star's colleagues somehow achieved these results by individually managing themselves, without bosses, titles or command authority. How did they do it?

Self-Management is Fractal Management

The world is becoming more complex. Some reports indicate that human knowledge is doubling every 13 months. Atul Gawande, author of The Checklist Manifesto, writes that with over 13,000 ways for the human body to fail, medicine today is the art of mastering complexity, if it can be mastered at all . Complexity is a constant of modern organizational life.

To meet global demand for high-quality tomato products, Morning Star colleagues pull arrows from a huge quiver of analytical disciplines, including enzyme kinetics, cell biology, plant genetics, thermodynamics, meteorology, global currency exchange and myriad others, all to balance a variable supply of raw material with rigorous customer demands--while trying to make a profit. As Avril Lavigne might say, it's complicated.

The path to managing complexity is, paradoxically, through simplicity. The two original core principles ground all enterprise activity around a mission and vision, buoyed by flexible support systems and practices. Colleague Principles act as an enterprise constitution, allowing for concentrated human effort. The fixed nature of the principles is what allows people to exercise effective autonomy in a fluid environment. This foundation allows people to freely act with agility and speed in response to dynamic change. It's easier to hit a target with arrows fired from the bedrock of principle than from the quivering quicksand of a corporate makeover or C-suite politics. The chain of command theory made sense when information moved at the speed of Morse code. Today, chains of command forged in pursuit of the mirage of control are shackling business performance everywhere.

Self-managed colleagues connect with each other by voluntary agreement, not by occupying a box on an organization chart. When these individual agreements are digitally rendered and relationally plotted, they resemble a large spider web. If one were to make a time-lapse movie of such a diagram, it would change shape and size as individuals enter and leave the ecosystem or voluntarily renegotiate their relationships and commitments. There is greater organizational control, not less, when everyone is a manager.

A fractal is a complex geometric pattern exhibiting self-similarity in that small details of structure viewed at any scale repeat elements of the overall pattern. Regardless of the degree of magnification used to view a network diagram of a self-managed enterprise, whether at the level of the individual (a single node), the factory or business unit (a sub-group of nodes), or the entire enterprise (all nodes), the same two core principles are present and operating. One also finds the functions of management (planning, organizing, staffing, coordinating, controlling) at every degree of magnification, because in self-management everyone is a manager. There are no titles, bosses, VPs, supervisors or hierarchy of any kind. There is only work, and people that engage in work. The fluidity of this arrangement enables individual and enterprise agility--a critical success factor in a complex world where information moves at the speed of light.

In a self-managed ecosystem, every colleague voluntarily engages with the mission and principles of the enterprise. The cultural DNA of respect for principle is deeply embedded in the organization through language, education, modeling and practice. This cultural reinforcement reduces the risk of individuals or groups acting in ways incongruent with the mission or principles.

Since there are no inherent barriers to communication anywhere in the network, free-flowing information catalyzes operational decision-making everywhere. A further powerful benefit of self-management is that innovation can and does arise from any point in the network. Individual self-managers freely propose process improvements and innovations to their peers, many of which are successfully implemented. Examples abound: one recent colleague-generated idea for material management achieved a compelling return on investment.

Similarly, each colleague in a self-managed organization has an equal voice. Self-management is not about voting or majority rule. It's about comprehensive due process, and protecting the voice of each and every member of the enterprise. Every colleague is a stakeholder in decisions that impact their work, and is free to engage with the decision-making process. Do peer-reviewed decisions often take longer to make than those in a traditional management structure? Absolutely. Is decision quality better with relatively greater input? Definitely.

Self-Management is Scalable

According to a recent article in BBC Earth News, scientists have recently discovered an ant mega-colony that has apparently colonized much of the world, rivaling humans in the sheer scale of their global domination. The Argentine ant (Linepithema humile) mega-colony originated in South America but now spans much of the Mediterranean, California, and Western Japan--one super-colony apparently covers 6,000 kilometers of Mediterranean coastline. The ants' chemical hydrocarbon signatures provided proof of the common identity of separate colonies existing on multiple continents.

These Argentine world travelers have a simple, two-pronged mission. First, they seek to survive; and second, to reproduce. Their mission, which they execute to perfection, is the essence of simplicity. As long as they focus on the mission, there are no apparent barriers to scale.

Ants use chemical signals to provide activity feedback and facilitate coordination. Self-managed professionals use information systems to provide feedback and coordinate activities, and adjust their "paths" accordingly. Ant colonies use division of labor to effectively feed themselves and modify their environments. Self-managed colleagues freely agree to act in concert with others or work individually. Individual ants take initiative in seeking food and shelter, chemically communicating promising trails to their fellow ants. Self-managed colleagues take initiative and create buy-in for their ideas and innovations. It's challenging to identify the leaders of an ant mega-colony--or of a self-managed organization. Leadership is fluid--and depends of the flow of commitments back and forth between the organization's members. If it's possible to grow without bosses from zero to become the world's largest player in a global industry, then there are no inherent barriers to scale for a self-managed human enterprise.

Identifying sources of strategic competitive advantage is an existential challenge for any organization. Patents expire, trade secrets leak, talent walks, and technology is largely fungible. Superior methods of organizing and managing, however, represent an astronomical and largely untapped source of sustainable business advantage. In an age when information freely gushes everywhere on luminous rivers of light, the future belongs to organizations that can engage every member with freedom, principle, and purpose.

Doug Kirkpatrick is the author of Beyond Empowerment, The Age of the Self-Managed Organization. He is an organizational change consultant, TEDx and keynote speaker, executive coach, writer, educator and SPHR.

He played the first season of his business career in the manufacturing sector, principally with The Morning Star Company of Sacramento, California, a world leader in the food industry, as a financial controller and administrator. He now engages with the Morning Star Self-Management Institute and other vibrant organizations and leaders to co-create the future of management.