Digital Firm Levels Executive System

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Digital Firm Levels Executive System
Ilya Pozin at West Hollywood’s Ciplex.

Ilya Pozin has decided to make his company “hierarchy free.”

He got rid of the chief executive position and eliminated all job titles, work schedules and management positions. Departments such as sales and graphic design were disbanded. Finally, he implemented a new compensation system so his employees would be motivated by their accomplishments instead of money.

Ciplex, a digital studio that Pozin co-owns in West Hollywood, builds websites and manages search-engine marketing campaigns for its clients. The company has 46 employees. He adopted the hierarchy-free model three months ago and the process is still ongoing.

“When I announced this, everyone thought I was crazy,” Pozin said. “But before, it took four to six months to build a typical website, and this system reduced that time to four to six weeks.”

Ciplex is now organized into three teams with 12 to 14 people each. A team has graphic designers, computer programmers and marketing professionals as well as one salesperson who lines up projects and handles billing.

Every two weeks, Pozin establishes work goals for the teams, but otherwise they have autonomy. The group divides up duties, establishes priorities and schedules meetings – all functions that managers used to perform.

In a traditional agency, customers deal with a project manager who then directs designers and programmers. That system has bottlenecks and causes miscommunication, Pozin said. With the team system, each member deals directly with the client as needed. For example, if a customer wants to change the layout of a page, he talks with the graphic designer.

This change accounts for the time-savings in projects. But the team structure also saves Pozin headaches by handling issues such as vacations and conflicts among co-workers. If an employee proves incompetent or argumentative, the team can fire him or her in a process that Pozin likens to the TV show “Survivor” – where a contestant gets voted off the island.

Pozin said he and partner Nikola Mickic function as a support system, along with an accountant and an office staffer, to make sure that the teams have what they need to do their jobs.

While setting up the compensation system, Pozin interviewed employees and asked how much they would need so that money wouldn’t be on their mind. Most employees asked for a few hundred dollars more every paycheck and Pozin agreed. A few employees asked for significantly more money and lost their jobs.

“If you’re going to do this culture flip, you have to go all in,” Pozin explained. “This system doesn’t work unless you take money off the table.”

He cited studies that show people can be motivated by autonomy, mastery and a higher purpose if they’re not concerned about money. The team structure provides autonomy – no bosses and lots of say in determining work hours and responsibilities. Mastery is the freedom to solve problems, which the team and direct communication with customers provide. The higher purpose is left to the individual employee.

Pozin admitted that the system doesn’t work for everyone. In addition to money-driven employees, former bosses find it hard to stop acting like bosses. For that reason, Ciplex’s former project managers also lost their jobs.

Overall, the hierarchy-free system lowered Ciplex’s payroll cost by about 25 percent. Savings came from eliminating manager salaries but they were partly offset by raises for remaining workers and new hires, Pozin said.

Roy Sivan is a website developer who has worked at Ciplex since October. He said the new system makes his work more interesting and allows him to manage his time.

“It’s up to me on a daily basis whether I want to work 12 hours or three hours that day,” Sivan said. “It averages out about the same – 40 hours a week.”

Sometimes the firm has to train customers in the structure. When customers demand to talk to the president and a team member explains that the company doesn’t have one, it sometimes makes the customer even angrier. Pozin has intervened to resolve these issues, and so far Ciplex hasn’t lost any customers because of the new system, he said.

Julien Plouffe, chief executive of Moonglow, a jewelry maker in Binghamton, N.Y., that hired Ciplex to build a website, said dealing directly with programmers proved quick and easy.

“When we made suggestions, the developers would post it in minutes, ask if we liked it and then move on to the next thing,” he said.

Moonglow’s jewelry displays the moon as it appeared on a specific date, such as a birthday. Its website features a moon-face calculator that Ciplex created faster and with more accuracy than the company that built Moonglow’s previous site.

Edward Lawler, director of the Center for Effective Organizations at USC’s Marshall School of Business, said the elimination of bureaucracy has become popular in management circles, but some of Pozin’s strategies are fairly radical. In particular, Lawler questions an employment system that eliminates the powerful tool of compensation from a company’s motivational toolbox.

“When you talk to people age 25, you’ll get a different compensation number than people aged 45, based on lifestyle and not necessarily skill,” he said. “You’re counting on motivations that are tangible. It may work well for this company, but I would be hesitant to make that system universal.”

Ciplex has grown about 35 percent a year since its founding in 1999 and had revenue of $4 million last year. Pozin believes growth will accelerate significantly this year because of the new system.

Hierarchy-free organization won’t work in factory settings, Pozin said. But it offers competitive advantages for the type of small talent-based advertising, PR, consulting and technology companies that abound in Los Angeles.

There are still some refinements to be made. For example, he recently decided to allow employees to self-select job titles as long as they don’t include hierarchal terms such as “manager,” “director” or “senior.”

How enthusiastic is he about the hierarchy-free motivational techniques, such as the emphasis on autonomy? Pozin said he plans to use them to raise his 18-month-old daughter.

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