When nobody (and everybody) is the boss by Polly LaBarre @FortuneMagazine March 5, 2012, 4:54 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Every Whole Foods store is made up of a dozen or so self-managed teams, and the leadership of the company forms a team where all decisions are made by majority vote. (TheMIX) — As a reverse fairy tale for the CEO set, the reality television program Undercover Boss is fascinating, not so much in the witness-to-a-train- wreck mode of the rest of the genre, but because it is so revealing of our conflicted relationship with “the boss.” The premise of the show — that the only way to get a clue about what’s really going on in his (or her) organization, is for the boss to go undercover on the front lines — is all too often the actual reality in organizations of any size. Yet, at the same time, the view of the boss as the ultimate authority with the heroic power to swoop in and save the day — whether that means paying down a mortgage, granting an instant promotion, or banishing a reviled policy — holds sway in real life as well as on “reality” TV. Few figures are simultaneously as reviled and revered as “the boss.” The problem isn’t with the people who fill the role (that’s another story), but the role itself. The “modern” organization was founded on the principle of control — a central authority sets direction, corrals information, curtails decision-making power, and punishes deviations from the norm. That might have worked in a world in which standardization, predictability, conformity, and discipline were enough to mass produce profits. But it doesn’t work in a world of constant change, competition from everyone and everywhere, and commoditized knowledge. And it certainly doesn’t work in a world in which there is so much hunger for greater humanity, freedom, and meaning. We’ve reached an inflection point when it comes to how we organize human effort. The most inspiring organizations today are experimenting with what gets people out of bed in the morning and what fires up their imagination, initiative, and passion. And the best bosses understand that their power comes not from maintaining control, but from devising ways to unleash more freedom and creativity among their people. Of course, the ideology of control is deeply embedded in our organizations. Chiseling around the edges won’t lead to meaningful change. This is why it’s so instructive to learn from organizations that have exploded the traditional hierarchy and learned to rule without bosses and manage without managers. These long-running experiments in organizational democracy and radical autonomy may have been “born this way,” but they offer up a set of insights and approaches for rethinking and redistributing leadership at any organization. Put peers before bosses Morning Star is the world’s largest tomato processor and probably one of the most remarkable models of managing without managers in the world. The central California company was founded by Chris Rufer in 1970 with a distinct organizational approach. According to Paul Green, Jr., who runs Morning Star’s training and development, that philosophy assumes that “people are happiest when they have personal control over their lives; that the best human organizations are those in which people aren’t managed by others, but in which participants coordinate among themselves, managing their own relationships and commitments to others.” Today, Morning Star is a complex, capital-intensive $700 million business with double-digit growth over 20 years (in an industry with an annual growth rate hovering around 1%) — and a collection of 400 colleagues without bosses, titles or job descriptions, who determine their own roles and responsibilities, negotiate their commitments peer to peer, and make their own decisions about who to hire and how to spend the company’s money. MORE: Why it’s time to cut the employee-office leash At the center of the company’s design for work is a mechanism that produces a sort of order. It’s called the “Colleague Letter of Understanding” (or CLOU, pronounced “clew”), a contract in which each individual defines his or her personal mission (and how it relates to the organizational mission), work commitments, key activities, and success metrics — all negotiated with 10 or 12 core colleagues (called CLOU colleagues). The CLOUs are available online to everyone in the company, they can be updated at will, and are embedded in a social network that includes a real-time feed of performance data, CLOU colleague activities, and peer feedback. Instead of hewing uncomfortably to a rigid, top-down hierarchy, the CLOU system allows Morning Star’s colleagues to operate in a “natural” hierarchy based on expertise, achievements, and accountability. People don’t move “up” at Morning Star, they grow in respect and responsibility (and compensation) based on their contribution. Likewise, ideas aren’t taken up the chain of command; they travel out to the relevant colleagues. In this system, where nobody (and everybody) is the boss, strong relationships make for a stronger organization. Grow without losing human scale Strong peer relationships may trump layers of management, job titles, and job descriptions, but can they scale? That’s a question W.L. Gore has wrestled with for decades. The 53-year-old maker of Gore-Tex high performance fabrics and some thousand other products — from Elixir guitar strings to Guide dental floss — employs 9,500 people in some 50 locations and is consistently ranked one of the best places to work and among the most innovative companies in the world. Like Morning Star, it was founded on a very different idea of what a company could be. Gore has no formal hierarchy, no bosses, few job titles, and offers associates (everyone is an owner) autonomy in choosing their work and negotiating roles within teams. And like Morning Star, peer relationships and commitments are the bedrock of the operation. To avoid diluting those crucial relationships, Gore famously caps the population of any given facility at around 200 people — the size where, founder Bill Gore observed, “we decided” becomes “they decided.” The emphasis at every turn is on direct, personal communication. The negotiation of roles is often laborious and time-consuming but it pays dividends. Another multi-decade experiment in organizational democracy, Whole Foods Market has maintained human scale even as it has grown to 62,000 team members and 310 stores around the world by making all work teamwork. Every store is made up of a dozen or so self-managed teams, each store is a team, and the leadership of the company forms a team where all decisions are made by majority vote. Each team has extensive control over budget, policies, and local innovation — and rewards are based on team performance. As Whole Foods founder and chairman John Mackey puts it, “humans flourish best when they are in small groupings of people they know well and who they come to love and trust.” MORE: How to cope with toxic colleagues – if you must And that’s the key. Humanizing the organization isn’t just about size — it’s about creating a culture of trust, intimacy, and informality. The best way to do that is to keep everyone on the same page — literally. Whole Foods, Morning Star, and W.L. Gore all open up an unprecedented amount of information, financial data, and strategic decisions to people across the organization. Morning Star produces a detailed financial report every two weeks for all to view. Whole Foods even shares salary information (of executives or peers) to any team member who requests it. Mackey calls it “no secrets” management.” While so many organizations separate and disenfranchise people by parsing out information on a “need to know basis,” these companies align and energize people by sharing it on a default basis. Give everybody a vote Although “boss” is “the B-word” at W.L. Gore, the company still has a president and CEO — but one who came into her job very differently than most. A Gore lifer, Kelly was chosen by popular vote. Her associates were asked who they thought was the best person to lead the company (no short list of candidates was supplied), and much to Kelly’s surprise, she was chosen by her peers. Peer review is an established ritual inside Gore — a forced ranking of each associate’s 20 to 30 closest colleagues’ contribution to the company’s success determines compensation. At Morning Star, compensation is a product of an individual’s self-assessment and the evaluation of a peer-elected compensation committee. Whole Foods WFM offers the right to vote to local teams when it comes to hiring. New hires serve for a period of one to three months on a team, after which the team approves (or rejects) the candidate as a permanent team member by two-thirds vote. It turns out that peers are much better at predicting who will be a great teammate or leader than any executive committee. And it turns out that when you distribute the work of leadership to a cohort of engaged and empowered peers, you create a rich social fabric that is infinitely more resilient than a rigid hierarchy with reinforced corner offices. Dear Readers: Have we reached the limits of leadership? Are the days of the big boss over? Can we manage without managers? Tell us what you think.