This case study is about the horizontal management model developed and implemented at VAGAS, a Brazilian software company for the recruitment market, and its main underlying ideas. It describes the current stage and a bit of the story of a work in progress since 1999, in a continuous and still very active invention and reinvention process, learning from errors, assimilating knowledge from experience, benchmarking with other models, improving the system and adapting it to the new needs of a fast growing company.
VAGAS (which means jobs in Portuguese) is the Brazilian market leader in e-recruitment solutions. Its mission is to be the all-encompassing tool for businesses to attract, source and select the right employees, and its value proposition is based on three pillars: software tools to manage the recruiting process, candidate sourcing and employer branding. VAGAS envisions a world where people can choose the best companies to work with and companies can choose the best people to work with them.
Considering its value proposition, VAGAS offers an integrated solution wherein:
- Tools for the recruiting process are provided through VAGAS e-partner, an advanced and comprehensive ATS (Applicant Tracking System) software aimed at companies of all sizes and segments, and licensed in the SaaS (Software as a Service) model. This software was VAGAS’ original core business.
- Candidate sourcing is provided through VAGAS.com.br, one of the largest and best-reputed Brazilian jobsites, which is available only to clients that use the complete VAGAS package. Additional sourcing is achieved via several vertical communities powered by VAGAS' technology and a very strong social network presence.
- Employer branding is provided via marketing consultancy - helping clients to diagnose and structure their EB strategy - with several online tools, including the “Careers” services in the companies’ websites and social network presences.
Although the value proposition is directed to the organization – responsible for 97% of all revenues - it must be noted that providing the best experience for candidates, directly and indirectly by its clients, is a key success factor for VAGAS. A large share of its investments is aimed to provide relevant content and services, always free of charge, for candidates. An interesting product is VAGAS Profissões, a site with content focused on the discussion of professions in Brazil.
- The VAGAS ecosystem receives an average of 300K unique visitors daily according to Alexa, ranking vagas.com.br among the 200 largest sites in Brazil and 6000 globally. These figures place VAGAS as one of the leading Brazilian recruitment sites and services and are even more expressive considering that more than 90% of all visits are organic.
- With 2400 clients, including 65 of the top 100 companies in Brazil (according to Exame Magazine Maiores e Melhores 2013 ranking) VAGAS is the absolute e-recruitment market leader in Brazil.
VAGAS has a very strong presence in social networks:
- Twitter’s largest career channel globally: 400K followers in @vagas, and another 400K in 50+ vertical channels.
- Facebook’s largest career fan page in Brazil: 400K fans.
- LinkedIn’s largest discussion group in Brazil and 9th globally: 450K members in the VAGAS.com.br discussion group.
- In its 15 years of existence, VAGAS has never grown less than 24% a year and since 2009 it has always been ranked among the 100 Fastest Growing Small & Medium Size Companies in Brazil according to the annual survey by Exame PME Magazine and Deloitte.
- VAGAS has 160 employees.
All figures are as of Feb. 2014
From practice to theory
First it must be said that the word “horizontal” only made its way into VAGAS’ vocabulary much after it was founded. In its startup years the team was small and hierarchy was simply not a question: all members were proactive in assuming responsibilities and making decisions. The pleasure of – sometimes emphatically - discussing ideas until consensus was achieved was part of the culture. The team shared strong values and was genuinely engaged in making a difference.
VAGAS’ approach to entrepreneurship seemed to work: long before considering or understanding the benefits of having horizontal or vertical management, despite being very small in a highly competitive market and with a zero marketing budget (the scarce resources were all directed to R&D), VAGAS “naturally” began its rapid growth path supported primarily by the word of mouth of clients that recognized it as a trustworthy partner engaged in their success.
As the team grew above thirty employees the operation began to be structured and the first leaders were assigned managing positions in their areas. But their role was a recurring controversy because the increasing centralization of decisions and use of hierarchical authority began to affect the team’s strong connection to the company’s mission and to threaten the “spirit of a small company” that VAGAS believed to be a major competitive advantage, responsible for its exceptionally strong results.
Progressively it was understood that it was necessary to maintain an “as open as possible” work environment where employees could have an active voice and share the responsibility for decisions, with a high degree of freedom and autonomy. This required a “light” management structure. Eventually managers formally lost their command authority and decisions had to be negotiated.
Perhaps at this point VAGAS started using the word “horizontal” to describe the management model that was emerging but still far from being fully understood, developed and adopted. This construction was - and still is - a long process of invention, experimentation, learning from errors and achievements. It happened under the pressure of a company growing at a very high pace, and – most of the time - with more than half of the team being for less than a year at VAGAS.
A matter of values
Recently – over the year of 2010 - VAGAS finally understood what it was aiming to build: a professional environment where individuals could live their own values together with other individuals that shared these values, while being actively engaged in a common relevant project, to make a difference. VAGAS finally realized that much of its achievements could be credited to essentially being a values-oriented organization and was in search of a management model to keep it (the “small company spirit”) sustainable.
This model could only be horizontal because in vertical environments, by definition, the responsibility for decisions and their intrinsic values is assigned to management levels. This understanding eventually led to the “radicalization” of VAGAS’ horizontal model and all remaining leadership delegation and command authority were abolished.
Therefore, VAGAS is horizontal because this is the best-fit environment for a values-oriented company. VAGAS’ members are daily confronted with the responsibility of making decisions - and facing their inherent values - that in hierarchical structures would be assigned to higher management levels. This daily experience of shared values is considered to be a key success factor for VAGAS’ strong reputation and ultimately was a most positive drive for its consistent growth and market leadership.
The maturation of a common methodology
For years the need for a common methodology to sustain the horizontal model with VAGAS’ increasing population was clear, but only in the beginning of 2013 the first version was finally apt to be implemented throughout the company. Before that, each area interpreted the horizontal management their own way, generating a rich selection of successful and not so successful stories. These experiences, together with information gathered from several different sources - including benchmarks with other horizontal experiences - were used in a long process of discussion, invention and refinement to create a methodology best fit for VAGAS’ culture. Although dealing with all the complexity of an organization, it had to result simple, practical and efficient. The outcome was a methodology that reads merely as: “Each team meets fortnightly to analyze the evolution of key indicators of the achievement of its purposes and conceive forms to improve them”.
The implementation of this methodology is now in its third version, that is briefly described bellow in the “Self-management – and no predefined targets” topic. It differs from the previous versions basically for being hosted in VAGAS intranet and for offering better standard tools for the management meetings. Another success factor is the presence of an independent external consultant with HR and business skills to actively participate in all these meetings and help to develop the necessary entrepreneurial approach and strategic vision.
The methodology is now achieving maturity and most of the company now operates “naturally” based on it. A recent preliminary survey indicated that 74% of the team has a favorable opinion about the methodology while only 8% are not yet satisfied.
VAGAS is structured as a “radically” horizontal organization with no hierarchy and no command structure within its participative environment, with a very high degree of freedom and autonomy for its employees, engaged in the common pursuit of the company’s mission.
The decision process throughout the company, independently of taking place in formal meetings or elsewhere, is based on consensus building. It is not a democracy in the sense that decisions are never made by a majority of votes: consensus, i.e., the agreement of all participants must always be achieved.
All people at VAGAS are expected to open controversies within and outside their areas and proactively engage in the process of building consensus. This behavior assumes the pleasure of debating ideas while maintaining an attitude of detachment, realizing the privilege of having others caring about one’s ideas and the satisfaction of “winning or losing” a good discussion.
A very short definition of VAGAS’ management model is that it is a place where "individuals are empowered to do whatever they want BUT everybody has everything to do with that”. And the underlying organization model is of “a community of people engaged in a common project: to accomplish the mission of the company in an environment that provides both professional achievement and enjoyment”.
Self-management – and no predefined targets
The company is structured in self-managed teams responsible for functional areas (e.g., Sales, HR, R&D) and, orthogonally, in multidisciplinary committees (e.g., Information Security, Culture). There are also temporary commissions created to manage specific objectives (e.g., one commission for each Strategic Drive, as described in the Strategic Planning topic bellow).
There are no formal rules, but the common situation is that a person at VAGAS divides her or his time (perhaps 75:25) as a member of one functional area and other attributions. There are also no rules to form committees and commissions, but the members are normally limited to 8 and chosen by the involved areas; an interesting case is described bellow for the above-mentioned Strategic Drive commissions. It is expected that the composition of the committees be reviewed at least once a year, although it not necessary to be a member to “occupy an empty chair” and be an active participant in its decisions. Teams are responsible for continuously improving their area’s achievements. They are strongly result-driven but there are no predefined targets. Not even the sales team - that has performed exceptionally well in VAGAS’ fifteen years - has ever had predefined monetary goals. The teams, with an entrepreneurial approach, measure and analyze the evolution of key indicators that reflect the achievement of their clearly defined purposes (their “businesses”) and create and implement strategies to constantly improve them. The focus is the on the process: results are harvested as a consequence.
The self-management methodology presupposes two-hour meetings twice a month with the presence of the complete team and always has “empty chairs” to be used by anyone interested in contributing to the discussion, individually or representing another area (people that “have everything to do with that”). These meetings begin with a brief analysis of graphs that represent the evolution of key indicators of their purposes and proceed with the discussion of ideas that may have a positive impact on their growth. Most strategic decisions are made in these meetings.
The graphs with the evolution of the key indicators of all functional areas, committees and commissions are available to the whole company via VAGAS’ intranet.
Although there are no formal leaders, VAGAS is not a leaderless company. At VAGAS nobody is designated leader or carries such a title: leaders emerge naturally as they become references in their areas, fields of knowledge, strategic thinking etc. A recent survey showed that 94% of the team recognizes at least one person as a reference for their work. This is also emphasized in VAGAS’ recruiting process that always aims to bring people who have something to teach to the group, and thus are potential leaders in these matters. In this sense, there are no limits to the quantity of leaders at VAGAS.
Recruitment and dismissal
Each team has the responsibility of hiring and also of dismissing team members. These processes can be demanding since it is central to VAGAS to not only select distinguished talents but also to try to insure that they share the same basic values, including the endorsement of the horizontal model.
The hiring process is “conventional” in its first phases and is performed by the HR team with the help of specialists from the hiring team (the internal client). Considerable effort is invested in placing the candidates in VAGAS’ environment during the interviews in order to identify viable cultural fits from both sides. The finalists (usually three) are then interviewed by the hiring team and by other people (usually including one of the founders). The final decision is made in a forum of all people that interacted with the candidates and, as all other decisions, require building a consensus or restarting from scratch.
Dismissal processes also require consensus, and – except when motivated by a strong misalignment with VAGAS’ culture and results in the decision of immediate dismissal – are preceded by feedbacks, and may involve special coaching and other special development initiatives with the help of the HR team.
At VAGAS, the compensation policy is aimed at creating an environment of fair salaries relative to individual contributions to the achievement of the company’s mission. This goal is somewhat frustrated by Brazilian laws that limit the extent to which this model can be implemented (for example, salaries in Brazil cannot be reduced).
The evaluation and compensation methodology is primarily based on a 360o assessment of four pillars: entrepreneurial vision of the VAGAS’ business, focus on achievements, understanding and living the company's culture, and technical skills. Each person is evaluated by all members of her/his team (including self-evaluation) and by any other members of the company that wish to contribute with the assessment. In 2013 each individual received an average of 17 evaluations.
The process is supported by software specially developed for the assessment and the results – the individual evaluations of all members by VAGAS’ community in each of the four pillars and their ranking - are accessible only to a compensation committee that uses this data together with other information (market references for salaries, for example) to review all wages of the company.
At the end of the process every person receives an individual feedback from an HR team member, and each person of the HR team receives his/her feedback from an external consultant that takes part of the whole process.
This assessment occurs yearly.
Strategic planning - and no predefined budget
VAGAS’ evolutionary strategic planning and its bimonthly follow-ups are also a participative process. This strategic planning methodology was created and refined over four years with the help of Dr. Pedro Zanni, professor at Fundação Getúlio Vargas, a leading Brazilian business school.
The process begins in late November, with “World Café method” discussions of the main topics by all interested persons. The discussions continue online during December, and in early January a small group of 16 people chosen with the help of a survey (asking the team to point out the individuals they consider to have the best strategic vision) for a one-week immersion.
In these five days all information gathered in the first phases is used as input for a in depth analysis of the company’s results, value propositions, clients and competition, external trends, strategic alternatives, etc. This finally results in the construction of VAGAS’ strategic drives with their respective strategic objectives, each one with a qualitative indication of its expectations for the year. Different of the usual outcome of strategic planning processes, these objectives are not broken into initiatives or projects to be developed during the year. So there is also no annual budget.
These results are then presented to the whole company.
The responsibility for the implementation of the plan is then delegated to strategic drive commissions that are formed to manage each drive and its objectives using VAGAS’ self-management methodology.
As an example, VAGAS’ 2014 strategic planning involved about 70% of the company. It resulted in eight strategic drives with three or four objectives each. An average of fifteen people applied to participate in each of the eight management commissions, and they themselves chose the final six members based on criteria like the representation of the main areas involved with the strategic drive. It must be remembered that “empty chairs” are always available in management meetings and are frequently used by individuals interested in specific strategic drives, objectives or projects, including the participants of the immersion phase.
Exactly as the management of the functional areas, the accomplishment of the strategic drives is a dynamic process that occurs during the year, in the commissions’ fortnightly management meetings. The projects and initiatives for each strategic objective – together with their specific budgets – are created in these meetings, from the analysis of the evolution of key indicators, and their execution is then negotiated with the respective areas.
Every two months VAGAS engages in two days of strategic planning follow-up meetings in which each commission has two hours to present and discuss the indicators of the evolution of its respective strategic drive and objectives. These meetings are open to the whole company and the engagement is noteworthy. All participants have an active voice and may open controversies to be resolved through consensus.
Culture and Innovation
VAGAS breathes innovation daily and not only because of its culture of building and strengthening ideas through controversy.
For example, at least once a week there are guests lecturing about subjects that normally have no relation to the business.
Already in its fourth year, Arte VAGAS – an art project aimed at Brazilian young artists - is present on all walls and has a new artist every two or three months with an individual exposition and a lecture about his/her art and vision.
Also very relevant for VAGAS are the two yearly celebrations, in July and in December, usually comprising the contact with some relevant aspect of Brazilian culture, e.g., regional or native ethnic costumes, music and dances.
Consensus is probably the most controversial aspect of VAGAS’ culture. Several horizontal initiatives explicitly mention consensus as being impractical* due to the inefficiency caused by endless discussions and the power that anyone has to block a decision.
These problems do occur at VAGAS but only to a relatively small extent. They are addressed by several practical approaches to the consensual process and by a proactive presence of the HR team in the self-management meetings to identify behavioral difficulties and to reinforce the benefits of a "controversy with an attitude of detachment to achieve consensus" mindset.
Considering efficiency, it does happen that a simple decision takes hours of precious time until consensus is reached. In such a case a vertical decision could certainly be much faster, as long as it does not involve to many hierarchical levels and is treated with adequate priority by the decision makers. So it also may happen that a slow horizontal decision is faster than its vertical equivalent. And it must be noted that horizontal decisions may still be more efficient because the ideas were thoroughly examined and tend to be easily backed by the team
It is also very important to note that “consensus” does not mean that large groups (or all of VAGAS’ employees!) have to meet and discuss every decision in the company. As an extreme counterexample, one sole person with discernment may “presume consensus” and make a decision, as long it is transparent and reversible so that a controversy may be opened “a posteriori”. It is therefore expected that all decisions are proactively informed to the affected persons or areas, so they can eventually open controversies – to be resolved by new consensus – if there is a disagreement.
This example illustrates VAGAS’ daily practice: depending on the complexity and the consequences of a decision, they are made by smaller or larger groups of people that may invite still more participants to share the responsibility of achieving consensus. And how does someone know how many people are needed to engage in a decision process? The answer is usually simple: through experience. The greater the uncertainty posed by a matter more experienced people should be involved to help to achieve a better decision.
Finally: what happens if consensus is not reached? First, it may happen that people exercise their detachment attitude and decide to agree with a decision they believe that they can engage in, although preferring another one. If the discussion reaches an impasse the group will usually decide to invite new participants– if possible recognized by their expertise (i.e. “leaders”) in the matter - that may help to enlighten the subject and help to achieve consensus. Otherwise, well, at VAGAS there are decisions that are postponed, waiting to mature to the point of finally earning a consensus, and that is normally not a problem.
* Brian Robertson, the creator of Holacracy, at 7:50 of his TEDx video, mentions his consensus experience as a complete disaster and states that it only leads to “long and painful meetings and never getting nothing done”. Frederic Laloux, in the “The keys to self-management. A coherent set of structures and practices to get rid of bosses, hierarchy and the pyramid.” story in the MIX, makes a thorough analysis of the problems of consensus and the virtues of an advice process where experts of all affected areas must be consulted in the decision process.
For some people the responsibility of self-managing their area, or of opening controversies, or of being questioned by people that don’t have their experience or expertise, or of having to discuss simple matters, or of having to decide what to do instead of being told to, may not be easy. For others it may be difficult to be responsible for her/his own career (there are no career plans at VAGAS) or not to have the perspective of growing in hierarchy. For these people VAGAS’ horizontal model may not be adequate, and eventually they decide to quit the company.
Some other people may misinterpret the “I do whatever I want, but everybody has everything to do with that” as “I do whatever I want and nobody has nothing to do with that”, and this happens to be the most frequent reason for a team to dismiss a member.
In other words, the cultural aspects of horizontal management, like the pleasure of debating and constructing consensus, or the correct understanding of the limits of autonomy, are perhaps the most challenging aspects of the horizontal model.
At VAGAS one of the main purposes of the HR team is to be an active reference for the culture, including the horizontal model and methodology. Thus it has a central role in dealing with these challenges, with instruments that include special feedback projects, individual coaching, the presence and evaluation of the dynamics of the self-management meetings, hosting regular open meetings to speak about culture, posting weekly “VAGAS Vitamins” that address very practical situations in which the culture could be misunderstood, and several other initiatives.
Another challenge is certainly the scalability of the model. The belief at VAGAS is that it is adequate without important modifications for a two to three times larger company, and that addressing this question is not yet a priority.
Horizontal is the best-fit environment for a values-oriented organization. Furthermore...
Horizontal companies are potentially stronger because management is distributed and less dependent on few people.
They also save considerable expenses in maintaining a management team.
Additionally there’s no waste of valuable energy – a very considerable cost - in internal struggles between individuals to ascend in hierarchy, which is the way people normally are recognized and grow professionally in vertical structures.
Quite the opposite, the horizontal environment is naturally collaborative, new talent is hired and information flows without inappropriate internal competitive concerns, so focus remains on the mission of the company.
A two weeks management cycle - including the execution of the strategic plan - results in a most flexible and adaptable organization, fit for a "disruption economy".
Hiring new talent on the basis of “having something to teach”, that could be a threat for an individual to grow in a hierarchical organization, is a natural drive for the team’s professional growth if it is horizontal.
A company with a large contingent of people with management responsibilities, carrying its DNA, is certainly stronger and more competitive.
There is little need to invest in motivating employees that are empowered, work with a high degree of freedom and autonomy, have an active voice, are not stressed with imposed artificial goals, practice shared values and are engaged in a meaningful common project. Most of all, they’re responsible for building their own professional environment.
A company that values controversies and detachment in a consensus-building culture is naturally innovative and creates a very strong foundation.
VAGAS is structured horizontally because it creates a values-oriented, strong, competitive and efficient company. That relies on people that are most respected as individuals as they engage in accomplishing a meaningful common project with other people that share the same basic values and nourish their human potential in a horizontal environment. That creates a values-oriented…
This is a strong and enduring virtuous circle and the ultimate motivation for VAGAS to pursue the practical accomplishment of a truly horizontal organization.
I would like to recognize the fundamental and proactive backing of Sidney Monreal Martin, Érika Domanoski, Pedro Zanni and Tiago Kaphan, also as representatives of a very large – and impossible to nominate - contingent of members of the team, formal and informal consultants, friends and family, that had and continue to have an active role in opening and engaging in the controversies that accomplish VAGAS’ dream.
I would also like to thank Linda and David Smith, Kety Shapazian, Germán Alfonso Ruiz, Alexandre Pellaes and Carol Kaphan for their help in improving this text and also for reducing its Brazilian Portuguese accent!
The contribution of two authors was very important for VAGAS’ process because they reassured the strategic importance and feasibility of the horizontal model: Philip Kotler and Gary Hamel lectured in Brazil in 2010, a very special moment for VAGAS, and their books “Marketing 3.0” and “The Future of Management” still remain as important references for the company. Other influences include Steven Levy’s “In the Plex” and Ricardo Semler’s “Virando a própria mesa”.
More insights about VAGAS may be found visiting www.vagas.com.br , www.vagas.com.br/profissoes/ , www.vagas.com.br/forumvagas/ , www.facebook.com/vagascombr , www.twitter.com/vagas , www.linkedin.com/company/vagas-tecnologia.