There are three things that ruin good companies the most (in my personal opinion, that is ), or at a minimum they stand in the way of them becoming great companies .
In all the companies I have worked for , there have been steep hierarchies . There was just one exception and that company got acquired by a big company with a steep hierarchy in couple of years . This is true for my customers too . I can’t think of a single good thing to say about steep hierarchies. None at all. Nada
Hierarchy is a necessary evil when scale comes into picture . Startups are not immune to it – look at the number of levels in Apple or HP today compared to when they started .
Hierarchy is often set up as an insurance . In an upturn , hierarchy is your friend – there are enough people to check the checkers of the double checkers to make sure the machine is humming along . In a downturn , hierarchy is your worst enemy. It prevents the decision makers to get information in time. And by the time they get it – every level below them would have changed the information “just a little”. This has been true all the time and executives know this well – but usually talk about flat organizations are just that – talk ! No action gets taken.
Very frequently I get asked by someone if they should leave technology and move into management . The answer is a “definite maybe “. In an upturn -management roles get you a lot farther . In a down turn, it increases your odds to get fired . But I digress.
Hierarchy restricts flexibility and leads to situations where power of leaders get measured by number of people they manage – not by customer satisfaction , revenue , etc. The evil effect is that when a new bright idea crops up – there is very little incentive to share resources (or credit if the idea turned successful). Hard boundaries are drawn – and it practically eliminates flexibility and leads to a direct loss of ability to execute .
Ergo – such kind of company crawls to insignificance and mediocrity while wondering all along as to what is going wrong .
2 The matrix
When a hierarchy in one dimension runs out of nodes and leaves – a new dimension gets added . Ask an experienced mid level employee “who do you work for ?” – and you will know the cluster $&@) this is .
Most companies have at least a 2 dimensional matrix . This is in addition to what traditionally was called line and staff jobs . Or put more simply – over time , less people in a company have line jobs – and more have staff jobs . In general – if you are not creating a product or selling it , you are overhead and you should be dispensable. Yet – you see more and more nebulous roles get created around product and sales jobs all the time .
Matrix is good for some scenarios – but often there is no balance . In many cases – I think companies resort to matrix to just cater to executive ego . There isn’t enough room at the top of the pyramid – so adding more dimensions is an easy way to prevent top executive talent from walking away . However , in the long term – this results in extreme grief, every single time .
There is no “undo” button – the decision to resort to matrix structure is irreversible in the short to medium term. This leads to reorganizing the structure multiple times – which usually leads to the executives walking away (usually happy) to other jobs , but the worker bee employees suffering a lot of uncertainty and lost opportunities .
3 concentric inner circles
Leaders need a fine balance of loyalty and merit in their employees . If all you look for is merit , and you don’t have any loyalty from employees – your decisions might not get executed without loss of time and energy and opportunity . If all you look for is loyalty – you will risk promoting people without merit , and those with merit will not hang around to watch the circus. When attrition happens – remember the job mobility of A players is always greater than C players . The good ones will walk – others will cry or become numb , but won’t walk away . The average quality of the organization can come down in a hurry really fast .
Striking that balance is very key for the long term survival of the company – and if you have to err , err on the side of more merit than loyalty . But that can happen only if you are secure . Many leaders are not very secure .
During WW2, General Eisenhower once said to a major general who wanted special treatment because he was in the inner circle “There are no inner circles – there are just men who live and men who die”. Today’s leaders would do well to make an introspection as to whether they are living up to the spirit of those words .
These three evils kill effective team work, even if there are plenty of talented leaders and followers in those teams . As Michael Jordan famously said “talent wins games , team work wins championships”.