Staff Functions

In some industries, the risks for non-compliance with certain procedures are especially high. Regulators might even go so far as to require someone to sign on behalf of the organization, typically a “C-Suite” executive ―the CFO for the accounts, the Chief Risk Officer for topics related to risk, etc. Because this individual risks personal consequences for the organization’s non-compliance including legal actions imposed by outside regulators, he or she would naturally want to protect him or herself from risk by mandating strict rules and enforcing their compliance. How can self-managing organizations address this issue?

One way to deal with this is through voluntary task forces. A risk task force for instance, composed of people with roles related to risk in their respective units, could commonly decide on standards and policies to ensure risks are mitigated in ways that align with the regulator's request. In terms of who then signs on behalf of the organization (or interfaces with the regulator), members of the task force might take turns with each member taking on that responsibility for a one-year period. The task force can also decide to organize cross-audits where a member of one unit audits another unit. Organizations like AES who have used this method report that there is more, not less, control. Voluntary task forces know much better than a central staff function far away in headquarters where the risks are, what guidelines are appropriate, where and what to look for in cross-audits. And voluntary task forces breed a sense of solidarity and responsibility. If one unit fails, it will be "one of us" who has to bear the brunt of repercussions from the regulator. Compare this to traditional staff roles, where the Head of Risk in headquarters edicts rules that are often hard to apply on the ground, enticing people to find workarounds.

The case of AES (see more on AES below) which has operated in the highly regulated electricity generation and distribution markets, gives at least an indication that the existence of strong regulation can be dealt with by self-managing structures.

Self-management

Central staff functions, as they are used today in many large organizations, concentrate power away from their operational colleagues. Eliminating or drastically reducing the influence of centralized staff returns autonomy to the rest of the organization and is a key element of the Teal breakthrough of self-management.

Wholeness

In many organizations, the relationship of central staff functions with people in operating units is based on mistrust: without staff policing them, operations cannot be relied on to act in ways that benefit the organization as a whole. With Teal, people are trusted to take into account the needs of the whole organization and are freed to pursue their passions and interests.

Evolutionary purpose

Central staff functions tend to make the organization more static and prevent innovations from happening freely at the margins, thereby slowing down the unfolding of the organization's purpose. Dealing in decentralized ways with the need for expertise, economies of scale and joint standards increases an organization's agility, and thereby its potential to pursue its evolutionary purpose.

AES, in a heavily regulated industry, pioneered the use of 80/20 voluntary task forces to deal with typical staff functions.

AES, with its 40,000-employees, functioned in self-managing teams of 15 to 20 people during its period under Teal practices. Believing that bad things start to happen when any site becomes too big, AES also tried to limit the number of employees in a site to a maximum of 300 to 400 (15 to 20 teams of 15 to 20 people)―the natural limit, they felt, for colleagues to more or less put names and faces together and enter into a casual discussion with any colleague.

Teams at AES were responsible for decisions relating to all aspects of day-to-day operations: budgets, workload, safety, schedules, maintenance, hiring and firing, working hours, training, evaluations, compensation, capital expenditures, purchasing, and quality control, as well as long-term strategy, charitable giving, and community relations.

This is quite remarkable: AES is an energy provider, operating thermal and hydroelectric power plants as well as electrical grids. This equipment is absolutely central to the lives of many people and businesses. Operating problems can lead to disastrous blackouts, and accidents to the loss of many human lives. And yet millions of customers throughout the world were supplied with energy produced by self-governing teams responsible for such crucial matters as safety and maintenance.

With 40,000 people scattered across different continents, AES only had about 100 people working at headquarters in Arlington―hardly a number that could claim to control what was happening in faraway places like Cameroon, Colombia, or the Czech Republic.

And yet, it worked. A front-page article in the Wall Street Journal illustrates with a story how far teams at AES went with taking on responsibilities typically handled by headquarters:

MONTVILLE, Conn. –– His hands still blackened from coal he has just unloaded from a barge, Jeff Hatch picks up the phone and calls his favorite broker. “What kind of rate can you give me for $10 million at 30 days?” he asks the agent, who handles Treasury bills. “Only 6.09? But I just got a 6.13 quote from Chase.” In another room, Joe Oddo is working on J.P. Morgan & Co. “6.15 at 30 days?” confirms Mr. Oddo, a maintenance technician at AES Corp.’s power plant here. “I’ll get right back to you.” Members of an ad hoc team that manages a $33 million plant investment fund, Messrs. Oddo and Hatch quickly confer with their associates, then close the deal. …

It sounds like “empowerment” gone mad. Give workers more autonomy in their area of expertise? Sure. Open the books to employee purview? Perhaps. But what good could possibly come from handing corporate finance duties to workers whose collective borrowing experience totals a mortgage, two car loans, and some paid-off credit-card debt? Plenty of good, says AES. … “The more you increase individual responsibility, the better the chances for incremental improvements in operations,” argues Dennis W. Bakke, the company’s chief executive and one of its founders. … “And more importantly” he says “it makes work a lot more fun.”

Is giving coal handlers investment responsibility risky? Mr. Bakke thinks not. He notes that the volunteer team in Montville does have a financial adviser, and they work within a narrow range of investment choices. They aren’t exactly buying derivatives. What the CEO likes about the arrangement is that “they’re changed people by this experience. They’ve learned so much about the total aspect of the business, they’ll never be the same.”

With only around 100 staff in its headquarters in Arlington, Virginia, AES had no central maintenance or safety departments, no purchasing, no HR, and no internal audit departments. In a smaller company, when an issue arises in one of these areas, people can simply call a meeting, or delegate a specific coordinating role to a colleague. At AES, with 40,000 people scattered around the globe, that was no longer feasible. The company came up with the “80-20 rule”: every person working at AES, from cleaning staff to engineer, was expected to spend on average 80 percent of their time on their primary role and make themselves available for the other 20 percent in one or more of the many task forces that existed around the company.

Take investment budgeting, normally the prerogative of finance staff at headquarters. At AES, everything happened in the field; every team established its investment budget once a year. Investment budgets would be added up at the plant level, sometimes running as high as $300 million in a year. When teams were satisfied with the consolidated budget for the plant, it was reviewed, together with those from all other plants, by a budget task force that would suggest possible changes and improvements (but didn’t have power to enforce changes). That task force was staffed with a few people from headquarters with relevant expertise, but predominantly with people from local units with all sorts of backgrounds―a security guard could sit next to a technician and an engineer.

Internal audits were performed in the same way, by volunteer task forces: each plant would be audited by colleagues from other plants. Task forces were put in place for topics as diverse as compensation, community service, environmental work, and corporate values.

AES found out that using voluntary task forces instead of fixed staff functions has multiple benefits. Employees find avenues to express talents and gifts that their primary role might not call for. They develop a true sense of ownership and responsibility when they see they have real power to shape their company. Dennis Bakke insists on another point: these task forces are formidable learning institutions. At any point in time, thousands of people would be involved in task forces, picking up technical and leadership skills from more experienced colleagues. It’s a modern-day form of apprenticeship, scaled to a massive level. No classroom training could ever provide the amount of learning that was taking place day in and day out in the voluntary task forces.^[2]

Fitzii has no dedicated staff functions. Individuals from functional teams volunteer to act as stewards of various staff functions, as needed.

Fitzii is organized in three parallel teams along functional lines – product & development, sales & marketing, and hiring success. Every Fitzii employee is a member of one of these teams, depending on his or her core role.

In addition, Fitzii team members volunteer to steward various staff roles such as finances, purchasing, and human resources. The individual steward accumulates expertise and moves decisions, actions, and projects forward. These allocations are based on individual interest and the team’s overall needs.

A practical example: when Fitzii developed a peer-based 360-degree feedback process, various team members were interested in contributing. Initially, development of the new feedback process lagged as no one was clearly responsible for moving it forward. When the team noticed this, one coworker from the product & development team took the role of steward of the feedback process. He collected advice and opinions from other interested coworkers, proposed a process based on their advice, and took over practical implementation of the new practice. In that sense, the role is less about authority over a particular staff function and more about serving the team’s practical needs.

Additionally, the team has regular access to subject matter experts from its parent company, the Ian Martin Group, as well as external experts, such as legal counsel.

Buurtzorg has a bare minimum central staff and has put in place mechanisms to leverage its decentralized expertise.

Buurtzorg has 9,000 employees, with a headquarters of only 40. There are no typical staff roles (no CFO, head of HR, etc.). Most headquarters employees are involved in administrative tasks (social security administration, for instance).

How is it possible to manage a 9,000-person-strong organization with such a bare bones headquarters? Many of the typical staff tasks are simply devolved back to the teams. Take recruitment for example: when a team feels the need to expand, it does its own recruiting (the regional coach might give advice when asked, but is not involved in the decision). Chances are that the team will co-opt somebody who fits in well. Because the team members make the decision themselves, they are emotionally invested in making the recruit successful.

How about expertise? At Buurtzorg, it doesn’t make sense for every one of the roughly 600 Buurtzorg teams to develop expertise in every arcane medical condition they might encounter. But rather than create staff roles, Buurtzorg has developed a number of effective alternatives to deal with a need for expertise, both medical and non-medical:

• Nurses on the teams are encouraged to build up expertise and become contact points beyond their team. Through Buurtzorg’s intranet, nurses can easily identify and access colleagues with relevant expertise in a specific subject area.
• Occasionally, volunteer task forces of nurses are set up to, in addition to their work with patients, investigate a new topic and build up expertise (for instance, how Buurtzorg should adapt in response to new legislation).
• When needed, an expert can be hired as a consultant , rather than brought into a staff role.
• If a staff person is hired, they have no decision-making authority over teams.

As an illustration, in a meeting of Buurtzorg’s regional coaches, a suggestion was made to hire a specialist in labor law, a topic many teams occasionally need assistance with. The suggestion made sense. And yet, other avenues were explored After closer examination, it appeared that most questions were recurring, and so the group decided to create a self-help section of “frequently asked questions on labor law” on Buurtzorg’s intranet. This took care of most questions, but a year later, the group realized that some questions still popped up for which the FAQ provided no answers. It was decided to contract a freelance expert for a few days per month who would answer questions from teams on request.^[3]

At FAVI, almost all central staff functions have disappeared and been integrated into "mini-factories".

Today, FAVI has more than 500 employees who are organized into 21 teams called “mini-factories” of 15 to 35 people. Most of the teams are dedicated to a specific customer or customer type (the Volkswagen team, the Audi team, the Volvo team, the water meter team, and so forth). There are a few upstream production teams (the foundry team, the mold repair team, maintenance), and support teams (engineering, quality, lab, administration, and sales support). Each team self-organizes; there is no middle management, and there are virtually no rules or procedures other than those that the teams decide upon themselves.

The staff functions have nearly all disappeared. The former HR, planning, scheduling, engineering, production, IT and purchasing departments have all been shut down. Their tasks have been taken over by the operators in the teams, who do their own hiring, purchasing, planning, and scheduling.

When opportunities arise that span the boundaries of several teams, FAVI workers self-nominate to create a temporary project team. Sometimes a person is appointed for a staff role to coordinate across teams, but that person receives no authority to impose decisions on the teams. For example, at FAVI there is Denis, an engineer, whose role is to help teams exchange insights and best practices. He spends his days encouraging machine operators to go and see what other teams have come up with. He can’t coerce a team into adopting another team’s ideas. He must get them interested and excited. If he fails to do so, if teams stop seeing added value in his work, then his role will naturally disappear, and Denis will need to find himself another role to fill. In the true sense of the word, he has a support function. This is highly unusual for manufacturing environments - an engineer who is in service to and not in command of less-educated (but highly skilled) blue-collar workers..^[4]

AES, in a heavily regulated industry, pioneered the use of 80/20 voluntary task forces to deal with typical staff functions.

AES, with its 40,000-employees, functioned in self-managing teams of 15 to 20 people during its period under Teal practices. Believing that bad things start to happen when any site becomes too big, AES also tried to limit the number of employees in a site to a maximum of 300 to 400 (15 to 20 teams of 15 to 20 people)―the natural limit, they felt, for colleagues to more or less put names and faces together and enter into a casual discussion with any colleague.

Teams at AES were responsible for decisions relating to all aspects of day-to-day operations: budgets, workload, safety, schedules, maintenance, hiring and firing, working hours, training, evaluations, compensation, capital expenditures, purchasing, and quality control, as well as long-term strategy, charitable giving, and community relations.

This is quite remarkable: AES is an energy provider, operating thermal and hydroelectric power plants as well as electrical grids. This equipment is absolutely central to the lives of many people and businesses. Operating problems can lead to disastrous blackouts, and accidents to the loss of many human lives. And yet millions of customers throughout the world were supplied with energy produced by self-governing teams responsible for such crucial matters as safety and maintenance.

With 40,000 people scattered across different continents, AES only had about 100 people working at headquarters in Arlington―hardly a number that could claim to control what was happening in faraway places like Cameroon, Colombia, or the Czech Republic.

And yet, it worked. A front-page article in the Wall Street Journal illustrates with a story how far teams at AES went with taking on responsibilities typically handled by headquarters:

MONTVILLE, Conn. –– His hands still blackened from coal he has just unloaded from a barge, Jeff Hatch picks up the phone and calls his favorite broker. “What kind of rate can you give me for $10 million at 30 days?” he asks the agent, who handles Treasury bills. “Only 6.09? But I just got a 6.13 quote from Chase.” In another room, Joe Oddo is working on J.P. Morgan & Co. “6.15 at 30 days?” confirms Mr. Oddo, a maintenance technician at AES Corp.’s power plant here. “I’ll get right back to you.” Members of an ad hoc team that manages a $33 million plant investment fund, Messrs. Oddo and Hatch quickly confer with their associates, then close the deal. …

It sounds like “empowerment” gone mad. Give workers more autonomy in their area of expertise? Sure. Open the books to employee purview? Perhaps. But what good could possibly come from handing corporate finance duties to workers whose collective borrowing experience totals a mortgage, two car loans, and some paid-off credit-card debt? Plenty of good, says AES. … “The more you increase individual responsibility, the better the chances for incremental improvements in operations,” argues Dennis W. Bakke, the company’s chief executive and one of its founders. … “And more importantly” he says “it makes work a lot more fun.”

Is giving coal handlers investment responsibility risky? Mr. Bakke thinks not. He notes that the volunteer team in Montville does have a financial adviser, and they work within a narrow range of investment choices. They aren’t exactly buying derivatives. What the CEO likes about the arrangement is that “they’re changed people by this experience. They’ve learned so much about the total aspect of the business, they’ll never be the same.”

With only around 100 staff in its headquarters in Arlington, Virginia, AES had no central maintenance or safety departments, no purchasing, no HR, and no internal audit departments. In a smaller company, when an issue arises in one of these areas, people can simply call a meeting, or delegate a specific coordinating role to a colleague. At AES, with 40,000 people scattered around the globe, that was no longer feasible. The company came up with the “80-20 rule”: every person working at AES, from cleaning staff to engineer, was expected to spend on average 80 percent of their time on their primary role and make themselves available for the other 20 percent in one or more of the many task forces that existed around the company.

Take investment budgeting, normally the prerogative of finance staff at headquarters. At AES, everything happened in the field; every team established its investment budget once a year. Investment budgets would be added up at the plant level, sometimes running as high as $300 million in a year. When teams were satisfied with the consolidated budget for the plant, it was reviewed, together with those from all other plants, by a budget task force that would suggest possible changes and improvements (but didn’t have power to enforce changes). That task force was staffed with a few people from headquarters with relevant expertise, but predominantly with people from local units with all sorts of backgrounds―a security guard could sit next to a technician and an engineer.

Internal audits were performed in the same way, by volunteer task forces: each plant would be audited by colleagues from other plants. Task forces were put in place for topics as diverse as compensation, community service, environmental work, and corporate values.

AES found out that using voluntary task forces instead of fixed staff functions has multiple benefits. Employees find avenues to express talents and gifts that their primary role might not call for. They develop a true sense of ownership and responsibility when they see they have real power to shape their company. Dennis Bakke insists on another point: these task forces are formidable learning institutions. At any point in time, thousands of people would be involved in task forces, picking up technical and leadership skills from more experienced colleagues. It’s a modern-day form of apprenticeship, scaled to a massive level. No classroom training could ever provide the amount of learning that was taking place day in and day out in the voluntary task forces.^[5]