An organization is dependent on several factors for its success. One of the main elements that can help contribute to the accomplishment of a company’s purpose is its organizational design. Yet, often times the impact of the organizational design is overlooked and falls victim to outdated values.
It is imperative for executives of a company to continually assess how they run their organization and to ensure the implementation of an organizational structure that is rooted in the customers and the employees.
The outdated hierarchical structure
In a traditional strict hierarchy, decision-making is the sole prerogative of a select group of senior leaders in the organization. It is an approach that centralizes power and is steeped in the erroneous belief that a happy few leaders are best placed to make the right decisions for the company on a strategic, tactical, and even day-to-day level.
This pyramidal structure is a very autocratic and even militaristic approach to running an organization, whereby decisions are pushed down on colleagues without the solicitation of input or the willingness to listen to other ideas and approaches. As a consequence, the creativity and the valuable input of those in the organization who are closer to the challenge or the problem that needs to be addressed, gets lost. And over time, the organization numbs down and resigns to the limitations of the hierarchical structure.
Shortfalls of the traditional hierarchy
Beyond being an antiquated organizational structure, hierarchical leadership also unleashes many obstacles and stumbling blocks on a company, further complicating and hampering achievement of key goals.
Negative impacts on employee morale. Colleagues prefer to work in an environment that is inclusive, and in a structure that values their input and contribution. The workforce of a company consists of individuals with varying backgrounds and experiences whose input enhances the long-term success of the company. People want much more from their professional life than the sheer repetition of a number of narrowly defined tasks, or the execution of top-down instructions without debate or input. A strict hierarchy leaves colleagues with the feeling of being underutilized and undervalued. It negatively impacts the feeling of overall wellbeing and belonging in the extended family that constitutes a successful company.
Employee churn and loss of talent. Companies that adhere to a strict hierarchy are engaging in paradoxical behavior. On one hand, their human resources department is likely spending a tremendous amount of effort and monetary resources to try to identify and recruit the best possible talent. On the other hand, once the talent has been on-boarded, the organization has little interest in the individual contribution of the valuable new recruits. This will lead to a situation where the high potentials quickly get frustrated with the culture they are forcefully being inundated with and will decide to leave the organization in due time.
The road to mediocrity. The combination of a scenario where an organization stymies creativity through centralized top-down decision-making will over time create a workforce that is mediocre in terms of overall quality and core behaviors. The high potentials will leave the organization, frustrated because of their lack of ability to influence to company’s decisions and direction. At the same point in time, the company – through its performance management tools – will decide to part company with the worst performing co-workers. In balance, those who will survive in the long term are those who never challenge the status quo, who are risk adverse and non-inquisitive.
Suboptimal decision making. Top-down decision making, without regard for the input and knowledge of those colleagues who are much closer to the issue and much more qualified to make or at least contribute to the right decision, is by definition suboptimal. Why would somebody come forward with a novel angle to an issue or an opportunity if that person knows that the sound advice will fall on deaf ears? A number of key considerations and knowledge sources that would greatly enhance the quality of the decision are lost. Therefore, decisions that are made in isolation and pushed down to the mass organization are unbalanced and uninformed.
The shift to the inverted pyramid and servant leadership
Rather than applying an outdated steep hierarchy, executives should try to come to grips with the reality that the company does not revolve around them, but around its valuable customers and its hard-working colleagues. The leadership team really is in essence an enabler, an instrument to create an environment that guarantees the largest probability of success for the company and its key stakeholders: customers, colleagues, investors, and lenders.
In organizational structure, which can best be described as “the inverted pyramid”, customer and customer-facing colleagues are viewed as the most important asset of the company. As we go down on the pyramid, we see the executives all the way at the bottom, as an indication of the reality that their primary task is to serve the organization and all of its constituencies.
In addition to the notion that the leadership works for the organization and its valued colleagues – not the other way around the inverted pyramid also squarely puts the customers at the center of its purpose. Without the customers, the company has no reason to exist. In this context, it is important to note that every individual is a salesperson for the organization. Driving consistent core behaviors, positive attitudes, and high levels of engagement with the workforce are the best possible ways to support incremental sales.
When a prospective customer is looking to source business with a new provider, they are not looking for yet another glossy presentation. They want to experience in practice whether what is being portrayed in the sales deck matches the reality on the shop floor. Nothing will convince that prospective buyer more than a visit to a state-of-the-art facility that is already in operation and that is populated with a knowledgeable and enthusiastic workforce that can energetically articulate what processes they are responsible for, and how their hard work fits into the bigger strategic direction of the company.
Implementing a solid organizational structure will create a positive ripple effect that will reverberate throughout a company all the way to its customers. Success cannot happen without a strong inner foundation for employees to support and be proud of.
Flipping the organizational pyramid and introducing an egalitarian servant-leadership model will serve as a catalyst to motivation, innovation and a higher sense of purpose.