Could Your Company Manage Without Managers?

The Wall Street Journal recently wrote about some tech companies that had no managers, or at least very few. The software company 37signals, for example, has been around for 14 years. It's small, sells products for collaboration among remote workers (I've used one in the past and it worked reasonably well), and is leery of having managers:

[Co-founder Jason] Fried previously oversaw the company's main product, Basecamp, in addition to looking after other products and setting strategy. But he was stretched so thin that key decisions about the project-management software, which serves as a hub for workers to share messages, collaborate on documents and discuss ideas, were sometimes left hanging for weeks or months.

Instead of managers, the company looks for people who can direct their own work and actually produce something, rather than watch others produce.

Anarcho-what?

The idea isn't new, at least in tech. Video gaming company Valve has 400 employees and no bosses. Instead, it uses a model called anarcho-syndicalism:

Anarcho-syndicalism is an economic theory with roots in the early 19th century that articulates a form of government in which self-organized cliques of labor work together to directly achieve goals. In essence: socialism minus centralized government plus trade unions.

The way this manifests at Valve is that, after an endogenous process in which a self-organized committee hires a new employee, he or she is free to join and freely move around any of the company's myriad of projects. Where Google boasts 20 percent free time for its employees, Valve boasts 100 free time.

Before you get too excited... 

Before you rub your hands together, cackle "Hot damn!," and fire all your managers, though, there are some big issues you'll have to consider.

• Many entrepreneurs--maybe even you--have a hefty dose of ego. That's natural. How do you pursue an idea while everyone tells you how dumb it is? You need enough belief in yourself to carry on. However, ego can run away with itself and start doing things like insisting on "world-class" managers because, after all, if you're getting bigger, you should have more people available to work and reporting to you. As they say in mathematics, you can only optimize for one variable in a problem. In this case, your choices are to make the company run better or to make yourself feel better--for now. Choose wisely.
• Hire carefully. You need to find employees who really want the company to succeed and who are very good at what they do. They should also have enough flexibility of outlook and attitude that they could take up something else in the company if it were necessary. These are the people who will make decisions that affect how the company runs, and their decisions may not be yours. Again, decided whether you want a successful company or ego strokes.
• Bone up on how to make leadership from peers work. Everyone has to be ready to take responsibility if they perceive it as necessary, but also to listen to others when they are leading. A great read is the Valve new employee handbook. You company may not run exactly the same way, but seeing the questions and considerations that come up at a place that has made this system work is worth doing.
• Be ready to pay well. You're not going to get rid of managers, put employees in the driver's seat, and get away with paying as little as possible. It's another area where employees will get involved in setting standards and even specific compensation. If everything isn't transparent, this entire experiment will fall apart.

Although this has been applied in tech, there is no intrinsic reason why a manager-less structure couldn't work in other industries. Get people focused on what creates value for the company, reward them with similar value, and learn to stay out of the way.