Priorities Should Shape Corporate Size
Six years ago, a large information services company was extremely proud when it cut its headquarters staff of several thousand to 99 employees. The company even took out two-page color magazine ads to tout the fact that it was now lean and mean. Four years later, the 99 employees had grown to a staff of more than 500.
What happened? One is tempted to reckon that those 99 souls got lonely and hired some assistants here, a director there. But the real answer gets to the heart of one of the major issues that U.S. corporations will face increasingly in the coming years: How does a corporation discover and understand its mission--redefine itself, if you will--and then find the right management structure and managers to carry out that mission?
Because of the pressures of national and international competition, rising costs of labor and materials and impatient investors, many companies have made deep cuts at all levels of management, figuring that they would send a message to Wall Street or opinion makers elsewhere that their problems were behind them and that they could move on.
In some cases, the strategy worked. But in many others, the problem was not so much bloated head count as inferior products, lagging technologies and poor response to customers. More than one chief executive has become an ex-CEO by using deep staff cuts to create a false sense of security.
For more and more companies, the practical alternative to resizing lies in focusing not just on a smaller organization, or the cost structure, but by looking at what is important and what isn’t.
Where are things done? How are redundancies handled? What is the basis of the organization, and how well does that mesh with the strategies selected?
When a company begins reshaping, a great deal of attention needs to be focused on how many layers of management there are between the first-line supervisor and the head of the company.
One way to evaluate management layers is to see how many people managers have under them at different levels.
Examinations of a number of companies have revealed that at the bottom and top levels, the supervisor-to-worker ratios are large. But in the middle levels, managers are often found supervising two or three people--and sometimes only one. Although there’s certainly no magic number as to how many people a manager can effectively oversee, fewer than four simply doesn’t work in most organizations.
A closer look at these situations will often uncover the root problem in a manager’s activities. In many cases, a small percentage of a middle manager’s time is actually spent managing. He or she is too busy doing the work of an ordinary worker or simply relaying information from above and below. Many of the problems of relaying information can be solved through systems that replace some of the hierarchy with an information-based organization.
Simply eliminating management layers doesn’t solve the problem. On the other hand, companies that have been successful at flattening the pyramid have learned to get each layer to work better. Here’s where those information systems help managers coordinate their work with other divisions--and other functions. Here’s where more attention is paid to interlocking teams and tasks forces, so coordination happens horizontally across layers and is not imposed from above.
Ultimately, flattening the pyramid also raises a question: Who should be the middle managers of the future? Should they be just the survivors of downsizing and early retirement, or is a different kind of selection process needed? It seems clear that the latter is the choice here, and some companies are beginning to look hard at what it will take to be a successful middle manager.
In the early 1980s, a management consultant might have advised clients to organize around strategic business units, or SDUs, with each totally self-contained. Since then, we’ve seen how this can lead to duplication and redundancy. Now companies are learning that they need more sharing of resources, particularly across divisions that often have conflicting short-term objectives. As a result, negotiating is quickly becoming a key skill for many middle managers.
The process of redefining an organization’s mission and creating a structure to fulfill that mission can be summarized by looking at some things to avoid.
* Avoid quick fixes. Avoid thinking that resizing puts your problems behind you.
* Avoid a narrow focus on cost cutting without changing the way you work.
* Avoid doing things that destroy loyalty and morale, by the way you retain, redeploy and communicate.
* Avoid one-shot solutions while instead moving forward on multiple fronts.
* Avoid backsliding by rethinking from scratch what your company is getting from management, from its staff and how it can make the best use of both to move the entire organization forward.
