Sun Hydraulics

At Sun Hydraulics, minor role changes often take place organically, by people simply stepping up to take on a role or opening a conversation about the need for someone to take on that role.

When a larger role is created or an existing set of roles becomes available (say there is a need for an automation engineer), an internal recruitment process takes place. Candidates are interviewed by the colleagues who will work most closely with the person filling the new role.

At Sun Hydraulics, all new hires start with a “manufacturing tour,” no matter what their future role will be; they learn to operate not just one, but several work stations. For hourly employees, the tour lasts for two to four weeks, and they work in four to six different areas. For salaried employees, it takes even longer: one to four months on the shop floor. Only then do they take on the roles they were hired for.

Why such a long induction? People at Sun Hydraulics believe it’s critical to build relationships with other employees across the company to understand it from all angles. A self-managing environment provides opportunity to make things happen, to freely reach out to colleagues, to discuss change without going through a hierarchy of approvals. The more people you know, the more you understand the whole, the more you’ll be able to come up with new ideas and turn them into reality. At Sun Hydraulics, it is not unusual that after the manufacturing tour, new hires end up taking up a role that wasn’t the one they were hired for. They stumble upon a new interest or some urgent need and end up in a different place.

Why such a long induction? People at Sun believe it’s critical to build relationships with other employees across the company to understand it from all angles. A self-managing environment provides opportunity to make things happen, to freely reach out to colleagues, to discuss change without going through a hierarchy of approvals. The more people you know, the more you understand the whole, the more you’ll be able to come up with new ideas and turn them into reality. At Sun, it is not unusual, after the manufacturing tour, for new hires to take up a role that wasn’t the one they were hired for. They stumble upon a new interest or some urgent need and end up in a different place.

Sun Hydraulics uses four simple statements in order to frame a positive discussion around performance:

• State an admirable feature about the employee.
• Ask what contributions they have made to Sun.
• Ask what contributions they would like to make at Sun.
• Ask how Sun can help them.

Feedback about how individuals can improve is given in the natural course of events throughout the year and not saved up for the annual appraisal.^[1]

At Sun Hydraulics project and investment management is radically simplified. There is no management that wants to understand and control the complexity. Projects happen organically and informally. Engineers are typically working on several projects in parallel. They constantly rearrange their priorities, based on what they sense is the most important, most urgent, or most fun to do. Google has the famous practice of “20 percent time” - engineers are free to decide how to spend their Fridays. Sun and other self-managing organizations basically extend this to the whole week. There is no master plan. There are no project charters and no one bothers with staffing people on projects. Project teams form organically and disband again when work is done. Nobody knows if projects are on time or on budget, because for 90 percent of the projects, no one cares to put a timeline on paper or to establish a budget. A huge amount of time is freed by dropping all the formalities of project planning - writing the plan, getting approval, reporting on progress, explaining variations, rescheduling, and re-estimating, not to mention the politics that go into securing resources for one’s project or to find someone to blame when projects are over time or over budget. When Kirsten Regal, one of Sun’s leaders, was asked about how little their meeting rooms seemed to be used, she quipped, “We don’t waste time being busy.^[2]

The case of Sun Hydraulics shows that a budget-free approach is possible even for a publicly listed company. Allen Carlson, the CEO, explains: "After our IPO in January 1997, we had to get better at predicting our numbers. … The market penalized us when we missed one quarter in ‘99 after we adopted a new manufacturing system. We said, 'Look, we can’t predict what’s going on in the economy, and we have no idea what our orders will look like a year from now. … We don’t run this business by the numbers. The numbers will be doing what the numbers will be doing; we can just give you a good picture of what the next quarter will bring.' So, we got away from making annual projections and started just doing quarterly forecasts. … We know our performance in the long run will be a result of just doing the right things every day."

Most business leaders would feel naked without budgets and forecasts. When the question was put to Carlson "How do you deal with having no forecasts to compare people’s performance to? For instance, how do you know if the guys in Germany (where Sun has a plant) were doing a good job last year, if you have no target to compare against?", his answer came shooting out of the barrel: Who knows? Who cares? They are all working hard, doing the best they can. We have good people in all the places around the world and if I need that sort of scorecard I probably got the wrong person. That’s just the way we operate. … If I’m the head of sales of Sun in the US and you ask me what is the forecast, I have no clue! How could I generate one anyway? … At the end of the day, there is so much outside of your control. … It’s impossible to predict the unpredictable.

Sun Hydraulics, a company that was founded in 1970 by two engineers, designs and manufactures hydraulic cartridge valves and manifolds. It has been a publicly owned company since 1997 with factories in Florida (where it is headquartered), Kansas, England, Germany, and Korea. Its shares are traded on NASDAQ, and as of June 1, 2016 Sun had a market capitalization of nearly $800 million. While the founder’s family still has a significant stake in Sun, they do not exercise majority control.^[3] Sun would seem to be an important case of a company able to maintain a commitment to Teal despite a traditional corporate structure and a dispersed and fluid ownership. Maybe Teal organizations and non-Teal ownership can be compatible after all?

Sun Hydraulics is a global producer of hydraulic cartridge valves and manifolds with hundreds of engineering projects running in parallel. Despite this, there is no master plan. There are no project charters and no one bothers with staffing people on projects. Project teams form organically and disband again when work is done. Nobody knows if projects are on time or on budget, because for 90 percent of the projects, no one cares to put a timeline on paper or to establish a budget. A huge amount of time is freed by dropping all the formalities of project planning - writing the plan, getting approval, reporting on progress, explaining variations, rescheduling, and re-estimating, not to mention the politics that go into securing resources for one's project or to find someone to blame when projects are over time or over budget. According to one of Sun's leaders, "We don't waste time being busy".^[4]

Sun Hydraulics is a global producer of hydraulic cartridge valves and manifolds with hundreds of engineering projects running in parallel. Despite this, there is no master plan. There are no project charters and no one bothers with staffing people on projects. Project teams form organically and disband again when work is done. Nobody knows if projects are on time or on budget, because for 90 percent of the projects, no one cares to put a timeline on paper or to establish a budget. A huge amount of time is freed by dropping all the formalities of project planning - writing the plan, getting approval, reporting on progress, explaining variations, rescheduling, and re-estimating, not to mention the politics that go into securing resources for one's project or to find someone to blame when projects are over time or over budget. According to one of Sun's leaders, "We don't waste time being busy".^[5]