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Self-managing organizations: a hype or a new way of organizing?

23 September 2020
Flat hierarchy. No bosses. Decentralized decision-making. The organization of the future or a doomed experiment?

‘Self-managing organizations’ is an umbrella term describing organizational forms (Holacracy, Agile organizations) that are characterized by less-hierarchical forms of organizing. Instead of departments or divisions, the organization is built around teams (which are called “circles,” “pods” or “cabals”). These teams work on projects for core business functions (e.g., the production of goods or services) or support functions (e.g., HRM, marketing or information and communication technology). This different way of organizing allows for greater flexibility—it is for instance easier to simply add new projects if needed—and a more fine-grained structure. For instance, the implementation of holacracy at Zappos led to the replacement of 150 departments by ca. 500 projects (Bernstein et al., 2016).

Today’s business environment facilitates self-managing organizations. The current attention given to self-managing organizations results from greater dynamics in the business environment. This puts pressure on organizations to innovate and make faster decisions, “wisdom of the employees” and from IT advancements that enable less-hierarchical organizational forms.

Yet, do “flat hierarchy,” “no bosses,” and “decentralized decision-making” describe the organization of the future or are self-managing organizations a doomed experiment? And why do holacracy, podularity, agile and other self-managing concepts work for some organizations, but not for others? In the first VU MBA Talk, Professor Ard-Pieter de Man (VU Amsterdam) and Joost Minnaar (Corporate Rebels) provided answers to these and other questions. Their discussion focused on pros and cons of self-managing organizations, the types of organizations in which self-management can actually work, and the complexities involved in the implementation of self-management. Some of the key lessons-learned from the first VU MBA Talk are:

Not all organizations can and should become self-managing
Although self-management works for organizations in all types of industries, it doesn’t work for all types of organizations, because there are several requirements within an organization that need to be fulfilled (e.g., organizational culture, support by employees and the top management, IT infrastructure).

Self-managing organizations are not without hierarchy
The absence of (middle) management does not mean that there is no form of control and leadership. Instead, formal authority is rather replaced with more informal authority (e.g., “hierarchy by expertise”).

Self-managing organizations are not for everybody
Employees need to take over tasks that are normally handled by managers (e.g., budgeting, releasing colleagues), which is probably perceived as a burden by employees and which may create stress.

Self-managing organizations work, but we don’t know yet how well
The recent emergences of self-managing organizations prevent us from drawing any conclusions whether these organizations perform better or are more sustainable than traditional forms of organizations. However, there is some anecdotal evidence that self-management works and that self-managing organizations are more productive than their industry peers.

Avoid a ‘one size fits all’ approach in the implementation of self-management
Standard frameworks, such as holacracy, can serve as an inspiration for the implementation of self-management. However, it is important that organizations learn from the problems they and other organizations experience and adapt the self-management to fit their specific needs and problems.

The discussion has shown that self-managing organizations do bear great potential. However, organizations need to carefully assess whether self-management fits their specific circumstances and whether they are already prepared for the transformation. Most importantly, the transformation to a self-managing organization is a continuous process that requires constant monitoring and learning in order to fit the structure to the specific needs of the organization.

Examples of self-managing organizations
The Netherlands: Buurtzorg, ING, Hollands Kroon
International: Belgian Federal Office of Social Affairs, Haier, Handelsbanken, Medium, Morning Star, Spotify, Valve, W.L. Gore, Zappos

Recommended readings
Bernstein, E., Bunch, J., Canner, N., & Lee, M. (2016). Beyond the holacracy hype. Harvard Business Review, 94(7/8), 38-49.

de Man, A.-P., Koene, P., & Ars, M. (2019). How to Survive the Organizational Revolution: A Guide to Agile Contemporary Operating Models, Platforms and Ecosystems. Amsterdam: BIS Publishers.

Minnaar, J., & De Morree, P. (2020). Corporate Rebels: Make Work More Fun. The Netherlands: Corporate Rebels.

Lee, M. Y., & Edmondson, A. C. (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Research in Organizational Behavior, 37, 35-58.

Dr. Jost Sieweke is an associate professor at the Department of Management & Organization at Vrije Universiteit Amsterdam. He is also the programme director of the new Executive MBA: Leading with Purpose at the School of Business and Economics.