Self-Managed Company: Transparency
It took us 6 years and a lot of trial and error to transform Ragnarson into a self-managed company where people get to even set their own salaries. This series of blog posts is a step-by-step guide to changing your organisation into a self-managed one.
Self-management is fueled by transparency. If you want people to take more responsibility, then knowing not only the problem at hand but also the full context of the entire organisation is the key to achieving this.
The CEO is not the smartest person in the company. It’s the person that has the biggest context. And that is why in organisations where people lack data to make their own decisions, most of the important calls are made by the CEO.
Imagine that you want every employee to become a mini-CEO who makes independent decisions, guided by the company's goals and situation. The first thing you need to do to achieve that is giving them information and context.
Why are most companies not transparent?
In traditional organisations, access to information depends on hierarchy. CEOs know more than VPs, VPs know more than managers, and so on. Why is that so?
Mostly, because of fear. We are afraid that when people know more, they see all the injustices and flaws in the company, and we have to face the consequences of that.
Some companies don’t share their revenue so that people don’t ask for a raise. But the real problem is the remuneration system, not the information itself.
Other organizations don’t want to share the information that they are losing money. They fear that if employees knew that, they would start looking for a new job. The real problem here is that people simply don’t trust management to handle the situation.
Each piece of data represents some flaws and fears in an organization. Becoming transparent means facing those challenges, and sharing more and more information with your people. It’s a long process, not a one-time event.
Whenever in doubt whether something should become public, ask yourself a question: If you want your employees to be mini-CEOs, will they need this information to be fully independent and make good decisions?
Our approach at Ragnarson is to share everything by default, including salaries. We even plan to make our KPIs available for everyone and release them on our website. But it took us 6 years to get to a place where we are not afraid to share almost everything.
Why do people need to know those things?
First of all, your team needs to know that you trust them, and they need to trust you. If they know more, there will be no place for assumptions and guesses. In time, they will start to feel that they understand more and more about how the organization works and how it is doing.
Because of that - thanks to a bigger context - they will know how to act. For example - during the COVID-19 pandemic, due to the uncertain situation, Ragnarson’s team decided to postpone most of the pay raises. It was a bottom-up initiative and it showed how well our team members understood the situation on the market.
From your perspective, instead of having to control each aspect of the organisation, you will be able to let go and trust that the team can handle most of the problems on its own. You will be able to focus on growing the business instead of putting out fires. This process needs to start with transparency and context.
What can go wrong?
Transparency forces organisations and employees to become mature. As time goes by, the safety net of the “all-knowing and almighty management” will disappear, and everyone will understand that running a business is tough and full of risks.
Some people might quit because it’s too difficult and stressful for them to take more upon themselves. It's fine when that happens. Different environments suit different people. After some time, you will see who fits and who doesn’t, and you will be able to recruit better.
Start with the basics
My recommendation is to start slowly. The first thing you should do is to think about all KPIs and financial data you might share and tackle objections that come to your mind. Each organisation is at a different stage of transparency, so I would start with the suggested order of which data should you make available first:
1. Business KPIs
This is the easiest way to start. Each team or part of the business has its main KPIs. For Marketing, it’s leads; for Sales - deals; for Product - releases, etc. The first step I would recommend is building a KPI dashboard with all those data, available for the entire company. This is how your team gets to know how the company is doing.
Pros: This will give people a bigger context when it comes to other teams in the company. For example, people from the product team might start to worry because of the weaker results of the marketing team. With the right facilitation, it might lead to an exchange of ideas or resources on how to tackle the problem. If product people have a broader context (marketing means more customers, more money, faster development), they might start to care about this part of the company as well.
Cons: At first, people might feel uncomfortable with the organisation watching (and judging) the effectiveness of their work. In immature teams, this might lead to blaming other departments for the company’s situation. That’s why there should be a story behind the raw numbers;, a context - Why are we experiencing problems here? What are we doing to handle this? Etc.
This is a vast topic and I’ll cover it more in the next posts. But for starters: if you begin to share more data, you need people to understand it better. It means that you need to give them an opportunity to hear what’s behind those numbers. The simplest ways are regular email updates from the CEO and teams, company-wide meetings with every manager telling the story behind the numbers. Your job here is to give as much context as possible, to build a story that will make people understand what is really going on.
Pros: It will allow discussion between teams, generate new ideas, and allow for constructive critique. It will give people more understanding of how the company’s “engine” works. Thanks to context, better decisions and productivity emerge.
Cons: It will take some of yours and your team’s time each week. It will make space for - sometimes - heated discussions.
3. Financial KPIs
This is stepping to the next level, because knowing how much money the company is earning (or losing), means that the team needs to be more mature. If team members don’t understand the basic principles of running a business (e.g. that high revenue doesn’t mean that everyone should get a raise), there might arise a lot of misunderstanding.
Pros: Your team will be aware of where your business stands. They will be able to make decisions depending on the condition of the business. If times are tough - they will understand that it requires more effort and fewer perks; if times are good - they might have ideas about what they should improve next. Including your team in strategic decisions is a step forward.
Cons: At first, there might be a lot of context about the business to give here. People tend to have a lot of misconceptions about how companies work. You need to help your team interpret the financial standing of your organisation.
If people are increasingly involved in the company goals, they need mechanisms that allow them to share their thoughts and give honest feedback. The more they know, the more ideas and criticism they will have, so you should create a way to share it. One on one feedback, team-level feedback, company-wide feedback - all of those are necessary.
Pros: There will be no place for holding a grudge. With good feedback mechanisms, people will be able to talk honestly about their feelings and thoughts.
Cons: It might be a lot to take at first. Negative feedback is hard to take - for you, and for other members of the team. In time, you will learn to separate yourself from the feedback and it will all become much easier. But the beginning is quite hard. Also, people need to understand that not all feedback will be acted upon, and you need to learn to act upon the feedback that is truly important.
Those are the first steps I would recommend to take. I will share more insights later on about the next key steps - decision sharing, shared salaries, and shareholders. As for now, let me know which points you would like me to describe more, and don’t hesitate to DM me if you have any questions.