Self-Management Pioneers Series: The Morning Star Company

Excerpted from the book BEYOND EMPOWERMENT: THE AGE OF THE SELF-MANAGED ORGANIZATION, by Doug Kirkpatrick, JetLaunch, 2017

Introduction

California entrepreneur Chris Rufer started Morning Star[1] as a trucking company in 1970, beginning with one truck. While driving his truck in the summer to put himself through college, he began to notice how the factories where he delivered his loads were often inefficient and poorly run.

Equipped with an MBA, he crafted a business plan for a tomato processing plant that would produce industrial tomato paste in efficient bulk containers for worldwide distribution. His formula for success would be to know his customers and suppliers well and be the low-cost producer. He spent endless hours identifying the right combinations of process equipment to achieve maximum throughput and efficiency. Finally, Chris brought together a group of grower-partners and began construction of his first successful food processing plant, Ingomar Packing Company, in 1982.

Following Ingomar’s success, Chris formed The Morning Star Packing Company to process tomatoes near the small town of Los Banos, California. In the spring of 1990, a tiny farmhouse on the outskirts of town became a beehive of round-the-clock activity. Cars and pickups were parked all over the yard, shaded by oak trees. The kitchen became a conference room where an endless parade of job applicants, bankers, regulators, vendors, and contractors met together in nonstop organizational meetings. Desk lamps burned late into the night; sleep was in short supply.

Chris and his team focused with intensity on getting the new factory up and running. Tomato plants were already in the ground, growing. A successful startup would declare an entirely new level of industry competition. Most of Morning Star’s new employees had left secure jobs to join the team. If the venture failed, there would be short-term personal disruption, but all could find new jobs. Chris, however, had everything on the line. Stakeholder obligations and personal guarantees created high stakes; folding one’s cards was not an option.

The first loads of tomatoes arrived at Morning Star’s first new state-of-the-art facility in mid-July of 1990 and kicked off a successful season, producing over ninety million pounds of bulk tomato paste for the world market.

The Morning Star Packing Company built its second advanced facility in Williams, California, in 1995. This facility replaced its original namesake as the largest tomato processing factory in the world. Chris later purchased an existing vacant (and somewhat dilapidated) factory near Los Banos, gave it a thorough renovation, and commissioned Liberty Packing Company in 2002, dedicated to the production of bulk tomato paste, diced tomatoes, and canned products. He also created custom harvesting operations to optimize the supply chain with trucking and manufacturing.

Morning Star has never pursued growth for the sake of growth; the focus has always been on technical innovation combined with very good execution. Morning Star has grown, however, in response to world market demand for low-cost, high-quality bulk tomato products. At home and around the world, people just seem to enjoy the flavor of tomatoes in their food. As of this writing, the three California Morning Star processing facilities are the largest individual plants in the industry. Together, they comprise the largest tomato processing company in the world.

While Morning Star owes much of its success to its low-cost strategy, culture of innovation, and process execution, a good measure of its success is also attributable to a unique organizational philosophy: self-management.

Organizational Philosophy

Morning Star implemented its self-management philosophy in 1990, with the construction of its first factory.

The primary characteristic of this philosophy is flatness. The organization is designed to be as flat as a floor, with absolutely no hierarchy. There are no directive human bosses; the only boss is the company Mission statement. The philosophy is one of total self-management. Morning Star employees refer to themselves as colleagues and consider themselves professionals in their respective roles.

Command authority doesn’t exist in the company, even on the part of the owner (barring unusual circumstances with legal ramifications). Consequently, there is no unilateral authority to fire. Acquiring or concluding the services of other colleagues must be accomplished according to a clear set of established principles incorporating due process.

No one in the organization has a title, which sometimes creates confusion for those outside the organization but serves to reinforce Morning Star’s flatness within the organization. The back of every title-free Morning Star business card reads Excellence Through Commitment.

While lacking formal structure, there are resources available to help colleagues synchronize their activities with others. Each colleague executes a Colleague Letter of Understanding (also known as a CLOU). The CLOU is an accountability agreement between colleagues declaring each individual’s personal commercial mission, business process responsibilities, scope of decision authority, and performance measures.

Morning Star’s success takes place in a complex and demanding business environment. As an organization, Morning Star must grapple with subjects like plant genetics, microbiology, food chemistry, thermodynamics, and meteorology. Individually, Morning Star colleagues continuously navigate the business risks and opportunities impacted by these disciplines. The Colleague Letter of Understanding is a key navigational device, answering the question, Where should I focus my efforts?

The Morning Star culture is very conducive to self-managing, mature individuals. It can be a challenging environment for those who need to be told what to do, or who are themselves directive toward others. In the utter absence of position power, leadership responsibility must be earned.

There is as much need for leadership in a self-managed organization as in a hierarchical one; it’s just that self-managed leadership is dynamic rather than static — it depends on the issue and the individuals. Leadership in such an ecosystem can rotate and evolve naturally, depending on the circumstances. No particular leadership style is required, and many leadership styles can work well.

Ultimately, the foundation of shared bedrock values creates an environment where successful colleagues can mentor others and help them navigate successfully.

• Company Mission

The Mission of The Morning Star Company is simple:

Our Mission is to produce tomato products that consistently achieve the product and service expectations of our customers in a cost-effective, environmentally responsible manner. We will provide bulk-packaged products to food processors and customer-branded, finished products to the food service and retail trade.

The first sentence is a simple declaration of purpose. The second sentence describes the two business domains that Morning Star supplies.

Morning Star generally doesn’t strive to exceed customer expectations. Tomato products are commodities, and customers will usually not pay extra for exceeded expectations. According to Rufer, business is a dynamic adventure of balancing the needs of customers, suppliers, employees, and society at large and using resources appropriately and efficiently. That philosophy is the essence of the Morning Star Mission.

See Appendix for an expanded version of the Morning Star Company Mission.

• Company Vision

The company vision of Olympic Gold Medal Performance contains several elements.

The first element is one of total responsibility. While each Morning Star colleague is identified with specific business processes, no one is allowed to ignore a known issue with the excuse that “it’s not my problem.” All colleagues have an obligation to report any issue that comes into their field of vision to other pertinent colleagues.

The second element is clarity of vision. This is primarily accomplished through the creation of a personal commercial mission for each colleague, congruent with the overall company Mission.

The third element is the creative advancement of technology. This element recognizes that innovation is the only source of longterm competitive advantage. Patents expire, trade secrets disappear. An entire organization dedicated to innovation and learning cannot be easily duplicated.

The last element of values is foundational to the Morning Star philosophy. These values include integrity (which actually improves economic business value for individuals and companies by lowering transaction costs), openness, and physically attractive facilities.

See Appendix for the Morning Star Company Vision.

• Colleague Principles

Relationships at Morning Star are governed by a set of Colleague Principles. These Principles have several key features.

The Principles (to which colleagues agree to adhere) require several commitments. First, colleagues agree to embrace the Mission.

Second, colleagues agree to commit to individual goals (specified in the Colleague Letter of Understanding) and teamwork (which requires, by definition, communication).

Third, colleagues agree to accept personal responsibility and take initiative.

Fourth, colleagues agree to tolerate non-work-related differences in the interest of teamwork.

There are several corollaries to this set of principles. One is the requirement of direct communication with colleagues. Since there are no supervisors to process complaints about individuals, each person must address issues directly with their colleagues. There is simply no other way to get things done. An ombudsman is available when someone seeks confidential advice regarding. Ultimately, however, the burden of communication remains with the individual colleague.

Another corollary is that differences shall be resolved privately, if possible. The Principles describe a process for gaining agreement one-on-one, then bringing in a third party to mediate if the initial discussion fails to achieve resolution, and finally bringing the issue to a panel of peers as the final step in resolution.

A further corollary is that information shall be shared with colleagues, even if it is not requested. This places an affirmative obligation on each colleague to forward pertinent information to others that may be helpful to them in accomplishing their respective missions. There is no excuse for hoarding or hiding information. Prodigious information sharing is a key Morning Star strength and contributes greatly to organizational agility. Information permeates the entire enterprise — and there are no structural barriers to sharing information anywhere in the company.

The requirement of following these principles demands selection process rigor. The selection process generally includes multiple interviews and a battery of diagnostics. New hires have come from the U.S. Navy, the semiconductor industry, and many other diverse backgrounds. Morning Star strives to place “A” players in every position. The overall Vision is that of Olympic Gold Medal Performance.

Every Morning Star colleague is considered a professional. Each Morning Star electrician and mechanic, for example, is personally responsible for the operation and maintenance of equipment valued in the millions of dollars. Electricians and mechanics conduct payback analyses on capital project proposals. They deal personally with vendors, seasonal colleagues, and sometimes customers. In addition, they personally perform the operational and maintenance work needed to run each factory. Each full-time production colleague accepts total stewardship for his or her slice of the factory.

For an individual electro-mechanic’s agreed orbit of responsibility, documented in the CLOU, accountability for performance lies with no one else.

See Appendix for the Morning Star Colleague Principles.

Power of Self-Management

The power of self-management can be seen in two areas.

First, Morning Star is a principle-driven enterprise. Its two core principles are 1) individuals should not exercise the use of force against other people (or the property of other people), and 2) individuals should honor their commitments to others. Human beings tend to experience greater harmony and prosperity in life when they acknowledge and act in accordance with these simple yet profound principles.

The total absence of command authority (or force) means that people have no choice but to seek commitment from others through influence and persuasion, rather than outright direction. While this usually takes longer than issuing commands, it does ensure consultation with all stakeholders in a decision. It also ensures the sharing of information and usually results in better decisions.

The lack of position power also presents a key test for aspiring leaders. In an environment devoid of command authority, respect and credibility must be earned. The question for a potential leader becomes: How effective is your leadership when no one is required to follow you?

Second, the organization enjoys a high degree of agility to deal with opportunities and threats as well as and strengths and weaknesses. Colleagues are able to use their freedom to continuously improve business processes, for example. No Morning Star process is off-limits to analysis, experimentation, and improvement.

Colleagues take commitments seriously at Morning Star. Even ad hoccommitments undertaken between two colleagues passing in the hallway on a low or medium level business matter may be documented and fulfillment expected. In the absence of command authority, there is no other way to get things done with others. There may not be bosses, but there are many colleagues to whom one is fully accountable for various commitments.

Self-Management Requirements

Effective self-management requires several ingredients. First, self-managed freedom must be balanced with responsibility. Freedom without responsibility is unproductive. Responsibility without freedom is frustrating. Morning Star strives to achieve a harmonious balance between the two.

Second, colleagues must completely understand their tasks, goals, and values. This primarily consists of having a deep understanding of the business processes for which they are partly or fully responsible. Short-term or long-term goals may be either business-related or personal.

Third, taking initiative is a major key to effective self-management. In order for self-management to work, colleagues must display initiative in all areas. This includes initiating the acquisition and termination of the services of fellow colleagues. In addition, colleagues are fully responsible for their own training. It is never an excuse at Morning Star to say that one was not trained to perform his or her job.

Finally, self-management requires integrity, a characteristic that actually improves business value. When suppliers, customers, and co-workers can count on a colleague’s word, the cost of doing business actually decreases and business value increases, which is a key success factor.

Activity Feedback

Activity feedback is critical to success in a self-managed environment.

First, self-management requires performance measurement since no one can manage themselves without knowing how well they are performing in the first place. There are no supervisors or managers to provide evaluations.

Second, continuous process improvement requires measurement since it is impossible to know if a process is improving or deteriorating without a mechanism in place to convey reality. Results that are declining or are not improving are often indicators of a business process that needs immediate attention.

Third, Morning Star measures performance against both perfection and reality. It’s a good bet that the world’s greatest golfer will never shoot an 18. It’s also reasonable to assume that if a golfer strives for an 18, they’ll be more likely to improve than if they strives for, say, a 78. Morning Star identifies perfect results for each and every business process, creating a vision of perfect performance for each colleague. Morning Star also identifies more realistic and achievable goals for each process. The ultimate goal is to transform work into a game and to make it an enjoyable voyage of discovery.

Self-Management: Desired Results

The first key benefit from self-management is the concept of “enlightened competition” (again, like Nucor, from the idea of competere, or “seeking together”). Self-management gives Morning Star colleagues the freedom to seek best practices from each other within a facility, from other Morning Star facilities, and externally. Annual inter-company functional area meetings provide a forum for these “compare and contrast” discussions.

A second desired result from self-management is the effectiveness, efficiency, and ultimate profitability of the enterprise created by the lofty performance of engaged and enthusiastic colleagues.

Colleague Letter of Understanding (CLOU)

One of the key self-management tools available to Morning Star colleagues is the Colleague Letter of Understanding (CLOU).

The CLOU (essentially, a performance contract between colleagues) accomplishes several things.

First, it defines overall responsibilities of colleagues in terms of the Vision, Mission, and Principles.

Second, it identifies the specific responsibilities and commitments for each colleague.

Third, the CLOU documents various colleague representations, including each colleague’s declaration of commercial competence to perform their mission.

The parties to a particular colleague’s CLOU are generally the internal customers and suppliers who engage in business process hand-offs with the colleague. A typical Morning Star colleague will likely have about six or seven CLOU signatories. These are the people to whom a Morning Star colleague owes the most in terms of time and attention.

• Overall CLOU Responsibilities

First, in addition to emphasizing the Vision, Mission, and Principles, the CLOU requires each colleague to be responsible for all business processes reasonably within their scope of awareness. Colleagues agree to take the initiative to deal with issues within their control, as well as issues that come into their field of vision, regardless of whether the colleague is normally responsible for those issues.

Morning Star has undertaken to document its business processes and decisions, identifying event triggers, information requirements, inputs, and outputs. It is incumbent on each colleague to master the processes within his or her control.

Second, colleagues agree to undertake a specific level of effort (expressed in terms of expected hours per week).

Finally, colleagues are expected to align their personal business process activities with the Vision and Mission of the enterprise.

• Specific CLOU Responsibilities

The CLOU identifies specific colleague responsibilities in the form of a matrix that defines each colleague’s personal commercial mission (again, aligned with the overall company Mission). For example, the mission of a front-end mechanic might be: “To create a vast and beautiful tropical tomato juice bowl for the evaporation process.” Personal commercial missions are often simple, mnemonic, and to the point.

The specific commitments matrix outlines the specific business processes for which the colleague is responsible, the decision authority affixed to each process for that colleague (Decide, Recommend, or Act or some combination thereof), the specific performance measures (called Steppingstones) that pertain to each process, and the reporting intervals for each metric.

There is little or no discussion of empowerment at Morning Star because colleagues have all the power they need to get the job done from the first day of work. There are no inherent barriers for anyone seeking any resource necessary to accomplish the Mission. Everyone is as free as everyone else at Morning Star to communicate, initiate action, innovate, and execute.

• General CLOU Obligations

The CLOU also contains several general obligations for each colleague. These include certain commitments to continuing education and training, notification of observed risk situations, commitment to collaboration, and appropriate handling of proprietary information.

Steppingstones (Key Performance Indicators)

Each business process needs to be monitored for performance. Morning Star calls its performance measures “Steppingstones” instead of KPIs because it considers them to be steppingstones toward perfection (even if perfection is not attained). Colleagues identify Steppingstones pertinent to their individual business processes. Each process may have one or more Steppingstones attached to it. Steppingstones may be common to several colleagues (who may be responsible for the same process), or they may be unique to an individual. The frequency of publication is appropriate to the specific process (some financial measures are quarterly; many production measures are hourly).

Each Morning Star factory historically measures a few hundred Steppingstones covering all facets of production, administration, distribution, raw materials acquisition, quality, marketing, and sales. The ultimate Steppingstone is, of course, return on assets. Without a positive return on assets over time, there wouldn’t be a company in the first place.

Steppingstones data, to the degree possible, are subject to inquiry by any colleague at any time. Usually consisting of time-series data, Morning Star strives to update and display Steppingstones data in a way that facilitates enlightened competition between colleagues at different factories, and encourages experimentation, information sharing, and the implementation of best business practices.

Trying to self-manage without receiving appropriate performance feedback would be like trying to fly a 747 without a functional navigation system. People need to know where they are relative to where they want to go. The company provides resources to help people navigate, make decisions, communicate, and act. But ultimately, people have to manage themselves and their relationships. Managing oneself and one’s work relationships around innovation and execution represents the essential core of self-management.

As business process authority Roger T. Burlton wrote in his book Business Process Management: Profiting from Process, “Morning Star is the best example I’ve seen of a mature, process-managed company. Nowhere else have I witnessed or even heard of a company that’s so driven to manage its relationships in such a natural way — totally process-empowered and a great place to work.”[2]

[1] After the final sentence in Thoreau’s Walden Pond: The sun is but a morning star.

[2] Burlton, Roger T. Business Process Management: Profiting from Process. Sams Publishing, 2001. 105.

Appendix

Morning Star Mission

Our Mission

Our Mission is to produce tomato products that consistently achieve the product and service expectations of our customers in a cost effective, environmentally responsible manner. We will provide bulk-packaged products to food processors and customer-branded, finished products to the food service and retail trade.

We will use the most appropriate tomato products manufacturing technologies available, properly assembled in new factories to take advantage of their individual strengths and economies. We will creatively match human talent and technologies to continuously achieve customer expectations for great product quality and to lower costs of operations (conserve resources). We will focus and build our talents for around-the-clock, people coordinating operations utilizing material conveying and pumping, structural, motor, electrical, automation, steam generation, heat transfer, aseptic, fluids and food formulating and preservation technologies.

Morning Star Vision

Our Vision

To be an Olympic Gold Medal performer in the tomato products industry. To develop and implement superior systems of organizing individuals’ talents and efforts to achieve demonstrably superior productivity and personal happiness. To develop and implement superior technology and production systems that significantly and demonstrably increase the effective use of resources that match customers’ requirements. To provide opportunity for more harmonious and prosperous lives, bringing happiness to ourselves and to the people we serve.

Colleague Self-Management

For Morning Star colleagues to be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers and fellow industry participants, absent directives from others. For colleagues to find joy and excitement utilizing their unique talents and to weave those talents into activities which complement and strengthen fellow colleagues’ activities. For colleagues to take personal responsibility and hold themselves accountable for achieving our Mission and shaping the Tomato Game.

Clarity of Vision

For Morning Star colleagues to develop a clear vision of perfect results and how their personal commercial mission relates to achieving our customers’ tomato product requirements. To achieve demonstrably superior efficiency in the use of environmental resources to create our products. To measure and present our performance in the context of perfect results and to use this vision to drive our decision making and actions.

Creative Advancement of Technology

For Morning Star colleagues to develop significant, creative technological advances in tomato production methods. Only when we achieve this, will we dedicate additional, significant resources to expand production or produce different products.

Values

To work with fellow colleagues, customers, suppliers and industry participants within a framework of solid integrity and openness in pursuit of voluntary and mutually beneficial transactions and relationships. To maintain our facilities in a clean and orderly condition with a pleasant appearance.

Morning Star Colleague Principles

In order to encourage, achieve and maintain an atmosphere of high integrity, trust, competence and harmony among all colleagues, customers and suppliers, each Morning Star Colleague commits to the following:

• Mission. Our Mission is to produce tomato products, which consistently achieve the product and service expectations of our customers in a cost effective, environmentally responsible manner. We will provide bulk-packaged products to food processors and customerbranded, finished products to the food service and retail trade.
• Individual Goals and Teamwork. We hereby agree to commit ourselves to the pursuit of perfection with regard to our integrity, competence and individual responsibility. In recognition of each Colleague›s personal goal of achieving happiness, each of us commits to pursue teamwork because Together Everyone Accomplishes More.
• Personal Responsibility and Initiative. We agree to take full responsibility for our actions as well as those of fellow Colleagues and our overall Mission. We are personally responsible for our training, time commitments, performance and participating in and contributing toward achieving the Mission and practicing the Principles. We commit to manage ourselves, to be principally responsible for the planning, organizing, staffing, directing and controlling functions with respect to our Mission. To personally take the initiative to coordinate our responsibilities and activities with other Colleagues, to develop opportunities for improvement and for making things happen. In coordinating with our fellow Colleagues, we commit to (a) communicate and consult with other parties who are likely to be meaningfully affected when initiating a change of any sort, (b) seek the input of others who we believe have additional and substantive expertise related to the proposal.
• Tolerance. It is understood that individuals differ in many ways — their values, tastes, moods and methods to achieve goals. It is agreed that these types of differences between individual Colleagues, which do not directly affect our Mission, will be respected and tolerated.
• Direct Communication and Gaining Agreement. Differences between human beings are a natural and necessary aspect of life, especially in the pursuit of excellence. Differences may vary from how to answer the phone, to what type of oil to use in a gearbox, to what equipment to purchase to improve operations, to whether one is following our Principles or advancing our Mission, to how a person combs their hair. To gain agreement and move forward, we agree to utilize the following process: When one Colleague perceives a difference with another, we agree to privately engage with the other Colleague as soon as practical and attempt to resolve any differences to our mutual satisfaction. As a general rule, we will not discuss such matters with other Colleagues. However, if a colleague feels uneasy directly discussing a matter regarding another Colleague, then they should to go to another Colleague to discuss alternatives for solving the issue, keeping in mind that confidence should be maintained with their chosen ombudsman.
• If either of the Colleagues do not feel the matter has been resolved to their satisfaction, then both of them agree to engage one other Colleague as soon as practical and attempt to resolve any differences to their mutual satisfaction with the help of the third Colleague.
• If either of the Colleagues still do not feel the matter has been resolved to their satisfaction, then both of them agree to engage with a contingent of approximately three (3) to ten (10) Colleagues appropriate for the matter. Appropriate Colleagues would be those in the affected work environment or those with relevant expertise with the issue at hand.
• If the issue is not resolved to the satisfaction of both parties, a summary of the issue, verification that the colleague process for gaining agreement was followed, and potential resolutions supported by named colleagues shall be immediately prepared, signed by both parties and the local CLOU Colleague, and forwarded to the President of Morning Star. The President with either (a) decide the issue and provide a written summary of the decision to both parties; (b) call a meeting with both parties and the panel; or © designate a person to decide the issue.
• In attempting to resolve differences, the following shall be given careful consideration: A) our Mission and any specific objective; B) the relevant facts, assumptions and values; and C) the method used to determine the proper direction. Other courses of action, upon mutual agreement among the affected Colleagues are encouraged; however, either party has the option of requiring the above steps to be taken at their request.
• When there is a course of action has been determined for the facility Colleagues, or specific Colleagues, it is incumbent on each Colleague to follow that course of action. If new, material information becomes available which could change the chosen course of action regarding any particular matter, then it should be presented for consideration and a new determination. Until a new course of action is determined, each Colleague agrees to follow the chosen course of action and work energetically toward achieving the Mission in the manner decided.
• Caring and Sharing. To the degree Colleagues care about themselves, their friends and relatives, fellow Colleagues, suppliers, customers, the environment, the Mission, Principles and facilities, etc., each of us will come closer to achieving our personal goals. In caring for others, each colleague commits to (1) share relevant information with others, (2) take initiative to forward information that they believe may be helpful to another’s activities, even if it is not asked for, and (3) responding to respectful inquiries made of them by other Colleagues in a respectful and responsive manner.
• Doing What is Right. Live, speak and endeavor to find the truth.