An unusual journey to self-management: Matt Black Systems Four Key Insights
We had the pleasure of meeting two experts of self-management in London as part of a Learning Expedition organized by Ouishare (alongside our work at Nesa’s FutureFest where we were a content partner). Julian and Andrew are CEOs of Matt Black Systems, an English subcontractor in the aeronautics industry. 15 years ago, they began the transformation of their 30-strong company into a self-management model. Today, they are doing the same amount of work with just ten employees, productivity has more than tripled and continues to improve. The company is also diversifying with new brands and new products in new markets.
Here are four insights from Matt Black Systems for businesses to succeed in the journey towards self-management.
I took the liberty of commenting on them in the light of my consulting experience and Ouishare's expertise on the topic.
1 - Opt for roundabouts rather than traffic lights
When I asked Andrew and Julian how their organisation worked, they answered me with a question: "What is the difference between a roundabout and a traffic light intersection?”
Let's compare these two most common road traffic environments:
- An intersection with traffic lights has a fixed logic that gives clear orders to drivers: orange, you stop, red, you wait, green, you pass. Drivers do not have to think, they just follow the instructions.
- A roundabout uses a clever structure that requires no centralized logic. The drivers "order" each other by following the simple rule: “before entering, give way to the circulating traffic". The drivers must pay attention and coordinate with each other.
The first environment is in "command-and-control" mode. Decisions are made by the logic of the machine and commands are issued. The sensors, the lights, and the central processing unit make up the structure that governs the intersection. The people and their cars are simply processed by the structure. Such a system is nevertheless dependent upon the drivers following the commands issued (their only choice is to conform-and-comply, or not). The system provides safety to drivers, yet is often ineffective - how many times have you waited at a red light for no cars to pass by?
The second case is based on a more sophisticated road layout and simple common rules. The drivers are given "responsible autonomy” and use their own judgement; giving way when necessary and driving at the right time. Whilst there are rules, the decision to go or not go is for each driver to make. It is the sophisticated road layout, with its curves and lanes that make up its structure that allows the drivers to coordinate and collaborate in a smooth flow. As a result, there are less accidents and traffic flow is higher. Cars don't need to wait unnecessarily.
Matt Black Systems opted for a "roundabout" environment 15 years ago while phasing out traffic lights; moving from a classic hierarchical, "command-and-control/conform-and-comply" model to a self-management, “responsible autonomy” one that encourages personal initiative.
This first analogy invites us to see the company not just as an organizational model or a typical structure (org charts that are hierarchical vs flat), but rather as a contrived environment with a rule-set. It is the nesting of three key dimensions: (1) structure, (2) rules or functioning modes and (3) people.
- A classic hierarchical organisation uses its structure to gather information to a central point, make decisions and then issue commands to its people. The myriad of rules made up by the organisation control the operation of each function and are mostly there to make their elaborate processes work. People are rewarded for their followership- like cogs in a machine.
- As far as self-managing companies are concerned, their structures enable information to be dynamically shared and acted upon by people/employees within a simple over-arching common rule-set. Communication, coordination and collaboration is fluid and voluntary. People are rewarded for their self-leadership and the value they deliver.
2- Small is beautiful
A company's success is often attributed to its economic growth. In general, it goes hand in hand with an increase in the organisation's headcount. Matt Black Systems' story is unique, because the internal innovation - technical, organizational, business model - that allowed the economic success was done with small teams.
Pareto's law is frequently used across many aspects of a business: i.e. the overview that "80% of work is delivered by 20% of employees". This rule-of-thumb applies well to organizations of 100 people; but what if there are 10 or 10,000 in a company?
Price's law allows that calculation to be done : "The square root of the number of people in an organization is responsible for 50% of the work and the square root of the remaining people do 50% of the work that is left”.
- For an organization of 100 people, 10 people (square root of 100) do 50% the work, of the remaining 90, 9 of them do 25% of the work. In total, 19 people do 75% of the work. Closely aligning with Pareto’s 80%/20% rule.
- For an organization of 10,000 people, 100 people (square root of 10,000) do 50% the work, of the remaining 9,900, 99 of them do 25% of the work. In total, 199 people (2%) do 75% of the work.
The story of Matt Black Systems was built on these insights.
This resulted in a 180 degree shift in organisational theories: the number of people in a team is no longer a simple variable, but an organizational design tool.
It is on this founding principle that Andrew and Julian chose to reduce the size of their teams until gradually reaching teams of 1 person - i.e. no more teams in which accountability is shared amongst people; every person was solely accountable for the commitments they made. The leap they made was to create a structure that allowed these accountable teams of 1 to communicate, collaborate and coordinate in voluntary transactions in much the same way as drivers on a roundabout. The simple and common rule-set used by each person was enough to allow collaboration whilst each could demonstrate their contribution and be rewarded accordingly. No resentment then existed between team members who were contributing differing amounts.
This did not remove the Ringelmann effect (tendency for individual members of a group to become increasingly less productive as the size of their group increases), but it distributed the rewards according to the effort contributed. Individuals may be in many different work groups and contributing different amounts to each depending upon their talents and interests. Individuals gravitated towards work groups that suited their talents and interests and in these groups they tended to be Price’s high achievers.
3 - Encourage independence and accountability
Initially, the organization adopted Lean Manufacturing (systematic method for waste minimization) principles to review all its management methods and production processes. The program to introduce these Lean principles initially stumbled and it was this failure and the exploration of the reasons that was the first stepping stone towards self-management, as it was critical in the staff seeing their roles in the context of the wider business rather than a limited vision confined to the specific boundaries of their role.
It was at this point that the company recruited people who were more entrepreneurial and who exhibited responsible autonomy. Above all, these new recruits demanded increasing freedom when it came to managing their resources and activities. But, as what happens in many organizations, the newcomers were given tasks that no one else wants to do. But instead of drowning in thankless tasks, these new team members took the opportunity to do things differently: reorganize, redesign, change or abandon processes. Initially these new “internal freelancers” focussed on their work to radically change how their tasks were dealt with, usually creating innovative and efficient processes for the company. In time, they reached out to other like-minded staff members to collaborate and combine their efforts for even greater gains.
Going back to the three key dimensions as set out earlier in the article, these incoming empowered people were a strong trigger for change in spite of the prevailing Matt Black Systems’ culture. It was through prioritising the restructure of the system to make it increasingly easy for these empowered workers to progress that allowed the changes to gather momentum, and led to:
- The gradual changing of culture: everyone became fully responsible for their field of activity: managing Profit & Loss whilst following common allocation rules, deciding individual salaries based on its results, etc.
- New processes and rules where each employee can objectively demonstrate the value they provide: everyone took full responsibility for strategic decision-making in their field of activity.
- No more managers: the incumbent management team became “stranded assets” as their control was no longer required.
This undoubtedly affects the human dimension of the business. The expectations placed on employees has shifted: requiring an entrepreneurial mind-set, the development of a wide range of skills (in addition to specialisms) and to be fully responsible for allocated business functions. Not everyone is cut out for this, and as a result, all of the initial employees left gradually over the years!
One aspect of the system not mentioned here is the wage scheme where an individual determines their salary based upon the value that they deliver. Thus, in time salaries have escalated significantly as a result of people taking the opportunity to earn more money by adding more value. This has shifted the pay to be in proportion to how much value an individual actually delivers rather than the average labour rate in the sector; from human resource to individual talent. Nonetheless, it may also design very competitive and virtually neo-liberal relationship between people.
This is what struck me with this Matt Black System experiment: one could think that setting-up an organisation strongly oriented towards self-management would produce a more balanced and more human way of working together. The impression I got is that the system (i) is actually designed solely for responsible and self-disciplined people where the key attributes are autonomy and accountability and (ii) solidarity and cooperative behaviours are emergent properties rather than being imposed. To some the system may seem cold.
So, the question remains, Who is responsible for the organisation? The leaders who designed the model or the staff who are self-managing within? It is probably better to consider the leaders as simply the first generation of self-managing inhabitants who have subsequently left the organisation.
4 - Transforming your organisation is also about you
The role of the two directors in this transformation process surprised me. Andrew and Julian’s charisma and leadership left me perplexed: isn't this transformation a paradox between the means (management's top-down leadership) and the ends (self-management)? How can it be decided by leaders that teams will now be self-managed without directly preventing them of doing so?
Andrew and Julian revealed that they had to create a succession of larger “spaces" throughout the process so that the teams could gradually build their autonomy in steps rather than in one giant leap. It was then a question of the teams developing their self-management styles, creating conditions for teams to address problems, and letting them experiment with new solutions with the freedom to fail.
In time, Andrew and Julian’s physical presence limited progress: no one could yield to the temptation to ask their opinion. So, there came a time when the right thing to do was to stop attending the Matt Black Systems' offices or plant (remote working). Nevertheless, they have always remained available for outside meetings to coach employees. Over time, the executives have also gained recognition for their valuable role as a coach of self-management.
Generally speaking, any kind of organizational transformation towards a more autonomous and cooperative model calls for an enlightened leadership who can give up their role and instead focus on designing and implementing the structures necessary to support self-management. Like a junction being transitioned from traffic lights to a roundabout, it is a matter of creating the new road layout- not a matter of talking to the drivers. Too often we hide what it implies for top management: a lot of renunciation. They will often need to give up certain privileges and rights, and sometimes will need to remove themselves from the entire structure, to allow their teams to fully experiment with the self-management model. After all, when the goal is to build a roundabout there is no place for traffic lights that issue commands.
Transforming an organisation is a journey where you know when you’re leaving and where you’re starting from, without knowing the destination nor arrival time. Matt Black Systems' history is unique and original; no company could take the same path. It is up to each manager to decide how they wish to transform their "environment" or "corporate culture". Do not decree an implementation of a new self-management model, but rather set the conditions for it to emerge. And it always starts by measured and strategic change to structure, rules or the people who make it up.
This article has been co-written with Julian and Andrew. Many thanks to them for their kind remarks and improvements :-D !
To learn more about Matt Black System and to make your own opinion, please visit MBS’ website and Andrew and Julian’s The Fractal blog.