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Why One Company Lets Employees Pick Their Own Salaries

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Why One Company Lets Employees Pick Their Own Salaries

Aaron Dignan is the founder of renowned organization design and transformation firm The Ready, and the author of the Next Big Idea Club Spring Finalist, Brave New Work: Are You Ready to Reinvent Your Organization? He recently sat down with Next Big Idea Club Editor Jeremy Price to discuss how to prevent your organization from sabotaging itself, and how to start doing the best work of your life.

This conversation has been edited and condensed. To view the full version, click the video below.

Jeremy: You focus on the notion of bureaucracy and how there’s often far too much of it. You have this astonishing anecdote about how bureaucracy can almost looks like sabotage.

Aaron: Yeah, a [government document] written during World War II was declassified a few years back, and it had to do with how to sabotage a company. It says things like, “Hold conferences when there’s more important work to be done,” and “Talk at great length, using personal anecdotes,” and “Have three people approve everything when one person would do.” Most of us who are in companies that are bigger than 500 people are like, “Yep, I’ve seen that, and that, and that.” What was obviously sabotage a lifetime ago is now indistinguishable from work.

Policies, agreements, rule of law—these are all good things, but bureaucracy has metastasized into something far more pernicious and pervasive. There’s red tape wrapped around every handle, and I think people are sensing that.

Jeremy: Absolutely. I’ve been in so many meetings, especially on advisory boards in college, when we were just spinning our wheels, with people talking and talking but not doing anything of consequence. So I love how your book points out that we have more meetings than we really need. In fact, you actually recommend trying a period of two weeks where there are no meetings at all. Tell me more about that.

Aaron: Meetings are the microcosm of the organization. Whatever happens in meetings—wasted time, lack of alignment, lack of candor—is probably happening across the whole organization.

We like to think about meetings as a starting place for building new habits and new mindsets. Teams often have so many meetings, and meetings to prepare for meetings, because it’s all part of the theater of, “Let me present perfect work, and get the approvals, and the feedback, and the gold stars.” It’s just internal theater, instead of customer-focused work.

“Whatever happens in meetings—wasted time, lack of alignment, lack of candor—is probably happening across the whole organization.”

So one way to deal with that vast amount of meetings is just to stop having them. Because changing and tweaking each one in concert with everyone’s participation is a massive undertaking. But just agreeing, “For the next two or three weeks, we’re not going to have any recurring meetings”—that’s actually a really simple thing to execute. It’s hard to agree to, but it’s easy to execute. Then you get to find out what you miss.

The reality is, I bet you’ll miss a little bit, but not a lot. Once you figure out what you do miss, you can then design much more deliberate, structured, team-owned meetings in order to get right at that stuff.

Jeremy: I love that. If you’re looking to make a positive change in your organization, the impulse is often to say, “Okay, what new thing can we do? What new policy can we enact?” But in your book, you mention that a great place to start is actually to say, “Okay, what can we take away?” In this case, it’s the constant stream of meetings.

So when organizations start with that mentality of, “Okay, what can we do less of?”, is there anything else that people cut back on with positive results?

Aaron: Removing constraint is a great way of seeing what’s really going on, and seeing what emerges. Rather than saying, “Oh man, the travel policy isn’t working for us. What should we replace it with?”, the answer might be, “What if we didn’t have a travel policy for a little while?” Maybe something bad would happen, but it’s far more likely that the world would stay almost exactly the way it is. So then it’s just one thing we don’t have to write down, or deal with, or comply with.

If you’re gardening, you feed the things that you want to see happening, and you starve the things you don’t. You weed the things you don’t want, and you give extra water and fertilizer to the things you do want. You notice what happens when you interact with it, right? Tuning an organization is [similar]—it’s the work of trying things, whether that be adding or removing, feeding or starving, and then noticing what happens next. You’re not going to fix it—you’re in a relationship with it. You’re just managing it.

Jeremy: I feel like Morning Star is an organization that is effectively putting these policies into practice. Can you take me through exactly what they’re doing?

Aaron: Morning Star is an interesting one—they’re the world’s largest tomato processor, and while tomato processing may not be the most glamorous thing in the world, they take a very human-centered approach to the work. They have a self-organizing environment where people have a lot of autonomy, and there’s a lot of transparency and trust. Team members write their own job descriptions and set their own salaries using an advice process that allows their colleagues to provide feedback on what they’re doing. But ultimately, [each employee] has the final say to work on the things they want to work on, and make what they want to make. And it works really well—the company has been remarkably profitable, in some cases ten times more profitable than their competitors.

Profit is one measure of success, but what I care about is [whether or not] people love to work there, and if they feel connected to their community, and if they feel like they’re doing something meaningful. That stuff matters. And you see at places like Patagonia that when people feel connected to the purpose of their work, the results tend to follow.

Jeremy: For sure. I still just can’t believe that they’re setting their own salaries and writing their own job titles. There’s an incredible amount of trust that you need to place in your employees if you’re setting up those policies.

You write that the way we organize our companies is a reflection of our assumptions about human nature. What are the underlying assumptions about human nature that are currently out there in the workplace? And what are the beliefs about human nature that you are trying to encourage?

“When people feel connected to the purpose of their work, the results tend to follow.”

Aaron: So back in the ‘60s, Douglas McGregor was looking at attitudes about work, workers, trust, and autonomy, and he had this idea of Theory X and Theory Y. Theory X was this idea that people were basically untrustworthy and lazy and uncreative, and needed to be told what to do with carrots and sticks. And then Theory Y was the idea that no, people are creative under the right conditions, and they want to learn, self-actualize, and take responsibility.

McGregor’s thesis was that Theory X people actually don’t exist, that we’re all Theory Y by nature—but because we believe there are Theory X people, we build these elaborate cages for people. And then, because we’re chameleons, we start to show up that way.

When he would ask people, “Are you Theory X or Theory Y?”, everybody would say that they’re Theory Y. You might say, “Well, what about the people who work at your grocery store, or your gas station? They’ve got to be Theory X.” But we can’t all be Theory Y, except everyone else is Theory X, right?

Look at Sam’s Club versus Costco—it’s the exact same business, in the exact same industry, but one treats its workers differently. It pays them differently, and trusts them differently. And you see the result in the experience of walking in the store; you see the result in the P&L; you see the result in what feels like the caliber of talent.

And some people would argue, “Well, one of them is getting better people.” But whenever we start talking about “better people” or “the top talent,” I get suspicious. Because it’s like, “Well, are they really getting the good people? Or is it just that the environment is making people achieve more, making them realize what they’re capable of, and helping them show up differently?”

“Are they really getting the good people? Or is it just that the environment is making people achieve more?”

Jeremy: Right. We’ve been talking about bureaucracy, and how some organizations stifle human creativity and human flourishing, and it all makes me think of this story by Franz Kafka called The Trial. It’s about a man who wakes up one morning, and there’s a couple of men in his house. They say, “Hey, you’re under arrest,” and he’s like, “For what?” They won’t tell him, but they say, “You need to show up at court on this particular day, at this particular time, and get things sorted out.” So he does, but even then, the judge won’t tell him what he did wrong. So he just bounces around to all these different lawyers and judges and members of the local judiciary, but he can never figure out what the heck is going on—he’s lost in this maze of bureaucracy.

So I’m wondering, when it comes to the ideas in your book, do those apply to the government and our legal system, or is it really just for businesses?

Aaron: It’s funny you bring that story up, because it was actually in the first draft of the book. What I’m writing about has to do with how human beings come together to solve problems and create new things, so it isn’t only for for-profit organizations. We’re talking about the way we work together, so I think government is squarely in that space.

And in many ways, government is one of the places where bureaucracy and dysfunctional teaming is more pronounced right now. We’re seeing massive polarization, immobilization, and inability to get anything done. The legislators of our generation have created far fewer laws, changes, and programs than their predecessors, and it’s all because we’re stuck. And it’s not that the core tenets of democracy are wrong—it’s just that the way we design these systems matters, and little changes affect things in massive ways. If you suddenly decide that corporations are people, that’s one small choice that plays out over many decades.

There are some cases globally, and even domestically, of smaller municipalities starting to govern differently using ideas of consent, rather than voting or consensus or autocracy. And I think that’s encouraging, but I think we have a long way to go.

Jeremy: You also mention in the book that Google gave its employees more time to work freely on independent projects, and the results spoke for themselves—they ended up with products like Gmail and Google Maps. Could you tell us about what happened there?

Aaron: Yeah, Google let its employees spend 20% of their time [working on personal projects of their choosing]. Interestingly, some other cases we look at in the book take an even more radical stance: “Why 20% time? Why not 40, 60, 100% time? Why not just let people that we trust decide what to work on?” If we put a bunch of people together and give them a shared purpose, or they choose a shared purpose, can they just coordinate and figure out how to get that work done? And what happens if they don’t?

I think that one of the misunderstandings about self-management and self-organizing systems is the idea that if there’s going to be a failure, then by definition, that approach is wrong. So let’s say we forget to clean the toilet for two weeks—that’s actually where learning and mastery happens. Anybody who has ever raised a child will tell you that you can’t prevent them from ever skinning their knee, or they will never learn how to run—they won’t be able to do anything on their own. They become completely codependent and messed up as adults. You have to give them enough leash to make mistakes and to learn. You don’t let them do anything catastrophic—there’s no jumping off buildings. But there’s a lot of jumping off the couch.

So with these systems—like 20% time or 100% time—even if they’re likely to create a problem down the road, that’s not necessarily a bug. That’s a feature. When nobody cleaned the toilet for two weeks, the feature is that now we all have to sit in a room and be like, “How are we going to get this done?” And then we decide: Maybe it’s a rotation, or an election, or a tour of duty. Or maybe we’re going to hire an outside firm that we’ll pay to clean the toilet.

If they have enough autonomy, transparency, and purpose, people will solve these problems—they just might need to fail a little bit along the way. And that’s okay.

“What is stopping you from doing the best work of your life?”

Jeremy: That speaks to this whole concept of anti-fragility, in which systems actually get stronger following mistakes and slip-ups.

Aaron: Right—your job as a leader is not to ensure perfect execution. Your job is to ensure continually expanding capability, and that means you have a totally different playbook. You’re not in the business of preventing errors—you’re in the business of making sure we learn from errors.

Jeremy: That approach also brings human dignity back into the equation. You’re not saying, “Hey, I expect you to be this robot that gets it right every time.” Instead, you’re recognizing and accepting workers as imperfect human beings.

Lastly, what is one piece of advice you would give to anyone who wants to change their organization in a humane and productive way?

Aaron: It actually starts with the question that’s on the inside flap of the book: “What is stopping you from doing the best work of your life?” Whether you’re the leader of your team or not, go back to your team and ask, “Can we spend ten minutes talking about what’s stopping us from doing the best work of our lives? Then can we look at the list, and pick one thing that we’re willing to try in the next week that might move us forward?”

It’s as simple as that. And if you do that once or twice, you see that it’s not something that you have to spend the entire weekend on—it’s something you can take small and immediate steps toward. And I think that starts to unlock bigger questions, making us more comfortable with the principles that actually serve us, like autonomy, transparency, consent, decentralization, and trust. If you want to change your organization, change it by changing it. It’s not going to happen in a PowerPoint org chart—it’s going to happen in a conversation. So go into that conversation with just that one question in mind. See what happens, then rinse and repeat.

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