1.3.4 Organisational Structures - Why Flatter Is Not Necessarily Better
It is said that economists use the tower crane count as an indication of economic health; I use the highlighter and Post-it note frequency as an indicator of the value of a business book. One book that has scored highly on this measure is by Eileen Shapiro – “Fad surfing in the Boardroom”. She defines “Fad surfing” in the “Fad surfer’s Dictionary of Business basics” as “the practice of riding the crest of the latest management panacea and then paddling out again just in time to ride the next one; always absorbing for managers and lucrative for consultants; frequently disastrous for organisations”
Shapiro casts her cynical but highly perceptive eye on a whole set of fads from the meaningless mission statement to becoming the lowest cost producer. But in a recent conversation I had with the GM of a sizable SME, the one that came to mind was her entry under Flat Organisation.
Flat Organisation
1: The process of reducing the number of levels that make up an organisation’s structure in order to increase its ability to respond quickly and effectively to changes in customer needs and competitive dynamics;
2: A set of actions, once known as “decentralisation”, that historically has in turn precipitated an equal and opposite set of reactions – namely re-centralisation;
3: An organisational concept that aims to abolish all hierarchy and thereby produces new organisations with slower decision-making and greater focus on internal politicking than ever before.
Judged purely on the basis of outcomes, I have never been an unquestioning disciple of flat organisations. The oldest and the classic example of flat organisations is the Catholic Church that has but three levels of management. 219,583 priests respond to 2,949 bishops who in turn respond to 1 pope. At the other end of the scale is the Australian Army that has eight management levels – nine if you include Field Marshall, the highest rank of all but only used in war time.
It would be a pretty safe bet to say that internal politics would be rife in the Catholic Church – odds of 2,949 to 1 to make the top job would see to that and my impression as an outsider is that their decision-making is ponderous and their ability to adapt to changing customer needs and competitive dynamics is questionable.
However – and this is the point that Shapiro makes – internal politics flourishes in highly hierarchical organisations as well. Of the 90 or so statements that make up the questionnaire used in the Towards Ten Thousand Workgroup Performance Accelerator, the lowest rating statement of all is one that relates to the presence of internal politics.
Given that the organisations concerned in the vast majority of cases were not “flat” there must be other reasons why so many organisations are a breeding ground for internal politics. If it’s not the angle of the pyramid nor whether it’s upside down or the right way up, there must be other factors at work. Here are some of them:
- The organisational structure is based on function rather than process – this leads to the establishment of fiefdoms and silos where the heads of these functions are more concerned with their own status and turf than they are with the health of the organisation as a whole.
- Senior management has been performing the same role for many years – they cling to the quo long after it has lost its status.
- Barely competent managers promote barely competent subordinates – an extension of the Peter Principle. Why would you promote someone whom you regard as a threat? Promoting people on this basis rather than merit not only lowers the standard of management but sets up a vicious circle. As David Oglivy, the advertising guru put it: “If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants". Substitute “promotes” for “hires”.
- There is insufficient scope for advancement – the opportunities that exist go to those most skilled in the art of politics and not to those with a capacity for the job.
- The organisation lacks direction and leadership – plenty of time for politicking.
- Teamwork is non-existent – it’s everyman for himself.
- The emphasis of performance appraisals is almost exclusively on the individual.
- Organisations making the transition from hierarchical structures based on function to matrix structures based on cross-functional workgroups. The old guard will be desperate to retain their levers of power.
It can be seen from the above that internal politics can be very damaging to any organisation. It would be naïve to believe that one could rid any organisation of this curse entirely but it can be minimised – and this brings me back to my conversation with the GM. One of the issues facing his organisation was a lack of promotional opportunities.
Their solution has been to eliminate one level of management but to replace it with two additional levels. In terms of people, the one level of management removed represented one person but the two levels of management introduced provide opportunities for many more.
There are also two additional benefits. Those occupying the new positions have an enhanced opportunity to develop both their business and people management skills and the management structure has sharpened the focus on meeting their customers’ needs.
In this case, the shape of the pyramid has been altered but the rationale behind the changes has not been influenced by the need to surf the fad of flat organisations or to deliberately buck this trend.
It’s not the shape of the pyramid or the number of management levels that dictate the effectiveness of an organisational structure. It’s the needs that the structure is designed to serve that should shape its geometry.
- Identifying and meeting customer needs – now and in the future
- Doing the above as effectively and efficiently as possible
- Competing effectively with one’s competitors
- Providing employees with a satisfying and rewarding place of work
These are the criteria that should be used – not the rationale that I remember the CEO of a large US corporation espousing – “we have reduced our management levels from nine to six and I guess we will try to move from six to five”. Don’t get me wrong – this is a successful company and I’m sure that the reduction of management levels played a part in its success but to promote the idea that the flatter the organisation becomes, the more successful it will be is to ignore the real criteria that should drive organisational structures.