The traditional hierarchical view of organizational structure lends itself to a style of leadership where division of labor, chain of command and top-down communication dominates. While an org chart with the CEO/President at the top may still have its place, we believe that the way organizations should increasingly operate is with empowered employees playing a more prominent role in taking ownership of success. Employees should have the clarity and autonomy to decide which work will deliver the best results. They should be enabled to collaborate across hierarchical levels to get the support they need to be successful. And employees should be able to assume leadership as much as the management team. We believe this is a key new paradigm for a more agile and engaged organization.
The Iceberg of Ignorance
In his acclaimed study “The Iceberg of Ignorance”, consultant Sidney Yoshida concluded: “Only 4% of an organization’s front line problems are known by top management, 9% are known by middle management, 74% by supervisors and 100% by employees…” Sydney identified the phenomenon when he asked a cross section of workers in a large factory to note all the significant problems they were aware of and subsequently asked other levels of management to do the same.
This is one major issue with traditional top down leadership. Decisions are made on an inadequate amount of information because the organization doesn’t have a customer feedback loop to communicate issues from the front line to leadership. This leads to poor decisions that also drives disengagement and a lack of confidence in leadership within the organization.
The Inverted Organization
The idea of an upside down organization isn’t original. The basic premise is to stop thinking about your organization as a top-down structure and start thinking about it as inverted, where frontline employees serve clients, managers serve employees, and leadership serves the broader organization – all with the goal of better supporting the customers.
A good way to deconstruct how this looks as an operational model is the service-profit chain. This concept applies mostly to for-profit organizations, but with some creativity could also be adapted to non-profit organizations. The end goal is the same, happy, repeat customers. In the service-profit-chain, this is referred to as the 4 R’s: customers stay loyal (retention), they buy more (related sales), they tell others (referrals), and they provide constructive feedback (research & development).
The key to maximizing value for customers is by focusing on the point where customers experience value, and moving a little further down the supply chain, the employees that most impact that value.
Empowering these employees to take action more quickly on issues or identify new opportunities increases not only the agility with which an organization creates value for customers, but also engagement. Employees are motivated through having a greater sense of control over outcomes, more autonomy, knowing that leadership is listening, and having a stronger connection to their work as well as a connection to leadership. So ultimately, a more agile and engaged organization.
Additionally, setting up the tools and processes to facilitate collaboration between front-line employees and leadership will also improve visibility for those making strategic decisions on the reality of day to day operations. This in turn will lead to better strategies for creating customer value.