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I recently read about Morning Star Tomato. According to this video, their employees are entirely self-managed and contribute to the company in whatever way they see fit. Decisions like equipment purchasing are made by consensus.

While this seems like an interesting idea, I have to wonder how they make HR decisions. I assume they make hiring decisions by reaching some sort of consensus that the individual is or isn't a good fit. But if someone isn't pulling their weight, how might they go about disciplining or firing them? And how would they work out how much to pay people? Wouldn't making these decisions by committee create a toxic work environment (i.e., turn discipline/firing and salary decisions into a popularity contest)? I've read interviews with former employees of Valve that claimed that cliques formed within the company, making the management structure less "flat" in practice that it would appear to be.

It's worth noting that this company is very successful. They process a significant portion of California's tomato crop.

Does anyone have experience working at a company with this kind of structure or know someone who does?

DarkCygnus
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    I'm pretty sure that. just as there's not one approach to HR decisions in tradiational companies, different 'self-managed' companies will hire/fire etc. vastly differently. I would also not bet on HR decisions beeing included in the slef management (havent seen the video). That said, I think it's an interesting question but hard to answer. – mart Feb 24 '15 at 14:08
  • @mart--You're right, I'm sure there are different ways of handling these things, depending on the individual company. I'm just wondering if there are any known best practices. It seems that this structure is pretty experimental, though, so I'm guessing most of them just improvise their own unique methods. –  Feb 24 '15 at 17:18
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    Sounds like they hire the right people and judge them on results. I think you've confused what HR with management, HR aren't in a position to make hiring decisions, judge performance etc etc in any case. Also, one person's clique is another persons jelled team. – Nathan Apr 11 '15 at 21:04
  • @NathanCooper That's a good point, but the question still stands. How do companies without managers make hiring, firing, and disciplinary decisions? –  Apr 22 '15 at 17:19

3 Answers3

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I've worked in a company similar to this in structure albeit much smaller.

Here's a few things I'd like to point out.

Experience

While we were all "equals" in regards to making choices where consensus wins generally speaking the longer you were with the company and the more you accomplished the more likely people would listen. That said in the event a consensus wasn't possible we had one of the company's founders who was incredibly intelligent would act as the tie breaker / final word. Everyone respected him so in the one or two times it came to this everyone accepted it.

Just the same if you were "the new guy/gal" your opinion counted, but you really didn't have much leverage to work with in the event there was a disagreement. (again this was a very rare issue)

Hiring by consensus

The hiring process did involve everyone and anyone could effectively remove someone from consideration, think of it like this a candidate comes through, if no one decides not to hire them then they get the job, but if anyone says no, they aren't.

The process didn't involve everyone at once though. We had some people who had run companies in the past who had lots of hiring experience, generally they culled most of the candidates without involving anyone else. As candidates survived their scrutiny the immediate team that person would work with would be brought in, same deal if you made it past them you were introduced to the company and as long as no one spoke out against you then you got the job. I would say 90% of candidates never got past the first round, most of the rest got axed second round, only one candidate was ever axed at the last round. (by someone who had worked with the guy in the past) I work in a traditional company now and I would actually say the number of candidates rejected vs accepted is fairly close to the same. I find traditional though is better at hiring really good, or really bad people, where as the consensus method we used was very reliable at getting good, but not necessarily great people.

Firing

Firing actually went pretty smoothly for us. We were in a write to work state so firing some one was a fairly simple process legally speaking.

We had two general types of firing immediate and consensus. Basically if someone was doing something severe enough immediate on the spot termination was in the best interest of the company it was done on the spot and then that person would explain things after the fact. (Typically this always happened where a trusted person fired a relatively unknown person)

consensus was usually for stuff like where a person's performance slipped to a point of unacceptable, usually by that point with our company size there were already a number of people both aware, and pissed off about it. Generally though teams self enforced. If you weren't pulling your weight, your team would try and help until they got tired of it, then you were gone. (usually the person with the most experience actually would facilitate the termination)

Raises and salary

I'll admit my knowledge here was limited in regards to the rate a person was hired at. At some point they determined what an acceptable salary was for a position (range) and any new employee would be hired at that rate, generally the experienced managers would negotiate things with the candidate and their judgment was respected.

Raises were pretty even across the board. on a pretty normal year the raises would be about 5%, the highest we ever got was a 12% raise when we had a rockstar year, we actually took a pay cut one year to float the recession in the early 2000s (basically it was we had to reduce pay, or cut jobs, we all treated each other like family, so we were prepared to "take one for the team" to help each other out.) Generally though we got much better raises than you would a normal company as our staff members who'd been with the company the longest were making only 20-30% more than most of the staff, which felt entirely fair especially when you consider what the average CEO makes compared to their staff. (If we had a one time thing that brought in more money we typically just gave a bonus out)

Cliques, gang mentality, revenge mentality

While these are legitimate concerns and frankly would probably be nearly impossible to prevent in a large company, ours was only a medium company. Our hiring process also helped a great deal in preventing favoritism and bias from becoming too much of a problem. That and if you ever did something against company interest you could expect to piss off everyone and be fired promptly. (Keep in mind not agreeing with everyone is fine, we actually had people who regularly got into heated political debates. You were only in danger when you were fighting for something that was obviously for personal interests vs what's good for everyone)

Company loyalty was pretty extreme in that company. We treated each other like extended family. If something was causing grief for one of us, it was causing grief for all of us and we'd try to rectify it as fairly as possible, this mentality was held by most which prevent self centered people from really being able to manipulate things to their personal advantage.

What happened?

So this company was awesome, everything sounds like a dream, so why the past tense? Well all that I covered was well and good, and I still saw the company like old family. unfortunately there are some things this model struggles with. For us the thing that shattered this dream was hiring up the food chain. While we were all good at our respective jobs to be successful long term you need someone with entrepreneurial qualities, the person who can come up with next move and play. For a good while as we'd lose such a person someone would fill the gap and things would keep going, well we eventually hit a point we didn't have someone with the necessary qualities to fill such a role. The problem is the company was effectively the longer you were there and the more you accomplished the more leverage you had, that said when you bring in a new guy who was supposed to give the company direction it goes against how the company worked for decades. Eventually this caused the company to flounder an turn to selling off it's assets.

Eric J Fisher
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  • Wow, thanks. This answered all of my questions and then some. Very interesting. –  May 05 '15 at 17:08
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    No problem, I would say in your considerations of such companies just take a look around during the interview process. If everyone seems to work collectively and generally things have a positive vibe they probably have things in good order and a system that works. if it seems there's any tension you're probably looking at a place that has cliques, rivalries, etc that will likely be a horrible working experience. – Eric J Fisher May 07 '15 at 18:59
  • Looks good and formidable for shaking hands politicians, not for real good techinicians. – lambdapool May 11 '16 at 14:06
  • @lambdapool it really depends on the personalities you hire. You have people who can work well together towards a common goal and you have people who are self serving. In this type of culture self serving people are effectively a cancer to the health of the company requiring the collective company body to recognize and remove these individuals before it comprises the overall company culture. I worked as a IT Technician for small government prior to this role, I can assure you the technicians were WAY better at working towards a common goal than the people in office who were self serving. – Eric J Fisher May 13 '16 at 19:39
  • Reading this today, it sounds like far from being a flat structure, there was simply a latent hierarchy based around seniority, recognised capability, and past experience in conventional companies (which caused most candidates to be filtered). Eventually, this latent hierarchy was successful in excluding (or failing to reproduce, or to retain) certain skills necessary for collective health, a new entrant could not be placed high in the hierarchy because no facility for explicitly recognising the fixing of that placement existed, and the company perished. – Steve Dec 09 '23 at 09:09
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I am working in software industry and the current employer doesn't have any HR people, which is not unheard in smaller companies simply because there's no need for it. It might be different in other industries or very large corporations.

Hiring. Yes, the interviewers share their notes and opinions and make the decision together. Usually there's a decision maker (e.g. founder, senior manager, etc) who makes the final decision. The interviewers are the potential colleagues of the candidate and they have the expertise in the field, so they are in a good position to make a correct decision. HR wouldn't help much with hiring decisions, often they simply help to filter out the candidates who have very little to no chance to be hired.

Firing / Promotion / etc. HR presence doesn't really change anything here either. If someone is not efficient enough, it is noticed by managers rather than HR as they have expertise to make judgement. Same goes for promotions. If there are legal issues when in it comes to firing, read the next paragraph. Often, the managers are in a better position than HR to make an informed decision and HR presence doesn't stop the popularity contest.

Some legal stuff and paperwork. That's the main difference, as that's what is handled mostly by HR. In companies without a HR department, lawyers are hired on retainer in case some advice is needed.

Gediminas
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    the question pertains to manager-less companies, but your answer relates to HR-less companies, a very different thing – Steve P Apr 12 '15 at 20:22
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I work at a property that "employs" a lot of independent contractors who are primarily self managed. We have departments and those have a manager to oversee general procedures and make sure everything gets done. We are an "at will" facility so we can terminate or quit without a reason but generally we need to have two managers agree that a person is not working out in order for them to be let go.

Purchasing decisions are made by the applicable department, large ticket items need to be approved by accounting, AKA, me. Our company owner has the final say in any disagreements but we bother him as little as possible.

We maintain a cooperative work environment which instills a family atmosphere and when you care about your coworkers you are more inclined to do your own work, then help others so we can all go home. We have a weekly meeting to address any problems employees have and go over the upcoming workload for the week. If we are going to be short-staffed we have a list of "day rate" people that we can call in for temp help.

Different from a lot of companies we start everyone out as a 1099 for the first month to see if we are a good fit for each other, if not, they can leave no harm no foul. Maybe I should note that I am in Hollywood and the film industry is notoriously off kilter compared to every other industry. ,

Noctophilia
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