Chances are you have heard about the Theory X and Theory Y in people management. Social psychologist Douglas McGregor (1906-64), juxtaposed them to demonstrate the power of belief. In other words, if you feel people are naturally lazy and have to be threatened into good performance (Theory X), you will find plenty of examples around to substantiate this belief. Likewise, if you are convinced in people’s natural desire to use their talents to do great work, you won’t be disappointed in your search for evidence.
How is it possible that so much in management depends on our beliefs about people? Well, time to brace yourself and accept the fact: in people management your attitude matters more than anything else.
I’d like to propose something radical, I’ve tried over and over again in my own office: strip off in front of your team. Do it thoroughly and from the very beginning when you start employing people. Sounds scary and unusual? It tends to be, but only up to the point when it becomes the very DNA of your company, and the benefits become so strong and so obvious, you wouldn’t even dream of running the business in a different way.
Where and how to begin with the stripping? In a rather surprising place – your financial accounts. Don’t ever make it a mystery what the company spends money on, and how much you pay yourself. It’s much easier to be transparent about financial matters if that has been part of the company’s culture right from the start. Also, at the beginning it comes relatively easily. Well, again, that depends solely on your mindset, and whether you can bring yourself to trust that first person you brought in to work with you enough to show them what business owners normally like to keep hidden.
I’m not implying it was easy for me – by no means. In fact, bringing on board that first full-time salaried employee was one of the scariest experiences of my life. Looking back I understand that managing others, their resources and time – as opposed to those of my own – was definitely not part of my comfort zone. My business partner had to drag me had out of it kicking and screaming. And I’m glad he did. I still remember though coming to our “office” (three desks rented from one of our biggest clients at the time) and wondering what our first employee was going to do to my hard earned clients, my reputation, my bottom line, and everything else. To my surprise, time showed that clients were happier than ever and my bottom line, as well as the reputation, were looking rather healthy.
What’s the next step in your corporate stripping exercise? Get rid of all kinds of secrecy in your company: “strategic information”, plans, results of projects, performance reviews, disciplinary issues and legal issues (the last two with care about what you are allowed to share). Make open communication the default setting. This doesn’t imply one-to-one conversations behind closed doors can no longer happen. All it means is that you – or anybody in your team – can no longer use hidden information as a tool of power.
And here we get to the crux of the matter. You can’t successfully implement any of the above if you don’t fully trust, both yourself, as a responsible adult and your team as responsible adults. It’s not easy to arrive at a level of maturity, integrity and self-awareness where you can completely let go of doubt and fear (I’m still learning!). But the sooner you start thinking in this way, the quicker you will get to the place where this is fully achievable.
When you start implementing these principles you may discover that things you thought weren’t practical or possible when it comes to self-management of teams can in fact work without a glitch. Your team knows, often better than you, how it wants to evolve and develop, what candidates are best fit to expand it, how different team members are performing (here is where things like peer reviews come in) and how to help them resolve problems. If you inspire enough trust and openness, your own team can help you, better than any consultant, determine the strategy and overall direction for the company. It can also – caution… advanced level! – self-manage renumeration and salaries.
Letting staff set their own salaries
This is where we enter a territory even I used to define as really scary. You may well be able to implement a beautiful, trust-driven culture in your company, but never quite reach a stage where employee determined renumeration is possible, which is absolutely fine. If you do however have the ambition to lift the team empowerment to sky-high levels, start by reading Maverick! by Ricardo Semler. This very book gave me, and my cofounder, a kick in the butt like no other business or management book had ever done before. The story of its author, possibly the biggest business culture visionary of the last century, begins in the eighties when Ricardo took over the management of a manufacturing company in Brazil, Semco, from his father. On the first day in the office, he fired 60% of senior management, some of whom had been in the company since its early days. The stir he caused with this action was difficult to imagine. Semler junior knew what he was doing well though: with the old management in place the changes he envisioned to implement in the company wouldn’t have had a chance of success.
A whole plethora of fundamental transformations followed, resulting in – for all I know – the first example of a vastly profitable, large organisation with an entirely open culture. These changes were envisioned and implemented in the middle of Brazilian economic crisis, in a highly regulated space with workers unions – that exerted a lot of influence in the manufacturing industry – constantly breathing down Semler’s neck. If that kind of organisation can implement open culture with a truly extreme level of trust, so can a modern startup (thought I).
And that’s what we did. We took the strippage exercise to its very limits by empowering our people to decide their own salaries. This is truly scary stuff even for experienced business strippers. We implemented a revenue sharing scheme (50% of every quarter’s turnover pays for overheads and staff, with the remainder disbursed as a bonus pool) and encouraged people to discuss amongst themselves the fair levels of guaranteed salary for different positions based on function and seniority. We’ve implemented quite a few other things since, such as quarterly peer reviews (anonymous but open for all to see) and open allocation for those who prove they can contribute to the company on multiple levels (soon coming to all our colleagues). A number of tools (such as weekly company huddle in which all present participate) and lots of open communication helped achieve this.
I fully expect that those of you who are running businesses with a few staff are shaking your heads in disbelief that such an open culture is achievable, practical and scalable in a growing business. Let’s be clear: this is a very bold approach to running a company, and there are risks/downsides to be aware of. Yet, I believe that this is the future that people management is slowly but inevitably moving towards. The startup world is in this case – as usual – the incubator of social change or the early adopter of concepts that the wider world of business is only starting to accept as viable.
What we have learned
When I speak about this, people are usually interested in mistakes we made and lessons we had to learn before we became fluent in the art of cultural strippage. Here are a few examples. Firstly, with open culture in place you have to be ready for problems to surface much more quickly and attack your peace of mind from quite unexpected directions. Of course, from the long term perspective this is anything but a bad thing (since the longer internal issues stay hidden, the more threatening they become). Yet, it’s very possible that initially you will spend more of your time worrying about things that otherwise would have taken way longer to be brought to your attention.
A major pitfall we didn’t manage to avoid when we started with trust-based culture was putting all sorts of decisions to the group. We caught ourselves taking way too long to decide on things that weren’t worth the time and attention of the entire team. The intention behind discussing everything on the company forum was good, but the result was simply not workable. We are now in the process of shifting to a model where the most competent person in a given area makes the decision, having consulted with all the people who will be impacted by it.
Secondly, we didn’t quite do the recruitment process justice. It’s absolutely crucial that the type of people who join an open company are, quite simply, right for it. A lot of very competent people won’t make a good addition to the team with this type of culture either because they feel safer within a lot more rigid management structure, or aren’t a perfect (literally!) fit with your values. These days we have a separate “culture fit interview” which is usually done by me or my cofounder in a pub over a pint of beer – or in another relaxed/unusual setting – where it’s easier to get to the bottom of who the person really is.
Lastly, awe-inspired by books such as Semler’s Maverick! or Hsieh’s Delivering Happiness, many times we were tempted to adopt a number of practices present in their companies without too much thought whether they would actually make sense in GrantTree. Even if values are similar, every company will be different simply because it’s comprised of different people, in a different setting and for a different purpose. It’s that unique cross-section of who, where and why that ultimately defines a DNA of your company – a DNA which you can’t mess with by trying to directly impose things that work elsewhere. Instead, you need to create an environment where it’s easy for ideas to be born and rise to the surface organically from the so-called grass roots (i.e. your people).
I hope the whistlestop guide to stripping in the context of management and culture has been inspiring and useful to you. I also hope that you are ready to take the challenge of introducing more transparency to your company and, step by step, help change the way business is done in general. Ultimately it’s companies like yours and mine that will define the future of business culture and people management (as long as the word still applies!).