DILEMMAS OF THE FLATTENED PYRAMID
Madhukar Shukla
XLRI, Jamshedpur
[NOTE: a modified version of this article was published as: "Four-fold flattening, Business Today, 1996 (Sept 7-21), 206.]
The emerging competitive necessities are forcing most companies to restructure themselves for greater agility. Within the last couple of years, a number of companies have taken initiatives to downsize themselves. Many have successfully reduced their hierarchical levels with the aim of creating a flatter and nimbler organisation.
While flatter structures aim to make organisations more responsive and agile, they also throw up new issues for companies to tackle. Many organisations find it difficult to deal with these problems for two reasons: firstly, because they had never anticipated and planned for them; and secondly, because these problems defy the conventional managerial solutions.
A flat organisation is not just a revision of the conventional structure. It demands a qualitatively radical change in our way of understanding and managing the organisation. Let us look at some of issues one must examine while planning to delayer the company:
* Control Mechanisms: In the conventional structures, the controls are vested in the hierarchy. The whole purpose of flattening the pyramid, on the other hand, is to bring the decision-making down to the operating levels. Organisations, therefore, need to find new alternatives for top-down controls.
Companies which aim to flatten their structure must also plan to replace the hierarchical controls with lateral or bottom-up controls. It would be necessary to strengthen the cultural processes and feedback loops for regulating the activities of their members. The challenge for flat companies would be to devise mechanisms which can effectively link the performance and productivity of employees with company's values, customer feedback, 360-degree feedback, peer-rating, etc.
* Information Management: Related to the issues of control is the question of how information is managed within the organisation. In the conventional hierarchical setup, information is treated as a means of control. Naturally, its flow is restricted across hierarchies and functional boundaries.
A flatter structure, on the other hand, can achieve speed and flexibility only if information is easily accessible across the levels and functions. That is, in flat organisations, information must be managed for enabling and empowering people to act, and not for controlling their actions. Without a proper system for managing information, a flat structure is likely to create confusion, insecurity and conflicts.
* Career Management: When hierarchies are flattened, the conventional avenues for career growth and promotion also cease to exist. It is no longer possible to continue promoting people. The challenge, therefore, is to devise new systems for career planning and growth.
Most organisations face problems because they fail to reconceptualise the meaning of career in a flat organisation. The logic of these structures is based on a business-process orientation, rather than on isolated functional tasks. Unlike the importance given to functional specialisation in tall hierarchies, the strength of flat structures lies in the multi-functional capabilities of its human resources. Naturally, the career paths also need to be linked to the ability of the employee to understand and manage the complete business process. To become really viable, flat organisation need to define career in terms of horizontal cross-functional moves, and to develop systems which link promotion, rewards and increments to employees' multi-functional competence.
* Managerial Role: The traditional managerial role-definitions lose their meaning in flat companies. Given the logic and nature of flat structures, direct supervision and control is often neither possible nor required. Correspondingly, there is also a need to redefine the role of a manager.
In flat organisations, wider span of control, requirements of cross-functional expertise, customer focus, and peer-rating, etc., create new demands on the managers. Thus, the priorities of managerial activities would change from controlling to managing cultural processes, creating an external focus, enabling people to take initiatives and work together, etc. The required managerial role would be that of a facilitator and team-builder, who works more as an equal than a boss.
It is also important to note that these changes in managerial roles erode the traditional bases of managerial power and control. For many managers, they can be quite threatening. Unless the organisation takes care of these anxieties, it may be difficult to derive optimum advantage of the flattened pyramid.
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