E138 | Improving Productivity By Creating A Network Of One Person Businesses with Andrew Holm & Julian Wilson
If you’re the owner of your business and you’re keen to improve productivity, or you want your business to run 200X better when you’re not there, why not get your employees to step up, not step back, from the challenge of running the business as efficiently as you do.
Don’t miss Andrew Holm and Julian Wilson of Matt Black Systems on this week’s episode. Some of the challenges that they’ve solved are probably some of the challenges that your business is facing today.
Andrew and Julian turned their business around by whittling the organisation down from 30 people to five over two years and dissolving the former hierarchical business model and creating a network of one person businesses.
The result? Two employees now produce the same turnover each year as 30 people used to do.
They spent £250k trying to improve productivity by implementing lean and then agile processes, but every time the consultants left, the business reverted back to how it operated before the change.
So they decided to change some stupid rules, triggering an awakening in their employees, encouraging their employees to think for themselves:
“On a roundabout, every car has a controlling mind in it. In a traffic light, there’s only one controlling mind.”
This episode is slightly longer than normal, but it’s worth it. Julian and Andrew explain, in detail, precisely the experiments they undertook to create their current business model. This is an absolutely fantastic conversation.
On today’s podcast:
- Lean and agile are outcomes, not processes
- Natural human behaviour at work
- The invisible manager
- Traffic lights vs roundabouts
- Creating a central market
- Book – 500%: How Two Pioneers Transformed Productivity
- Seminar Series: How Fractal Work emerged – Noon ET (5 PM UK time) Tuesdays, 4th, 11th, 18th, 25th; 1st, 8th June
Getting Rid Of The Invisible Manager And Creating A Network Of One Person Businesses
Andrew Holm and Julian Wilson turned their business, Matt Black Systems, around by whittling the organisation down from 30 people to five over two years. They dissolved the former hierarchical business model and created a network of one person businesses. The result? Two employees now produce the same turnover each year as 30 people used to do.
“We started off with seven or eight people and we ended up with 30. The business was quite profitable but boy, 90% of everything we delivered was late, and our customers were screaming at us.”
Before they had their a-ha moment, they’d initially spent £250k trying to improve productivity by first implementing lean, and then agile processes, but everytime the consultants left, the business reverted back to how it operated before the change.
“The business definitely looked smarter, it was definitely more polished. But actually, as we looked at the numbers, and the balance sheet, and p&l account, they hadn’t improved.”
So they thought, why not change the stupid rules? And they set about trying a series of experiments. The results were astonishing.
The invisible manager
The issue they were facing was that employees weren’t going to change things themselves. And no matter how the consultants changed the business, when they left, the employees naturally reverted back to what they knew, what was easier.
So Julian and Andrew took matters into their own hands.
First they removed the timesheet. Then they took away overtime, instead paying people the same as they would earn, whether they did overtime or not. People were suspicious, but productivity jumped 20%.
Traffic lights vs roundabouts
We live in a free economy, yet we run our businesses like a centrally controlled economy. So what, they thought, would happen if they devolved power to the individuals in their business?
“Our whole business follows a set of rules, a balance sheet and a p&l account, and investment capital and all the rules that we need, [we thought] we could just apply it inside [the business] as it applies to the business as a whole.”
The analogy Andrew and Julian use is the traffic lights vs roundabouts one.
“We say traditional businesses are like traffic lights on a junction. There’s a management team, the traffic lights, who give instructions to the changing lights. And they’re like an organisational model, which is held in that green box on the side of the road, which deals with all the logic.”
Andrew and Julian’s Matt Black Systems, on the other hand, is like a roundabout, devolving responsibility to the users of the roundabout. The drivers are the same people who use the traffic lights, it’s just that they have the power to figure it out for themselves in order to use it safely.
“When a driver comes up on a roundabout, he or she participates in working out the traffic flow. But at a traffic light control junction, he can sit there, have a shave, because they switch off because they delegate responsibility to the management and administrative team, who are the traffic lights.”
The thing with roundabouts, they add, is they increase the flow of traffic by 30% and have fewer accidents.
“In a roundabout, every car has a controlling mind in it. In a traffic light, there’s only one controlling mind. So if you take that analogy and apply it to business, a traditional business has one controlling mind at the top, the boss. What we wanted was everybody in the business to be a controlling mind.”
Creating one person cells
“A guy called Max Randleman noticed way back, 100 years ago, that with tug of war teams, as you increase the number of people, the average force per person reduces. And that’s what we were seeing [in the business]”.
Andrew and Julian didn’t know what to do about it. So they decided to experiment, again. They took each cell and split it in two, creating one person cells. Each person was then responsible for doing everything a standard team in the cell would – purchasing, selling, designing, making accounting, quality, health etc.
“And bingo, it was phenomenal. I mean, it really was transformational. And some people, their productivity lifted, two, three times. I mean, we weren’t looking at 20%. No, we were looking at multiples.”
And in their internal market with individual people, these people then came together to collaborate on projects. And they chose to work with other hardworking people.
The result? Their top paid shop floor worker earns more than £110k a year.
The rules of the game
“The key is in shaping the rules of the game and also making them as simple as possible.”
Now, their business looks like one of the 99% of small businesses making up the economy – each employee is essentially a sole trader responsible for everything a whole cell used to.
“Before we started this journey, our average turnover was £57,000 per person per year. At the end of the journey we ended up in excess of £350,000 per person per year. But the best guys are doing £600,000 of turnover. In fact, a few years ago we hit a million dollar man.”
They went from 30 people and the turnover associated with that number, to two people who now produce the same turnover. That shouldn’t be possible, but it is.