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Chapter 9
Make Each Level Count
Psychological fallout
Time-based structures
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Chapter 9
Make Each Level Count
Excerpt from Rethinking
the Corporation
By Robert M. Tomasko
An architect's work requires more than site selection and
structural design. A building also has an infrastructure, a complex
and sometimes invisible web of systems that work together to
make the building functional and livable. These include the mundane
heating, electrical, plumbing, and air circulation systems, as
well as the essential channels for people movement and telecommunication
hookup.
Infrastructure is not just an add-on. The development of new
technologies that provide efficient solar heating also required
architects to consider a new set of factors when siting a building.
Just as the invention of the elevator paved the way for today's
concrete and steel skyscrapers, some new organizational concepts
and technologies are needed to make horizontally oriented structures
workable and vacuum-free.
This chapter and the three that follow describe the organizational
infrastructure needed to make the new corporation work. Issues
such as the hierarchy of reporting relations, the career structures
they imply, and the middle managers who populate them are considered,
along with ways to rethink control and coordination so that new
learning, rather than resigned compliance, is produced.
Is hierarchy all that bad?
We like to say we are living in a post hierarchical business
world, but rethinking sometimes requires reconsidering the value
of some organizing practices that were once popular but now have
fallen into disfavor. A surprise occurs when this is done: The
post hierarchical corporation turns out to be one not completely
without hierarchy. While the age of the corporate dinosaur may
have passed and while the Egyptian pyramids no longer serve as
role models for good organization structure, the need for reporting
relationships and earmarked accountabilities has not yet completely
disappeared. But their nature, and the rationale behind their
layering, needs, in most. companies, some serious rethinking.
The wave of global reorganizing that began in the 1980s has
left many problems in its wake, especially regarding the role
of the manager in the new corporation. Middle managers are popular
targets for criticism, in large part because of their presence,
in some companies, in multiple layers. An employee of a large
computer maker, one long overdue for a major organizational overhaul,
observed that his employer had a vast hierarchy of managers whose
singular talent was that of career advancement. Other critics
have been no less blunt. Two Harvard Business School professors
who investigated the reasons behind the failure of many factory
automation programs (such as computer-aided design, computer-aided
manufacturing, robotics, and flexible manufacturing systems)
concluded that, while these technologies show great promise,
they are generally being installed into organizations too obsolete
to make full use of them. Among the most dated aspects of these
organizations, according to Robert Hayes and Ramchandran Jaikumar,
is their tendency to staff production management positions with
"specialized caretakers" who are more comfortable with
relationships up and down the hierarchy than across it.
Some companies have found themselves in "damned if you
do, damned if you don't" positions regarding middle management.
When they eliminate excess layers and attempt employee empowerment
programs, they are sometimes faced with an "I wasn't hired
to be a manager" backlash. Often the remaining managers
are implored to act more like leaders than managers, but they
end up feeling unclear about exactly in what direction they are
expected to lead.
In spite of these concerns, management jobs remain sought
after. A
study of U.S. college student attitudes conducted by Right Associates,
career transition consultants, found that more than 80 percent
of those with an interest in business expect to be managers or
supervisors within five years of starting their careers. The
conflicts caused by this strong demand for entry management jobs
and the reality that such jobs are likely to be in short supply
also will resonate through many corporate hierarchies as employees
in mid-career cope with their own concerns about under promotion
and plateauing.
Just as it has become popular to deny the value of organization
structure, critics often single out hierarchy as an unquestioned
evil. But is it really?
Look closely at what was considered in the early 1980s as
the model of corporations to come, the start-up airline People
Express. This company, which has already vanished from the aviation
industry, was a paragon of the "push authority far down
the ranks" school of management. In fact, there were hardly
any ranks at People Express. Every employee was designated a
manager. But, as Robert Levering found in his research into what
makes some companies especially good to work for, if everybody
is a manager, then-from a political viewpoint-no one really is.
Levering found a huge power vacuum between the executives at
the top of People Express and everyone else who worked there.
The lack of a viable middle management structure resulted in
many ignored "mid-level" problems: People at the top
were too busy; no one at the bottom had the necessary perspective
or authority. The gap in the middle undoubtable contributed to
the airline's demise.
The psychological fallout from
eliminating hierarchies
Completely dismantling hierarchy may be poor politics, but it
is even worse psychology. As hierarchy is reduced, anxiety frequently
increases. And this increase is coped with in a number of dysfunctional
ways. Some employees become increasingly rigid and bureaucratic,
undermining the hoped-for flexibilities that were supposed to
emerge from delayering. Others seem more prone to making mistakes
and to having accidents, and some suffer from burnout as they
try to carry out all their old responsibilities, in addition
to providing the early warnings about emerging problems that
their boss once gave.
Larry Hirschhom, of the Wharton Center for Applied Research,
studied what happens to workers who have had their responsibilities
enlarged in the wake of management delayering. In the old order,
supervisors and middle managers played two important roles. One
was the traditional function of providing coordination and integration
of work flows. This was relatively easy to hand off to the computer
system or to delegate downward. The second key role, Hirschhorn
observed, was less easy to give away or to automate. In that
role, managers offered to their subordinates psychological protection
against anxiety and fear of the unknown. This buffer effect is
something that relationships with effective hierarchal superiors
can also provide.
Facing risk and uncertainty is always hard. But it is usually
easier when you know you are not alone. Strong ties with teammates
and peers certainly help but can also lead to shared delusions
or isolating camaraderie unless coupled with a sense of direction
and linkage to where the rest of the company is going. For that,
someone apart from the immediate work team is needed, someone
who can help resolve the increase in tensions and conflict that
close teamwork can generate. At People Express, Levering found
to his great surprise, the biggest complaint of the airline's
"employee self-managers" was they lacked a sense of
management direction as the company grew and competition intensified.
Ironically, these workers, selected for their ability to be self-motivated,
wanted more direction and coordination, not less.
Abraham Zaleznik, one of the few Harvard Business School professors
with psychoanalytic training, also confirms the psychological
usefulness of hierarchy. He observes that detaching work from
authority relations encourages irrational behavior. Some people
become devious, whereas other focus more on how to do things
than on the substance of what they are doing.
These problems are becoming increasingly common in many "empowerment"
programs. Empowerment alone-without connection to a competitively
significant task-can leave employees wondering just exactly what
they are supposed to be doing so differently. One of Zaleznik's
colleagues at Harvard, former PepsiCo president Andrall Pearson,
calls empowerment "an idea in search of a place to happen."
From where is this substance, these competitively significant
tasks, supposed to come? Will they emerge out of the day-today
flow of the horizontal organization, or is some superstructure
still required to generate them? And if, as appears to be necessary,
it is conceded some hierarchy is required, what should be the
driving force behind its layering?
A time-based superstructure
Time is one of the key performance measures of a process-driven
horizontal organization. The key to competitive success in many
markets is minimizing cycle time-how long an important business
process takes from start to finish. The horizontal organization
reduces cycle time through measures such as eliminating functional
fiefdoms, broadening jobs, replacing SBUs with enterprise units,
and organizing each of these units around the five or six processes
that most drive its competitive advantage. The horizontal organization
is a fast-moving place, a bundle of kinetic energy. it is working
best when working fast.
Time is also a key factor driving how the superstructure above
all this activity is configured. If the horizontal aspect of
an organization represents the company's kinetic motion, then
its vertical dimension symbolizes potential energy, its ability
to maintain a measure of balance in the face of both today's
and tomorrow's challenges. The quality of time most important
here is its horizon, not its duration. The vertical organization
works best when oriented to the future.
Tine frame and organization level
A hierarchy, when layered appropriately, allows several expanding
time frames, or horizons, to be mapped on a company's structure.
At the structure's lowest level, managers are concerned primarily
with the events taking place within the cycle time of the business
process they oversee. This may be as short as a day If they are
managing Federal Express's overnight delivery business or as
long as several years if they are responsible for one of the
teams at Merck that stays with a new pharmaceutical from its
discovery to its market introduction.
Most first-level managers, the people to whom team leaders or
employees with reinforced jobs report, have time horizons of
approximately one year. This is the time frame in which operational
costs can be planned and controlled, changes in competitors'
tactics observed and countered, and deviations from customer
requirements spotted and corrected.
Above this level in the hierarchy are the managers of the various
enterprise units the company has created. Moat of their activities
should produce results that will be readily apparent in a two-
to three-year time frame. In this horizon, capital budgets are
prepared, competitive strategies for the enterprise unit are
developed, and new products are taken from idea to market entry.
Then, depending on a corporation's complexity and scope, a third
stratum of managers might oversee a group of enterprise units.
These cluster executives concentrate on their group's performance
and growth over a five-year period and report to a top management
group or a chief executive whose actions are geared to the promises
and threats facing the corporation over the next decade.
These expanding time perspectives are directly related to the
idea, presented in Chapter 3,
that a company is really just a portfolio of capabilities. Some
of these capabilities were classified as necessary to the current
functioning of the company but not key to distinguishing it from
its competitors. These were called core capabilities. Others
were defined as more critical to the business's current success,
and a few (called cutting-edge capabilities) we said were valuable
primarily for their future promise.
Over a five-year time period, some critical capabilities may
lose their power to drive competitive success and become part
of the business's core. Their place may be taken by what were
cutting-edge competences that have become the new basis for competitive
differentiation.
Group or cluster executives should spend a considerable amount
of time making sure multi year transitions like this happen smoothly.
They should also ensure the capabilities of each enterprise unit
are easily available to others who can make good use of them.
In addition, they should monitor shifts in customer needs and
keep alert to new markets that these capabilities can serve.
The ten-year-out perspective of the chief executive or the senior
management team has its own way to add value, again keyed to
the kinds of events that may take a decade to unfold. This level
factors into the company's decision making the implications of
long-term political, social, and demographic change, as well
as shifts in the underlying structures of the industries in which
the corporation participates.
These time periods are illustrative, not set in concrete. They
need to be uniquely specified for each company. What cannot vary,
though, are their broadening as one ascends the hierarchy, and
their discrete nature. Each level needs to be self-contained.
Levels that overlap or that come close to overlapping in future
orientation are good clues that the vertical structure has too
many resting places.
How many layers of hierarchy are enough?
These time horizons are similar to those found by London-based
organization researcher Elliott Jaques in over forty years of
investigation into what makes for an effective organization structure.
Jaques has long advocated adding a measure of rationality to
organization hierarchy by grouping work assignments by the length
of time they require to complete. His research, rooted in cognitive
psychology, provides a useful way to think about the maximum
number of levels an organization structure should have.
© Robert M. Tomasko 2002
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