The Way of Pez One Year Later

About a year ago I introduced our culture handbook, called the Way of Pez, as an experiment in running a company remotely, with minimal managers. The goal was to eliminate the inefficiencies present in communication and coordination over a hierarchy, while also saving on labor costs.

On our way to 20+ employees, we’ve shown that it’s possible to grow a flat organization that is efficient and healthy. Three key factors made this possible:

1. A well-defined culture that emphasizes learning and process over results
2. Chatbots that automate many tedious management functions (these are our products)
3. Leadership maturity (I had to grow up)

This article describes our culture, which is built on four pillars: self-determination theory, social and emotional learning, lean production, and teaching-as-management. The first three are frameworks devised by others, while the fourth is my own invention. The true innovation is combining these together to create a sustainable organization designed around intrinsic motivation and continuous improvement.

Self-determination theory

SDT attempts to explain the drivers of intrinsic motivation. People engaged in labors of love have high intrinsic motivation since there are no external forces motivating these people to do the work. This is the opposite of extrinsic motivation, where people are motivated by reward and punishment. Money and fear are two tools that extrinsically motivate people. Extrinsic motivators are generally unsustainable and create behavioral distortions (greed, anxiety). SDT, therefore, provides a framework for motivating people in a healthy way. The theory posits that three key factors drive intrinsic motivation: autonomy, competence, and belongingness (a.k.a. relatedness).

Individuals with a sense of autonomy feel that they can make their own decisions regarding how to accomplish a task. While employees may not necessarily decide what to work on, they are free to choose how to do the work and usually in what order. In contrast, people that feel they are being micromanaged lose their sense of autonomy because every decision and action is controlled.

It isn’t enough that people feel a sense of autonomy. Intrinsic motivation also requires a sense of competence. If tasks and challenges seem insurmountable, individuals can feel demoralized and lose confidence. On the other hand, tasks that are too easy seem boring and tedious and people may feel restless and stagnant. So work goals need to be designed like learning goals that are just slightly above an individual’s ability and comfort level.

Without support and camaraderie, even challenges within reach may seem daunting. A sense of belongingness can often keep people motivated to persevere through difficult challenges. Supposedly, Buddhist monasteries are designed to create a sense of belongingness to help monks persevere and maintain their commitment to the practice. In contemporary society, something similar happens at the gym, where many people go primarily for the camaraderie and the soft encouragement that comes with it.

Social and emotional learning

Intrinsically motivated employees lead to consistent productivity and a healthy form of loyalty. But it’s not the whole story. Organizations are built by people and are only as healthy as the relationships within the organization. Unfortunately how to establish and maintain healthy relationships is not something most people are taught explicitly. Instead, we are expected to figure it out as we grow up. But this is not optimal and can take decades (at least from personal experience). Social and emotional learning is a framework to teach students these necessary soft skills oft ignored in formal education.

SEL emphasizes five skills including self-awareness, self-management, social awareness, responsible decision making, and relationship skills. Two decades of research have shown that these skills help people perform better (academically) and behave more responsibly, leading to an astounding ROI of 11:1. While SEL was initially developed for high school students, I’ve found it to be equally valuable for people entering the workforce. SEL provides a toolkit for maximizing self-determination.

1. Self-awareness

We often do things without knowing we are doing them. For example, we are rarely aware of our breathing even though we are always doing it. The same is true with our emotions and behavior. It develops a sensitivity to our self, so we are more aware of what we feel, think, and do.

In a work context, it can translate into noticing which tasks and activities do we gravitate towards, how much time we spend on a task, how often we are being distracted, which activities (or people) frustrate us, etc. Developing self-awareness can help people break out of unhealthy habits and also recognize behaviors that prevent them from learning and/or growing.

2. Self-management

To change unhealthy or unproductive behavior requires more than being self-aware. For example, Alice may know that she is easily distracted by social media, but this knowledge on its own won’t help her address the issue. Tangible change comes from self-management, which is a combination of discipline, will power, and perseverance. People who can self-manage tend to have a high degree of autonomy because they are reliable and consistent in their work. In our example, Alice must exercise self-management and stop checking social media every five minutes. Brenda may realize that she often forgets to follow an agreed-upon process. By improving her self-management, she printed out a reminder for her desk that lists all the steps to follow.

3. Social awareness

Humans are social creatures. Every interaction we have affects both parties. Social awareness heightens our awareness of how our behavior can affect others. For example, Carmen has the self-awareness to notice that sometimes she is stressed in the office and complains a lot. Her social awareness tells her that when she openly complains, it stresses out her colleagues. It requires self-management to refrain from complaining or work from home that day.

4. Relationship skills

Having awareness and discipline tends to improve relationship skills, since it is easier to sympathize and empathize with others. Good relationship skills also mean being able to set clear expectations and healthy boundaries. This requires an understanding of yourself, what you want and what you expect from others. It also requires empathizing with others and having a sense of what they want and what their expectations are.

5. Responsible decision-making

Mark Twain said that good decisions come from experience, and experience comes from making bad decisions. By exercising SEL skills, responsible decision-making can be achieved without the pain of making bad decisions. Good decisions require an understanding of goals and constraints and the ability to weigh the benefits and disadvantages of different options. Having self- and social awareness helps highlight the motivations of each person involved and how decisions will impact them.

Here’s an example of how SEL skills tie together in an office environment.
Brenda realizes she is unproductive due to an open floor plan. She knows that most of the discussions around her are work-related, so she chooses to wear headphones as a solution. The headphones help some but not enough, so she holds a discussion to talk about noise in the office and what to do about it. It turns out others have also been frustrated by it, and they decide to allow working at home a few days a week so people can have quiet time.

Lean production

Most organizations have a mission. Whether an organization can achieve its mission is partly a function of how well organized it is. Inefficient organizations are filled with waste and unnecessary work. This faff takes away time from more valuable work and simultaneously breeds discontent.

Lean production provides a framework for continuous improvement by identifying and eliminating waste. Two aspects of Lean influence the Way of Pez. Lean focuses on maximizing production flow, or the rate at which things are produced. Achieving consistently high flow is the real goal, as opposed to setting arbitrary quantity targets. Flow is maximized by eliminating waste from a process. The seven wastes of Lean itemizes different forms of inefficiency in production.

Here are some examples for each types of waste:

Transportation —sending hard copies that could be electronic
Inventory — unnecessary hard copies stored, open projects, unused records in the database
Motion — walking to an officemate’s desk to communicate with them, searching for files or information
Waiting — waiting for the system to respond, waiting for someone to approve something before proceeding with work, waiting for meetings to begin
Overproduction — making extra copies, creating useless reports, failure to prioritize, overestimating time for a task
Over-processing — excessive reviews and approvals, redundant data entry, overcomplicating things
Defect — incorrect or missing information, data entry errors

(TIMWOOD for short) 🤓

These apply equally well to knowledge work. Many of our chatbots aim to eliminate TIMWOOD in knowledge work. Kanban boards provide a communication mechanism to minimize waiting.

Teaching as management

The fourth pillar of the Way of Pez is my own invention. Teaching as management eschews command and control structures in favor of leadership and mentoring. The key is to create a safe space for learning, which means allowing people to make decisions, even if they aren’t optimal. As Mark Twain famously said: “Good decisions come from experience. Experience comes from making bad decisions.” Learning requires failure, which in turn requires managers and leaders to not punish failure or sub-optimal outcomes. Punishing failure creates fear and paralyzes people into inaction. Instead, failure is an opportunity to teach.

TAM only works when managers are actively engaged. It’s essential that feedback is provided on demand, shortly after a failure or when someone gets stuck. Generally, I structure tasks in ways that can appear like homework problems. The key is to develop competence and confidence early on in a process before people spend too much time. Otherwise, there’s a lot of unnecessary waste.

The road ahead

I learned a lot about management science and people ops in 2019. The Way of Pez has worked well for a team of around 15 people. As Pez.AI grows, the latest challenge is adjusting the Way of Pez to scale to 50 people. The big challenge is how to maintain a supportive culture of learning and collaboration while creating a structure to minimize communication inefficiencies. Thankfully, we are well-positioned to tackle this challenge using our chatbots as key ingredients.

We’re a little ways down the road but we’d appreciate your feedback and comments. Let us know what you think or give us a clap. 👏

Brian Lee Yung Rowe is founder and CEO of Pez.AI, a chatbot company automating management one bot at a time. Expert, a digital concierge, answers employee questions. Proctor, a virtual project manager, oversees Kanban boards. Interviewer conducts structured interviews to all candidates. Learn how our bots can increase your workplace productivity at www.pez.ai 🤖