By Megan Lambert, Senior Consultant at BTS
How can we make faster decisions? Reduce our processes? Run more simply? How do we become more customer centric?
These questions are at the forefront of the minds of our clients right now, as large corporations compete with highly agile, “ankle-biting” start-ups for market share. As one BTS client described it, big business is like a slow moving tanker that is being overtaken by small, swift, start-up speedboats whose easy maneuverability allows them to leave the tanker behind.
These small speedboat start-ups have “organizational agility.” By that, we mean they can create momentum inside the organization, rapidly respond to changes in the market, and meet evolving customer needs. By contrast, large organizations often lack momentum due to the diversity and complexity of their services or products portfolio, the siloed behavior and mindsets inside the company, and growing bureaucracy of internal processes.
As a result of this disruption and the pressures from the marketplace, leaders at these large-scale organizations are asking themselves, “How can we innovate more quickly to keep up with the competition?”
The answer: flip your pyramid.
What does a “flipped pyramid” mean?
Rather than relying on the traditional hierarchical pyramid structure where organizational direction and strategy supposedly trickle down from the c-suite to the front line, turn the pyramid upside-down.
The basic premise behind the “flipped pyramid” is that the best decisions are made by people closest to the customer. People working at the “frontline” have first-hand insights and wisdom which allow them to better sense and respond to changes in the environment. Frontline people still benefit from executive mentoring and coaching – because executives often have a broader perspective of the company’s overall goals – but their main responsibilities become adapting to and meeting the needs of the customer, and then sharing these insights with the rest of the company. This creates an organization that can respond more quickly to environmental, customer, and market changes.
One of my clients created the below image to describe how this “flipped pyramid” works:
Why is the traditional pyramid corporate structure no longer working?
Many companies are finding that the traditional hierarchy is too slow to make decisions quickly – the top-down trickle-down is not responsive enough to the changing environment and customer landscape. At these types of organizations, power is concentrated in only a few hands, despite having thousands of people. This means that for major decisions, the company relies on a handful of executive brains, instead of the thousands available throughout the company. And those executives often aren’t close enough to the customer to make the most informed decisions.
For example: An executive might notice that the business is lacking data and needs better account information in order to do annual budgeting. He calls his directors and managers to request more data on the budgeting cycle from their teams so that he and his exec team can make better decisions. This is perfectly logical from the executive perspective – better information means better decisions. What he cannot see, however, is that this information request adds 10+ hours of work for a frontline employee, then 2-3 hours of work for their manager to review it, then another hour of work for his director to give feedback, and so forth. This simple request for information adds bureaucracy and process, rendering the first level people less efficient. Top-down leadership often tries to manage complexity by adding more complexity.
In a rapidly-changing, complex environment, creating more corporate mandates will give the false illusion of executive control at the expense of momentum. People at the first level will feel mired down by bureaucracy, unable to make the decisions that matter. As one BTS client put it, “Organizations are often inhumane in the way we treat people; we try to control and micromanage them instead of letting them follow their instincts and their own drive and create from that.” Structures that concentrate power and decision-making in a small group of hands can dehumanize employees by limiting their ability to decide and create – effectively disempowering them.
What is the alternative? It’s self-managing, agile organizational structures that distribute power and decision-making across the organization. This approach requires a new metaphor for how we look at business. Instead of thinking about a company like a machine (which makes people into mere cogs, some “bigger” and more powerful than others), agile organizations are like living organisms, which have a vast range of cells working in service of a common goal. The cells work in independent, self-managing teams to complete tasks, respond to new information, and monitor risks in order to keep the organism healthy overall. These “living organisms” are responding, changing, and growing constantly. In comparison to the analogy of a company like a machine, which is much more static and requires structural overhauls in order to create change, the organism model is significantly more adaptable, agile, and efficient.
If you are thinking, “This sounds great in theory, how does this “flipped pyramid” work in practice?” then stay tuned for the second part of this blog series.