Chapter 11
Provide Two Paths to the Top

Link power and knowledge
Broaden technical ladders
Veneers add value
Track the future
Mid-management's new role
New management tactics
Keep the paths parallel


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Chapter 11

Provide Two Paths to the Top

Excerpt from Rethinking the Corporation

By Robert M. Tomasko



For a parallel hierarchy to add the most value, it must extend all the way to the top of the superstructure. An inability to find productive roles for senior individual contributors at the upper end of the hierarchy is a clear signal that the dual path idea is not right for your company. Fortunately, an increasing number of companies are finding this not to be a problem.

The parallel hierarchy in action
A clean, unobtrusive functional look is the hallmark of consumer products designed by Braun, the German maker of small appliances. This spare appearance was created by Dieter Rams, the company's chief designer. It sets Braun's products apart and is one of the company's most critical capabilities. Its importance to the company's competitiveness is reflected by Rams's place in the corporate hierarchy; he reports directly to the company's chairman, not through a marketing or engineering department. When Braun was purchased by Gillette, Rams was also given direct access to the U.S. parent's chief executive. Gillette is a shrewd acquirer; it made sure it managed Braun so as not to kill off the goose that helped lay the golden eggs that made the company so worth buying in the first place.

Here's a second example. During the late 19605, the technology based conglomerate TRW, Inc., was run by a three person top team. One member was the chairman and chief executive. A second was the president and long-in-advance designated heir apparent to the CEO's spot. The close-knit team's third member was Simon Ramo, officially designated the corporation's vice-chairman.

Ramo had no direct operating responsibilities; he served as the technology eyes and ears of TRW. Earlier in his career, when TRW was still just a metal-bending parts maker, he had been sent from the company's Cleveland corporate headquarters to California. His mission: to create a new division for TRW, one that would be based on electronics and systems engineering technologies. Several years later, his task completed, he returned to headquarters to serve as a technological entrepreneur role model for other rising executives. His example encouraged others to start up new businesses, such as TRW's now vast consumer credit reporting service, which sprang from the systems management capabilities Ramo helped nourish. And his willingness to be outspoken about broad public issues affecting the company and society in general helped pave the way for senior professionals such as Pat Choate, TRW's former vice-president for public policy, to be strong advocates for massive job retraining programs as essential to the future competitiveness of the United States.

Ramo also maintained a part-time academic affiliation, in his case a research associateship at California institute of Technology. Unlike many professionals in large corporations, Ramo's interests broadened as his career advanced. Once the chief scientist for the United States' intercontinental ballistic missile program, he later applied the systems thinking pioneered there to developing fresh solutions to social problems. Before retiring from TRW, he reflected on his experiences managing the technological development of a $I billion corporation and put in writing many of the key lessons he learned to serve as a guide to TRW's emerging generations of technology entrepreneurs.

Ramo's books and corporate title helped provide widespread recognition for his accomplishments. The "R" in his company's name, TRW, stands for Ramo. This is an honor received by neither the president nor the chairman with whom he shared the top management role in the 1960s.

A third example of the professional hierarchy at work is Microsoft. Managing competitive capabilities has gotten more complicated since the 1960s. Microsoft has not found any one individual to serve as its Simon Ramo, so it has appointed seven people to fill his role as seer and innovator. Called Microsoft's "architects," the seven people serve as a panel of technical high priests to advise chief executive Bill Gates on matters such as emerging technologies and overall software development strategy.

One of the group's members, Jeff Harbors, is already independently wealthy from his awards of stock options, granted during Microsoft's early days. But he stays on board because he sees the panel as a way he can still significantly contribute to the company's future. Gates, Microsoft's founder, has spent his entire career there. Unpolluted by experiences in more rigid, unitary corporate hierarchies, he modeled Microsoft's advancement structure after that of an organization he had some personal acquaintance with-a law firm. (Gates's father is a prominent Seattle attorney.)

Creating structures that link power and knowledge
Some senior contributors, like Ramo, are actual business entrepreneurs. Others, such as Dieter Rams, are high-level keepers of the corporate conscience; Braun's appliances ail haves consistency behind their design because Rams has the power to veto any proposed products that deviate from the established norms.

This influence is not exercised in a vacuum, though. When power is granted to anyone in a company, it is to advance the needs of the business, not the personal interests of the power holder. These contributors must be among the strongest keepers of the company's ethics. They must also avoid the other common trap facing those with a grant of power: the tendency to use it only to stop things from happening. Rams has earned his veto right because the products he has championed have been so successful in the marketplace.

In the future it may be possible to find senior positions, now part of the management hierarchy, that have been moved to the professional path. Allied-Signal's Lawrence Bossidy envisions the twenty-first-century corporation as still having a chief financial officer reporting to the chief executive, but without the traditional army of controllers, auditors, and accountants who now report to the chief financial officer. Instead, these staff positions will be based in the enterprise units and central service centers that will duster in the company's horizontal organization. This pattern may well be repeated for the chiefs of other functional specialities, especially human resources, information systems, and research and development.

Organizations that acquire early experience in ways to link knowledge with power will be several steps ahead of their rivals as knowledge based competition comes to dominate many industries. They will be companies that realize that career paths are more than just tools to maintain employee morale.

Corporate superstructures must be rethought so they reflect the new reality that power needs to be expressed via knowledge and experience as well as through managerial authority. Both kinds of leadership are crucial; a key challenge for the vertical organization is to keep them in balance. This idea has always been true to some extent; now its acceptance is becoming mandatory. Hospitals could not serve sick patients without the dual governance provided by a medical hierarchy and the separate administrative one. Nor do many universities educate students using faculty members who will admit to anything but an indirect and loose reporting relationship with the school's president and administrative hierarchy.

For most of its history while an independent company, the publisher Time, inc., prided itself on its separation of "church" from "state." "Church," the editorial side of the business, reported through its editor in chief directly to the company's board. The publishing portion of the company ("state"), concerned with more mundane matters like advertising revenues and production expenses, had a parallel hierarchy that did not include the oversight of the editorial departments, as was the common practice in the rest of the more unitary publishing industry. This power-sharing arrangement was intended to give editors freedom to cover and analyze news stories without interference from the company's advertisers or financial managers. In the long run, it was hoped, this practice would help attract star journalists whose writing would increase Time magazine's value to its readers, ultimately making it a more attractive vehicle for advertisers.

At Business Week, published by a competitor of Time, a similar practice was applied on a smaller scale. The position of senior writer was created to provide an opportunity for high performers whose talents would be underused if they advanced to the traditional next step of department manager or editor. This is not a resting place for poor performers; senior writers include John Byrne, author of several business books and former editor of the magazine's Management Department. It is also a good home for Byrne's entrepreneurial inclinations; he helped originate the magazine's annual rankings of graduate business school programs, an activity that might otherwise fall between the cracks on the publication's organization chart.

The operating practices of many Japanese companies also reflect an awareness that relationships and practical knowledge can be just as important as managerial expertise. In each work location, senior executives operate through both the official management hierarchy and an unofficial de facto hierarchy. Consultations with the de facto leaders, who have emerged through a combination of accumulated experience, technical knowledge, and ability to command the personal respect of the other workers, are often held before decisions are announced through the official channels. These private discussions, called nemawashi, are especially important when business conditions worsen or significant changes in operating practices need to be made. By laying the structural groundwork, they make possible much of the consensus and harmony in Japanese workplaces that is commonly over attributed to national cultural values.

Broadening traditional technical ladders
The idea of parallel hierarchies has been most commonly expressed through the dual career ladders offered by some technology-oriented companies. Aware that many good engineers and scientists find management work an anathema, these companies have provided a sequence of jobs, increasing in pay, title, and responsibility, that allows their technical staffs to advance without taking on any traditional supervisory or management responsibilities. The system that 3M put in place several decades ago to accomplish this is one of the best developed and the most effective. Without it, 3M's ubiquitous yellow notepad product, Post-it, might never have been created. Post-it's developer, Arthur Fry, admits that without the option to stay in his field and aspire to become one of 3M's elite "corporate scientists," he would have left lab work and entered management-or quit and started his own business-long before the Post-it idea came to him.

Technical ladders are frequently attempted, then neglected, subject to a once-a-decade revival of interest; most have not lived up to their promise. A Columbia University study found many of them were "parking grounds" for technlcians who had failed as managers, rather than fast tracks for the company's most vitally needed technical talent. The problem lies with those who create them more than those who try to scale them. The ladder's effectiveness is frequently diminished by its lack of parity with titles and compensation given to equivalent-level managers. In addition, most technical career paths are criticized for premature topping off, in cultures that share the American value that everyone can become president, this truncated route only creates a caste of second-class citizens.

The problem of stunted advancement results in part from the well meaning but too narrow motivation behind many of these programs. Often, their explicit purpose is to maintain the morale of scientists and engineers and to avoid their turnover. Implicitly, however, too many have a negative purpose-to keep otherwise ambitious people out of management jobs for which they lack appropriate abilities. This is certainly important, but focusing on the negative purpose tends to limit careful consideration of just how the occupants of places on the second ladder are supposed to be making a contribution. For some, avoiding management responsibilities becomes a way to avoid responsibilities to the company altogether.

Creating dual advancement paths needs to be a business issue, not just a human resources program. It is also an idea with too much potential to remain limited to a company's "techies." A hierarchy of non management jobs should be available for all professional specialists or knowledge workers.

Empowerment is not a substitute for growth and advancement. Reinforcing jobs allows considerable opportunity for an individual to grow in place by adding breadth and depth to his or her skill base. For many individuals, the advancement opportunities available in the horizontal organization will be sufficient. But some also will have the interest and ability to contribute in the vertical superstructure and in ways other than assuming traditional management accountabilities.

What would such a career structure look like? It would have more of an upright rectangular shape than a pyramidal one. Perhaps it could best be symbolized by a spiral staircase, or double helix-essentially, two long chains twisted around each other. Whatever the shape, as with all structures, organizational or architectural, the way the basic materials are used will determine many of their properties.

Two ways to add value: bear loads or serve as a veneer
Architects use materials in two ways-for structural purposes or as veneer. When used structurally, a material's main role is to hold the building together, spanning openings or forming columns. When used as a veneer, it need support only its own weight, but it adds value to a building in other important ways. It can modify the building's outward appearance significantly. It can add a sense of texture and depth that might have been impossible to achieve otherwise. As a skin over the load-bearing structure, veneers allow the designer to economically leverage the materials being used. An all-stone or all-brick house is much more costly to build than one with a veneer of these materials over strong but less attractive cinder blocks. As an element of architectural design, the word "veneer' has none of the negative connotation it sometimes acquires in day-today usage.

Veneers such as glass can allow light to flow and transform a dark, inward-oriented structure into one better connected with its environment. Veneers also give the builder greater flexibility. Some materials. such as stone, can serve as either veneer or structural elements. When used structurally to make a wall, stone must be of a certain size to support the pieces above and must be arranged in a particular way, with its joints staggered, to maximize its ability to resist cracking. But the same stone, when used as a veneer, allows the architect many more size and placement options; it even can be used primarily for decorative effect, possibly to create a stone mosaic.

There are close parallels between the contrasting roles of structural elements and veneers in a building and the functions of managers and professionals in an organization. Managers must be load-bearing; their deployment determines how a business structures its accountabilities. The nature of their work forces them to focus much of their attention internally. To maximize the strength they provide, their positions have to be structured to minimize organizational brittleness-by limiting the number of managers placed directly above other managers in the structure and by ensuring that each of their levels reflects a discrete time horizon of relevance to the company.

The requirements on independently contributing professionals are different. Their roles can be more flexible. They can focus as much on the world outside the company as on its internal workings. They can act as windows to new markets and capabilities. These are all useful functions, but, like veneers, they cannot stand alone. They need to be plugged firmly into the workings of the rest of the corporation to pay off for the business. Providing those connections is a key job of the management structure. While most corporations have had many years' experience structuring management positions, relatively few have thought out an appropriate business logic for this parallel hierarchy. A good starting point is consideration of the company's future and the role of the professional hierarchy in planning for that future.

Mapping the business future on the professional track
What is it about the parallel hierarchy makes it worthwhile from the company's perspective? What is required if the business is to gain from each stage of the hierarchy?

For the dual hierarchy to serve the company, two things need to happen to the work performed by those advancing up the professional track. Like well-structured management work, it must reflect expanding time horizons as the person doing it advances. It also needs to give emphasis to the capabilities that will most strongly drive the business's future.

The considerations about time frame and future orientation are similar to those discussed in Chapter 9. There are a number of benefits that can be attained by having the levels of professional advancement correspond with the time frames associated with each management level. Thus, a company with four levels of management might also have four tiers of advancement possible on its professional track. These might correspond to the time horizons associated with each management level. Most of the professional contributors operating in the one-year or two to three-year horizons would be in the third phase of their careers (mentors and project managers), whereas those in the five- and ten-year hierarchal levels would be in the directors-phase. Professionals in the earlier career stages would be based in the horizontal organization and most likely associated with a business process manager. Their time frames would vary from one day to several months.

Increases in a professional's time horizon may be manifested in a shift from preoccupation with the needs of today's customers to concern with what those customers will want to buy in the future. The lower levels of the professional hierarchy can include employees with considerable knowledge about current customers and markets, and the senior ones can be more focused on the business's potential markets and new customers. London Business School's Gary Hamel has gone to lengths to bemoan the tendencies of most companies to "work very hard to delineate the executive ownership of existing competitive space. But how many," he asks, "give equal attention to assigning the responsibility for finding and then filling in the white spaces that represent new competitive territory?" This is a role for the company's senior individual contributors, not its senior managers, who are busy focusing on the existing businesses.

The mIddle manager's new role
Most of the discussion to this point has been about only one side of the advancement track, the path for individual contributors. This is because it is the least developed in most companies. It is also the place from which the greatest future organizational leverage will come. Those on the professional track, burdened with few operational responsibilities, may be very busy trying to change the corporation, rather than control it. But someone still has to be in charge, to be seen as in control.

With all the popular attention provided to worker empowerment and vision-driven leadership from the top, it is not surprising that middle management's role in the new corporation has been ignored. Some management watchers act as though middle management is destined to be replaced by the computer. Tom Peters has called management hierarchies "merely machines that process and agglomerate information, each level adding a further degree of synthesis." Their reason for being recedes, he says, as "we develop technology-based information processing, and especially as we link the systems in networks, inside and outside the corporation."

But, as we pointed out in Chapter 9, hierarchies provide more than information relay and conglomeration. They serve some valuable psychological purposes, and, when well-constructed, they keep the future from being lost. As a company builds a horizontal, process-oriented, organization, the role of those managers above it may need to significantly change.

How will it change? Those on the management track will not, through a wave of the magic wand of empowerment, escape responsibility for the results of the organization units they oversee. If anything, they will be held more accountable than ever for them; fewer management layers will make it easier to pinpoint responsibility, allocate praise, and assign blame. It may sound excessively basic to talk about a manager being held accountable to the next level up in the hierarchy for the results of subordinates' work. But more than one senior executive has tried to attribute the company's failings to the performance problems of his subordinates. A chief executive was fired by his board for doing just this; each explanation he provided for missed results stood up individually but, taken together, they indicated the CEO did not know what was personally expected of him. The once popular style of management-by-subordinate commitment has no place in the new corporation.

At Toyota it is very clear who is responsible for the success or failure of every new car introduction. it is the chief engineer assigned to that model. This manager has unusually broad responsibilities that involve almost everything associated with the development of "his" car. He is expected to monitor social, political, and environmental trends. He determines the size and market niche the model is aimed at. He decides which of Toyota's advanced manufacturing practices will be used to make it and which members of its vast supplier network will provide parts. He constantly travels to meet the car dealers and their customers to obtain firsthand feedback on what they like and dislike about existing Toyota models. This information is taken into account when he returns to Toyota City, 300 miles southwest of Tokyo, to approve the marketing strategies his experts have developed to sell the new model.

Jobs with this scope do not exist in Detroit, or in many other car manufacturing capitals. Toyota's structure is an example of middle management potency, a sharp contrast to the too-common pattern of responsibility fragmentation, finger pointing, and crash catch-up programs.

New middle-management tactics
Although a manager's traditional accountabilities will remain unchanged in the future, the tactics used to ensure results will, out of necessity, evolve.

General Electric's chief executive, Jack Welch, is personally spearheading a campaign to convince his managers that their role is no longer to control people and to constantly stay "on top" of all events. Rather, he wants them to focus on guiding, energizing, and exciting those who work in the organizations they manage.

The head of NutraSweet, Robert Shapiro, echoes Welch's concerns and feels he must demand much more from managers than ever before. He says managers have few opportunities in his company to execute clear-cut orders from the top of the hierarchy. Instead, he expects each manager to have a very clear understanding of NutraSweet's strategy and the capabilities needed to achieve it and then to improvise as the immediate situation requires.

This increased emphasis on results, rather than methods, is akin to what some management scholars have described as the best way to manage professionals: Provide them with "envelope supervision." This phrase covers two steps: discussing very carefully with the professionals the minimum information necessary for the manager to feel comfortable that all is on track without eroding discretion within the time horizon in which the professional is expected to contribute, and then establishing with them the limits within which the individual contributor's discretion may be exercised.

Another management practice, advanced many years ago by former AT&T executive Robert Greenleaf, still holds great promise to help the emerging breed of middle managers define their modus operandi. Called by the theologically oriented name "servant leadership," it is an approach based on Greenleaf's observation that often the strongest leadership is provided when the manager is focused on taking care of subordinates and eliciting from them what needs to be done. It fits well with the idea that the horizontal organization is where the real-time action is. One exponent of this philosophy, business school dean Robert Taylor, describes the servant leader as one who has, not the answers, but the right questions. He knows that it is the people in constant contact with customers and technologies who are usually the best source for the answers.

A servant leader allows subordinates to feel "they don't have to go to great lengths making sure they are getting their fair share of resources or rewards, that they don't continually have to waste time watching their backs-because they know their manager is doing these things for them."

This contrasts with the more typical perversion of management hierarchy in which subordinates feel the necessity to spend hours preparing for presentations to top management, because the seniors in the hierarchy act as if they are the consumers of the company's efforts.

Servant leadership might sound wishy-washy on the surface, but it has been practiced with great impact at tough-minded companies like Cypress and Federal Express. Ask a Federal Express employee how many subordinates report to his manager. You will probably hear something like: "Sorry, you seem to have it backwards. My manager works for the twelve of us to help us succeed at our jobs."

Greenleaf's ideas have more depth to them than the popular injunction to behave less like a boss and more like a coach. Still, at least one former practicing coach, Paul "Bear" Bryant of the University of Alabama's football team, has caught the essence of this leadership style in a homily that also summarizes his approach to recognition: "If anything goes bad, I did it. If anything goes semi good, then we did it. If anything goes real good, then you did it."

A flaw in some rosy "middle manager of the future" scenarios is that they carefully specify how the middle manager's role must change, but they then ignore the changes in management structure and hierarchies that also need to occur to provide a firm platform from which the new role is to be played. Both need careful consideration if the new corporation is going to behave as if the future really mattered.

KeepIng both tracks roughly parallel
Dual tracks can go very wrong if their paths diverge. The purpose of parallel hierarchies is to provide for multiple ways, in multiple time frames, for contributions to be made to an organization's success. The corporate superstructure must have coded within its configuration the knowledge and power necessary to perpetuate the business. Earlier in this chapter, we gave several examples of how this was done at the upper end of the hierarchies at Braun, Microsoft, and TRW This is a process, though, that has to happen at many points in a company's vertical hierarchy, perhaps analogous to the steps on a spiral staircase that form the cross-links that keep the structure together. Mechanisms such as an internal board of directors meant to guide the development of portions of a company's business without adding another senior level of management hierarchy can do this.

Germany's Siemens divided its $45 billion corporation into sixteen minicorporations, each with its own leadership team and board of directors. These smaller businesses range from $500 million to $8 billion a year in sales, but the idea can work just as well for much smaller entities.

In the future, it may become common for the originator of a new business idea, if he or she is on the professional track, to organize an internal board, serve as its chair, and "hire" a manager to oversee the idea's development-all with senior management's blessing.

When boards such as these are thoughtfully crafted they should include managers-at the level of, or possibly one level above, the executive being supervised-and senior individual contributors. Some may have room for members from outside the corporation, possibly suppliers, customers, or astute market watchers. The board idea is too good to limit to the very top of the company.

At the middle level of the parallel hierarchies, it is important that both sides build and maintain strong relationships by training together. Management development is too useful to provide only to managers; career-phase-specific programs should be devised for all levels in the hierarchy.

Probably the best way to prevent the development of two diverging cultures is to move people back and forth regularly from one hierarchy to the other. IBM and Xerox regularly use similar cross-hierarchy moves. An IBM technical contributor may rotate, with the prior assistance of a well-planned management skill acquisition program, to a managerial slot, with the eventual goal of returning to the professional track with an increased awareness of the management role, an awareness that can come only from rolling up one's sleeves and joining in the work.

These kinds of spiraling career progressions will become increasingly important as unneeded management levels disappear and as advancement from one level of management to another becomes more of a broad jump than a continuously progressing hop. These wide gaps, measured in broadened time horizons of responsibility, may require an advancement-oriented manager to move first to a professional contributor position at his or her current level, where the manager can serve as an assisting understudy to a manager one level up. A series of successful same-level management slot rotations also may be required before a candidate is considered for hierarchal movement.

Many other creative and mutually beneficial career movements are possible when a parallel hierarchy is a key component of organizational infrastructure. Other elements of the corporate infrastructure can also benefit from the kind of rethinking that has been applied here to provide two paths to the top. Just as the integrity and strength of a structure derives from the materials used to make it, the functionality of a structure is often determined by how well the design of its infrastructure was thought out.


© Robert M. Tomasko 2002

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