By Lisa Gill and Nick Parker for Enlivening Edge
Reading the literature on self-managing organizations, there is little, if any, reference to such organizations existing in the UK. It came as a bit of a surprise to find Matt Black Systems, a small company based in Poole in Dorset, had been self-managing since 2003.
The company, set up in 1971, makes parts for the aerospace and defence industries and for many years it functioned as a traditional hierarchical manufacturer. Julian Wilson inherited the company from his father in a time of crisis; costs were high, quality poor, and only 17% of orders were being delivered on time. One customer even told them Matt Black Systems was one of their top 10 worst suppliers. Realising the need for change, Julian brought in the services of Andrew Holm who had experience in big business. After spending a year debating what to do, they decided to try a procession of change initiatives including automation, micro-management and Lean.
This went on for five years, each time measuring against four monthly indicators: Quality, Delivery, Profit, and Compliance. Finally, unsatisfied with the results, they made a radical change.
Taking inspiration from nature and the way that birds in a flock operate entirely independently and yet move seamlessly together, they divided the business into autonomous cells of one and gave each cell full control of its budget.
“Bang!” says Julian as he describes it to us. “Then we got a big change!” Now they had accurate performance data for each individual and could see that 20% of the team had been producing 80% of the output. The most efficient workers thrived, and those who had been loafing found self-management too taxing, and left the organization. The team went from 30 engineers to 12. However, because these 12 are so much more effective, Matt Black Systems can afford to pay them significantly more and those who have stayed enjoy the benefits of being completely in control of their work, benefitting directly from improving their own performance and that of the organization as a whole. Each member of staff, as a cell of one, does their own product development, manufacture, sales, delivery, finance, administration, customer liaison, and recruitment. They even trigger their own payroll and pay rises. Productivity has risen by 300%, costs have fallen by 50% and the company continues to grow.
To support the infrastructure of 12 self-managing cells, Julian and Andrew have done something quite unique. They took all of the necessary elements of running their business (for example, annual returns or compliance measures for ISO) and wrote them up as cards which they call ‘recipes’.
“All you need to worry about in business are nouns and verbs,” says Andrew. “Nouns are the resources and verbs are the activities. Our recipes are essentially activities for record keeping. We don’t tell people how to do something, only that they need to keep a record once they’ve done it.” For this, Andrew and a team of developers have designed their own self-managing software which is fully customisable and allows users to record these activities – orders, invoices, and so on. Triggering payroll, for example, prompts a decision tree which requires the user to have completed a return. Each recipe has a companion document to explain the basic principles of that element.
“My vision,” Julian tells us, “is to create a school for entrepreneurs, really. The business now runs without my input; I don’t have a day-to-day role in the business anymore; I am an investor, landlord, brand owner, coach, and business system provider – services which I charge for.”
Julian trained as an engineer himself but also studied psychology and counseling for many years. He reflects that Dan Pink’s research on motivational drivers (autonomy, mastery, and purpose) provides a very useful framework, but comes with the caveat that for people to be self-motivated, you have to “pay people enough to take the issue of money off the table.”
Employees had previously been reliant on paid overtime which means the company had essentially been rewarding dysfunctional behaviour. To reconcile this, Julian and Andrew simply paid people the overtime as an unencumbered bonus. The second step was to give each cell complete control of its own budget with a profit & loss account and balance sheet. “Now they had a lever with which to control their salary,” explains Andrew.
Beyond the recipes, Julian and Andrew have defined six key skills – they refer to them as ‘magic’ – which they believe are human qualities of the greatest potential value to the business: curiosity, imagination, creativity, cooperation, self-discipline, and realization.
“If people feel threatened or demotivated in an organization, they retract some or all of these magic ingredients.” Julian and Andrew believe the only real way to truly unleash these qualities is in a self-managing environment. When we discussed other alternative organizational design approaches, such as Holacracy, Julian argued that these systems are still hierarchical in the sense that resources (i.e. capital) are typically owned or administered by a centralised bureau of some kind.
“I think all of the differences between our approach and the approach of, for example, Holacracy or sociocracy, stem from a single philosophical difference in perspective – property rights. We go for distributed stewardship of resources, rather than the central deployment or administration of resources…This is the only route to individual autonomy, mastery, and purpose, in my opinion.”
In reference to the book The Starfish and the Spider, Matt Black Systems seems to be a true ‘starfish’ – there is no ‘head’ and if you chopped off one of its legs, it would survive and continue to flourish. Julian and Andrew seem to have cracked the formula for a truly self-managing organization and they are certainly reaping the rewards.
Julian Wilson is speaking at the RSA on the 4th of November as part of the Reinventing Work Network. Click here for more information.
Next in this series, we’ll explore the journey of how Matt Black Systems went from hierarchy to decentralization; what it’s like to work in a self-managing organization (life on the factory floor); and what it means for leadership.
Nick Parker is currently exploring how the principles of self management might be effectively employed in the public sector in the UK. For the past 15 years he has worked at the leading edge of organisational change within that sector. He holds the national portfolio on reform in the sector for the RSA Fellowship.