As my responsibilities have increased at my “day job”, I have become increasingly interested in learning ways to become a better manager. After all, I do not want anyone to look back and think of me as a nightmare micromanager or incompetent in general. I became intrigued by the “self-managing company” concept embraced by NPS during this journey to become an effective manager of technical teams. I joined NPS Maricopa, an engineering firm comprised of a small team of civil engineering freelancers from around the world. The company is run by a brilliant engineer named Tom Haws. Since joining NPS Maricopa, I have learned a lot about self-management and embraced it as an effective way to run an engineering firm. The following blog post summarizes what I have learned about self-managing companies.

What is a Self Managing Organization (SMO)

An SMO in its purest form has the following characteristics:

Self-organized with teams. While many will say that an SMO is characterized by a “flat” organizational structure, a chief executive officer (CEO) is typically responsible for making important decisions. Some SMOs also have coaches in lieu of middle management.
Managers have almost no power over their subordinates. Leadership is earned and given with titles.
The division of labor is bottom-up and top-down with top management as well as individual employees having the responsibility and authority to create new tasks.
Monetary compensation is determined through a peer-based process.
There is a greater emphasis on making the company’s work intrinsically rewarding.
There is transparency of all key information and active distribution of information to ensure each employee’s capability to make decisions that benefit the whole organization.
Within-team coordination is accomplished through constant communication.

While self-managing teams have been around since the 1950s, applying self-managing principles to whole organizations has only been considered in the past couple of decades. Because SMOs are not very common, companies that work to incorporate self-managing principles into their organization could be at an advantage in the marketplace. SMOs are characterized by greater agility because it is much easier to implement creative new ideas when they are not stifled by “red tape.”

What Makes Self-Managing Organizations Interesting

SMOs are not just a good idea in theory. Some organizations have successfully incorporated self-management into their company structure and seen positive results. Some examples include the Buurtzorg (medical/nursing company based in the Netherlands), FAVI (French brass foundry), Sun Hydraulics Corporation (manufacturer in Florida), Morning Star (tomato processing company in California), and ESBZ (school in Germany). These teams attribute their success to a clear sense of purpose, more effective use of labor/energy, and a culture that promotes learning.
SMOs minimize the power of supervisors to control employees. For this reason, SMOs are dependent on a self-motivated workforce who has the expertise to perform their job. As a result, SMOs may need to offer above-average wages to attract the best talent (Martela, 2019).
SMOs tend to have fewer meetings.
SMOs like Sun Hydraulics have demonstrated that self-management can simplify project management and project prioritization, which is a major challenge for many civil engineering firms.
Given the various well-known social and cognitive biases of humans, the more informal structures in SMOs can in the worst case lead to social interaction and recruitment to projects being based on homophily (Felin 2015), at the expense of various minorities. In other words “birds of a feather flock together.” It is human nature to gravitate towards those who are similar to us. However, teams should be encouraged to recruit members with diverse perspectives.
Decision-making at SMOs is informed by the advice of colleagues, but it does not require consensus. Many companies refer to this unique approach as the Advice Process. For example, when the CEO of Applied Energy Solutions (AES) is contemplating a decision that will affect many workers, he simply communicates issues and the proposed solutions on the social network to collect colleagues’ advice. If consensus was required to make all decisions, it would be difficult to accomplish anything meaningful.
Strategy is an organic process that mimics how nature works. In nature, innovation doesn’t happen centrally, but at the edges, all the time, when some organism senses a change in the environment and experiments to find an appropriate response. Some attempts fail to catch on; others rapidly spread to all corners of the ecosystem.
Because everyone is expected to participate in activities such as invoicing and budgeting, the need for hiring additional staff is eliminated. In this way, teams can function in a more streamlined way.
Self management requires every employee to take responsibility for the difficult aspects of work. With freedom comes responsibility.
The point of self-managing companies is not to make everyone equal; it is to allow all employees to grow into the strongest, healthiest version of themselves.
I think a common misconception of self management is that it is a “free-for-all all” where everyone does what they want to do. However, that is not the case. Self management does not mean there is no structure, management, or leadership. SMOs still have structures, processes, and practices that inform how work is performed.

How SMOs are similar to traditional hierarchical organizations

A popular framework that describes the elements of an organization is the McKinsey 7-S model (see image below). This framework is general and applies to traditional organizational structures as well as more unusual company structures like self management. Based on my internet research, there seems to be a misconception that an SMO is a free-for-all all. However, this is not the case SMOs are similar to traditional hierarchical organizations in that they need to have a cohesive structure, shared values, effective systems, a unique style, the right skills/expertise to complete their work, and staff. Like traditional hierarchical organizations, SMOs can become toxic if they are not functioning correctly. Expectations should be clear, and everyone should understand how they fit into the organization as a whole.

The McKinsey 7-S Model (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)

How NPS leverages self management as a competitive advantage

The organizational structure at NPS makes us an agile team that can complete many projects quickly. Based on my experience, this is not typical. For example, a key competitive advantage of NPS is that every team member has access to the accounting records and is aware of the financial health of their projects as well as the organization in general. Unlike many other engineering firms (at least in the USA), every NPS staff member is involved in the invoicing process. This forces everyone to be budget-conscious. In my experience, engineering firms only allow project managers to view the budgets. This means most engineers do not learn how invoicing and project budgeting work until 5-10 years into their career! I now see how this practice is detrimental to engineering firms. The operation as a whole moves more smoothly when everyone shares the burden of administrative work. In contrast, allowing just a few people to access a project budget puts all of the responsibility of the project budget on one person and leaves everyone else in the dark. I believe that more widespread adoption of a self-managing structure where everyone shares the burden of administration work would minimize burnout in the engineering industry.

Another competitive advantage of NPS is not only our processes but the documentation of these processes. All of the companies I have worked with in the past only make an effort to document processes when someone is leaving the organization. Even this type of documentation is soon forgotten. The NPS standards, Tom’s YouTube channel, and our AutoCAD templates aid in developing high-quality work products promptly. In my opinion, many engineering firms could benefit from taking some time to create an operations manual or some type of reference manual/document that preserves institutional knowledge. While this may seem like a daunting task, involving everyone in a task like this (in true self management fashion) will reduce the amount of overhead that is required for this type of effort.

Finally, NPS also has a clear set of shared values that are spelled out in the NPS Values and Practices document. Unlike many firms whose mission statement is simply a nicely written paragraph on the company website, everyone at NPS is expected to incorporate these values and practices into their project work. We revist these values on a regular basis. Another firm I have worked at in the past did a good job of ensuring everyone was aligned with the company mission. We would revist the mission togeter every year at an annual retreat. This was helpful in deciding which projects to pursue and made everyone feel included in the “important stuff.”

References

If you are interesed in learning more about self management, here are some links to impo

TED Talk by Doug Kirkpatrick of – startup team member of Morning Star Beyond empowerment – are we ready for the self-managed organization? Doug Kirkpatrick at TEDxChico

TED Talk by Helen Anderson – https://youtu.be/oRBMfO8DC0A?si=prWYLlmrKe67b2-A

What makes a self-management organization novel? – https://www.econstor.eu/bitstream/10419/217482/1/s41469-019-0062-9.pdf

How Self Management Works – https://www.managementexchange.com/sites/default/files/media/posts/documents/The%20keys%20to%20self-management-detailed%20description.pdf

Self Management and Organizational Results – https://www.managementexchange.com/sites/default/files/media/posts/documents/The%20keys%20to%20self-management-the%20results%20of%20self-managing%20organizations.pdf