The manufacturer of tomato sauce, Morning Star, a Californian company which reached the U.S. market leader status in its field, managed to have double-digit annual growth promoting one of the most innovative business models: starting with Chris Rufer, President and founder of the company and the 400 employees, there is no chain of command, which means that no one gives or does not receive orders from anybody.
With employees working in three plants, without bosses, Morning Star has come in 20 years to a turnover of 700 million dollars, French newspaper “Les Echos” writes. Typically, a company of this size should have 50 managers, but in this case, they are replaced by contracts negotiated annually by each employee with colleagues involved in work (10 to 30 of them). The team of employees is subject to clear and detailed rules, regarding the tasks and performance targets to be met. Employees are responsible of negotiations with suppliers and there is no limit on the amounts used for purchasing equipment. But every employee will need to justify the ROI to their colleagues. The same goes for new employment, which are left to those who support the need for new employees. Discipline come naturally by controlling other employees and by sanctions that they propose which translates into damaging professional reputation or salary reduction.
The performance is measured annually also by the colleagues, so that each employee must make an activity summary to justify how they achieved the performance objectives and how they used company resources. All information about the company, including financial, are available to all employees, and any labor disputes are resolved by mediation or by setting up a jury of peers at work.
The advantage of such a system is a massive cost reduction. If, in general, a boss actually corresponds to 10 employees, in a company with 1,000 employees there should be 111 managers. Those who occupy management positions have salaries three times higher than other employees, on average, so that managers’ salaries often account for one third of the salary of a company.
But pressure on salary budget is not the only reproach addressed to the managers. Often managers are reminded that they put their own interests before the interests of the company, and they are far from realities on the ground, delay the implementation of innovative ideas because of bureaucratic prudence and de-motivate employees because they don’t allow them to be free. Morning Star example demonstrates that, after 20 years of experience, while the business and company profits have risen by two digits, such organizations can be really effective. But few companies can really work with such an organization system. In practice, one of the most difficult processes is the employment, because it takes a year for an employee to produce the output required by the position, and many new employees found long after that do not match the job they were hired to do.
The model promoted by Morning Star is one of the most recent innovations in management, as the flattening of hierarchies and information transparency become key elements in the employee retention strategies.
