Case-study: The World’s Largest Tomato Processor is Flat

tomatoesIn an industry notorious for treating workers terribly, Morning Star, the world’s largest tomato processor, operates with no managers. This is not a small mom-and-pop shop; their staff count swells to 2,400 employees during harvesting season. They take what they call “self-management” so seriously that they have a Self-Management Institute complete with training programs and white papers. Over 20 companies have visited them to learn from their practices.

Why self-management? According to their institute: “Self-Management is a very different approach to competition in a global economy.  Patents expire.  Trade secrets leak.  Competitors replicate superior business practices.  Systems and talent are fungible.  The only remaining source of true competitive advantage is to drive the cost of traditional management toward zero and unleash the full potential of human performance in organizations.”

So how do they do this?
According to Inc and HBR:
  • They really don’t like  “empowerment.” According to Gary Hamel, the writer for the HBR case-study, the reason why is that “the notion of empowerment assumes that authority trickles down—that power gets bestowed from above, as and when the powerful see fit. In an organization built on the principles of self-management, individuals aren’t given power by the higher-ups; they simply have it.”
  • People are committed to each other through peer-to-peer contracts, known as colleague letters of understanding, or CLOUs, where people detail their responsibilities, personal mission statement, complete with performance metrics. An employee may talk to 10 or more colleagues during the negotiations, with each discussion lasting 20 to 60 minutes. A CLOU can cover as many as 30 activity areas  and all together, they shape over 3,000  relationships among full-time employees.
  • People manage conflict through CLOUs. According to Hamel: “Suppose you believe I’ve failed to meet my CLOU commitments. As a first step, we’d meet, and you’d argue your case. I might offer an excuse, agree to do better, or toss the blame back at you. If the two of us couldn’t resolve the matter, we would pick an internal mediator whom we both trust and present our views. Let’s say the mediator agreed with you, but I objected to the proposed remedy. At this juncture, a panel of six colleagues would assemble to help us settle our squabble. It might endorse the mediator’s recommendation or propose another solution. If I demurred again, the president would bring the parties together, hear the arguments, and make a binding decision. It is highly unusual, though, for a dispute to land on the president’s desk.”
  • There is a lot of trust given away: If you need to purchase equipment or need to hire someone (e.g. an $8000 welder), you just have to consult your colleagues and then  do it. Although purchasing is decentralized, it’s not uncoordinated. Morning Star colleagues who buy similar items in large quantities or from the same vendors meet periodically to ensure that they are maximizing their buying power.
  • Employee-elected compensation committee  sets pay levels after measuring colleagues’ performance against their CLOUs and other metrics. It pays 15% more in salaries than industry average because it’s not paying managers; managerial functions are pushed out to all participants. CEO only makes six times what the lowest-paid earners make (including season hires).

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