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 way to collect and manage insights from employees across the organization. This leads to poor decisions that decrease confidence in leadership within the organization.
The Inverted Organization
The idea of an upside down organization isn’t original. In fact there are many other types of organizational models that move away from the traditional hierarchy. Holocracy, managerless organizations, and the lattice organization are some examples. But the basic premise is the same: To stop thinking about your organization as a top-down structure for how work gets done. Instead of employees supporting management’s objectives, 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. Happy, repeat customers drive growth and profitability. 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, it’s employees that most impact this value.
Ensuring employees are engaged and empowered to act on issues and opportunities translates to value for customers. Studies have also shown that employees become more motivated when they have some control over their work and environment and feel that leadership is actively listening. The inverse is also true. When employees are simply told what to do, it decreases the motivation they bring to their job.
Expectations of how we collaborate at work are changing significantly. The book, “The Conversational Firm” explores how one software company upended traditional bureaucratic hierarchy by giving all employees a voice. It’s the idea that organizations can have far more open dialogue across the corporate hierarchy than we ever before thought possible. This is the heart of the case for an inverted organization. And it’s just not a reaction to changing expectations. It makes business sense. Organizations can make better decisions, improve productivity and become more agile as a result of collaborating more effectively between employees and leadership.