The art of the self-managing teamDecember 5, 2012: 5:00 AM ET
How companies can weather changes in their starting lineups.
By Geoff Colvin, senior editor-at-large
FORTUNE -- Talk of a dynasty swept the baseball world recently when the San Francisco Giants won their second World Series in three years. But hold on -- only one of this year's starting players, catcher Buster Posey, was a starter on the team that won two years ago. How can any team be a dynasty when it isn't even the same team from year to year?
That question has an answer, and getting to it reveals one of the most important and most overlooked issues for companies struggling to get their own teams performing better: Teams don't last. Even great ones -- especially great ones -- break up as members spy opportunity elsewhere. Yet some organizations still manage to get long-term great teamwork from ever-shifting teams. We all rightly obsess over choosing the best members, but as management authority Ram Charan says, "Choosing does not build a team." We won't achieve much if we scant the far deeper issue of how our teams can build lasting strengths that transcend who's onboard.
Enlightenment resides in unconventional organizations with the courage to ignore the usual models. We can learn much from nonbusiness squads such as firefighters and emergency-room crews, as well as from companies such as W.L. Gore, Brazil's Semco, steelmaker Worthington Industries, and Morning Star, the world's largest tomato processor. The most striking trait of these highly effective teams: They're radically self-managing. At all the companies mentioned above, for example, hardly anyone has a title; workers are empowered to make decisions without consulting (or courting) a boss.
Orthodox management says it's all impossible, yet these companies have grown and prospered for decades. How do they do it? In widely different circumstances, they've all found their way to the same key principles.
Hierarchy, often informal, is based entirely on competence
There are no job titles, but there are leaders, and everyone knows who they are. They're the ones who have served their colleagues best, have offered the most useful ideas, and have worked hardest and most effectively for the team's success. At W.L. Gore, they say you find out if you're a leader by calling a meeting and seeing if anyone comes.
Even in cases where leadership positions are explicit, they're still transparently competence-based. Emergency-room teams, for example, observe a strict hierarchy based on position: attending surgeons at the top, then fellows, then residents. But no one disputes that the positions reflect skill levels.
Goals are clear
Most corporate teams have only a hazy notion of what they're trying to achieve. The most effective ones always know exactly. That's easy for teams on a baseball field or at a burning house, but corporate teams can be just as clear. At Morning Star, as strategy guru Gary Hamel explains, every employee negotiates a "letter of understanding" with the colleagues who are most affected by his or her work. It's highly specific, detailing how the employee's performance will be measured in up to 30 activity areas. When every member finishes the exercise, that team knows precisely what it's on the hook to accomplish.
Values are shared
Effective teams are actually passionate and specific about what they value. Often it's the sacrosanct imperative of keeping commitments to co-workers. In an elite trauma resuscitation unit studied by Wharton's Katherine Klein and colleagues, where team members change from moment to moment, all are united not only by a laser focus on the patient but also by valuing the importance of developing future leaders for the unit.
Teams with those characteristics can keep going without formally designated leaders, maintaining high performance even as members change through the years. It's not that the identity of the members doesn't matter. On the contrary, it matters hugely -- and teams like these, being self-managed, choose their own members much better than any official leader could. The key insight for leaders at traditionally organized companies is that such teams aren't loosey-goosey, unstructured, or chaotic. They're just the opposite: focused, disciplined, and more effective over the long term than typical teams. In an increasingly competitive global economy, those advantages are more valuable every day.
This story is from the December 3, 2012 issue of Fortune.