Business Beyond The Pyramid

The combination of process automation and outsourcing is having a profound effect on both the way in which we work and the way we manage work. Alistair Schofield considers the implications for the traditional hierarchy and the purpose of management in a world where the supervision of labour and production is no longer a primary objective.

I recently attended the funeral of Annie, a lady who died shortly before her 100th birthday and was struck by the changes she had witnessed during her long life. She lived through two worlds wars, saw women get the vote, the rise of the Labour Party, the rise and fall of Communism in Eastern Europe, the creation of the EU, the introduction of television, the massive growth and development of motorcars and, perhaps most dramatically of all, she saw air travel move from bi-planes to supersonic flight and into the exploration of space.

Interestingly though, with the pace of change constantly accelerating, the changes we will witness during our lives will be even greater. If you're not convinced, just take a moment to think back to the innovations, developments and changes you have seen in you life so far.

You have probably immediately thought of the growth of computers, the Internet, the iPhone or the iPad, as these are very obvious physical manifestations of change. However, amazing as these developments are, we can take them or leave them as we please. A new mobile phone may be able to take photographs, play music and download emails, but you don't have to buy one. More important are the changes that are imposed upon us, as in these cases we don't have a choice.

Perhaps the largest change is in the structure of organisations and the way in which we work.

Generally this is not something people give much thought to as we see it as an established routine - a fact of life. We leave the house in the morning, get back in the evening and work 5 days a week. But it hasn't always been this way, so why do we assume that it will continue?

Historically, many of our current work practices date back to the Industrial Revolution when achieving efficiency in capital-intensive industries meant employing a large workforce. The 'pyramid' shaped management hierarchy was therefore a sensible means of managing them. More recently, changes in both technology and attitudes have meant that this 'pyramid' structure is beginning to change, for four main reasons:

  • Automation - Increased automation in manufacturing has dramatically reduced the numbers of people employed at the lower hierarchical levels.
  • The globalisation of the English language - The economic success of the English speaking countries combined with the media and communication industries they have spawned have established English as the standard language of the global economy. For example, roughly 80% of the 2m graduates India produces every year speak English, with a similar situation in countries such as China , Malaysia and the Philippines. This has increased the practicality of moving some business processes to lower cost economies and has led to the massive growth we have seen in 'offshoreing' by British and American companies.
  • Improved communications - Developments such as the telephone, email, video conferencing not to mention improvements in road, rail and air travel have made distance far less of a barrier to employment than ever before. Moreover, as the volume of communication has grown, so the cost has fallen. For example, when I worked for the UK subsidary of an American company 15 years ago, the cost of transatlantic calls were so great that it paid us to lease capacity for our own private network. Today the same calls can be made foe free using the Internet.
  • Changing attitudes - Whereas 30 years ago only about 10% of school-leavers progressed to higher education, today the number is over 40%. Despite the fact that only a small percentage of those degrees will be vocational; having a degree nevertheless alters the expectations of the individual. Those people are looking for jobs where they will not simply be employed, but where they will be actively involved in the decision-making processes, where they can lead rather than simply follow. The result is that this generation of young people are far more inclined to seek positions in organisations where their individuality is valued.

These factors together are causing the traditional pyramid shape of hierarchies to change as they are eroded at the base.

While the most obvious examples of organisations changing in this way are in manufacturing and financial services, the same trend can also be seen in industries as diverse as computer software development, retail and even health care.

As a result of this trend, the majority of jobs and therefore of vacancies, exist at levels that would not previously have been thought of as entry points into an organisation.

 

For school leavers and university graduates this creates the question of how to acquire the skills necessary to reach the first rung of the career ladder - a problem exacerbated by the declining number of students studying for vocational qualifications.One of the ways in which many graduates are overcoming the problem is by accepting whatever jobs they can find and then by moving between jobs frequently, building their experience and seeking career advances wherever they can. From an employer's point of view this may be less than ideal, but it is a situation they are going to have to come to terms with.

At the same time as the shape of organisational hierarchies are changing, so too are their requirements.

Whereas we have traditionally thought of our organisations as being top-down, with the CEO and the Board making decisions and driving the business, this is no longer the optimum process in the diamond-shaped organisation.

When the primary purpose of the majority of the management hierarchy was the supervision of labour and production, the Board and the senior management team were inevitably the drivers of the business. In diamond-shaped organisations however, the majority of employees are of a grade and level of experience where they are expected to get on with their job without needing close supervision. Their primary objectives are therefore business and customer focussed rather than administrative. In organisations such as these, matters of policy and strategic direction are issues for the majority of employees and the balance of skills required therefore weighs more heavily in favour of leadership than management.

Moreover, with the academic background of young people moving more towards leading than labouring, new candidates entering the employment market will naturally gravitate towards those organisations that encourage people to lead at all levels.

While some companies have already moved to this new business model, the vast majority have still not noticed that the world has changed. They continue to rely on the decisions of a few senior managers while the majority of the staff reserve their creative energies for activities unrelated to work. Whereas, in the companies that have adopted this new model, the staff are actively engaged in leading the business and the senior managers are constantly being invited to consider new ideas and suggestions.

The fact is that our organisations have not always been structured in the same was as they are today, and in the future they will be different again. The question therefore is, what will be the optimum approach for your organisation and what are you going to do about it?

About the Author
Alistair Schofield is Managing Director of Extensor Limited.

 

 

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