Putting People at the Center: Tensions in Different Forms of Self-Management

I had the pleasure to host a salon discussion at the Renndanheyi Boundaryless Network Opentalk 2020 titled “EMC Contract: How to Evaluate a Self-organizing Network?” In the panel, I facilitated a discussion among three distinguished panelists: Yong Wu, Vice President of the Haier Smart Home Ecosystem Platform, Zhengzheng Liu, an Independent financial and journalist who has studied Haier’s system, and Yash Ranga, of Jaipur Rugs, one of India’s largest producers of hand-knotted rugs. 

Our panel aimed to explore how to assess and evaluate the success of self-managing organizations. Haier’s model of self-management revolves around what it calls EMCs. EMCs are self-organizing and dynamic configurations of work groups that form around a common goal or product vision. As a result, how EMCs can coordinate work without traditional management positions is a nontrivial question. For this, Haier uses what is known as an EMC contract. The EMC contract is a document that specifies what the various MEs can expect from each other and binds them together in sharing rewards and failures of the collaboration. The EMC contract provides the basis for both establishing a shared understanding of respective accountabilities and a tool for enforcing accountability and assessing the performance of each stakeholder within the EMC. In this respect, Haier’s approach mimics market-based transactions and shares similarities with another self-managing organization, Morning Star, which uses bilateral contracts called CLOUs to establish and enforce accountability. 

The panel inspired a reflection that Haier’s very market-based approach to self-management makes assessing and evaluating these self-organizing networks quite straightforward. At an EMC level, success can be assessed through traditional financial metrics related to the EMC’s product or service, such as growth, revenue, profit, etc. At a company-wide level, the indicators of success of self-management include the number of EMCs formed and the financial success of those EMCs, such as the number of EMCs that have spun off and become their own independent businesses. Thus, for Haier, evaluating its success at self-management entails measuring the market-based activity it is hoping to generate. 

This picture looks different for other forms of self-management that are not market-based. The organizational theorist, Paul Adler, identified market, hierarchies, and communities as three ideal-type forms of organization. In moving away from hierarchies, organizations can become, like Haier, more market like, leveraging the behavior of autonomous agents to self-organize based on their own interests. On the other hand, they can become more like communities, organizing around trust and shared norms. A clear example of self-managing organizations that reside around the community principle are worker cooperatives. 

In community forms of self-management, evaluation looks quite different than in market-based forms of self-management. Because the goal of these approaches is the engagement and participation of every individual in the process of self-governance, evaluation tends to focus on process indicators of self-management. They concern less the outcomes of the decision process and more the extent to which decisions reflect the will of the collective (see Joyce Rothschild’s 2016 piece on “The Logic of A Co-Operative Economy and Democracy 2.0: Recovering the Possibilities for Autonomy, Creativity, Solidarity, and Common Purpose” for more on the community form of self-management).

An important comment that came up at the end of the session from a fellow participant was about not forgetting the human element of self-organization and that ultimately these systems need to put humans at the center. But what “putting humans at the center” means is not at all clear. The two ideal-type approaches to self-management – community and market – are more “human” in very different ways. Market-based forms, like Haier’s, tap into the human desire to create and to own one’s own destiny. It is the drive of the entrepreneur. Community-based forms, on the other hand, tap into the human desire for belonging and connection. It is the drive of citizenship. 

There are potential dark sides to both of these forms that must be considered. Market-based forms reward financial success and punish failure. Markets are unforgiving in this way. How market-based forms treat those whose efforts and ideas fail in the marketplace is one indicator of how well it can avoid dehumanizing and objectifying the human beings involved in these endeavors. Similarly, community-based forms tend to be clique-ish and clan-ish, rejecting those that may think, act, and look different. How these forms can mitigate the tendency to automatically reject those that seem to be outsiders will determine how “human-centered” they can become. 

Ultimately, most real-life approaches to self-management are hybrids rather than pure types. But I believe being aware of these distinct forms of self-managing organization and the tensions inherent in each form can help designers be realistic about what can be achieved and also ensure that they remain vigilant to potential dark sides that can make any system less human than one hoped.