There are two basic management formats. One is the pyramid organization, where the head of the company, typically the owner, makes all the decisions and managers simply implement the company's mandates.
Alternatively, there is the flat organization, where managers make operational decisions, with the management team and owner only reviewing results or discussing issues and problems. Managers resolve daily operation issues, while reporting on a regular timely basis such as in a weekly managers' meeting. Of course, the owner can always review critical issues as required, but the company is run by the managers in this flat format.
There is a huge difference in these styles. The pyramid organization concentrates all power and decision-making typically in the owner's hands. The owner micromanages every aspect of the business with a constant flow of managers asking him or her for immediate short-term consideration and response to whatever is happening at the moment.
Typically few systems are in place, as the owner makes decisions on an issue-by-issue basis. This is more often called putting out brush fires and babysitting, as these are the main functions such a style promotes. It means endless hours of work and total self-absorption on the part of the owner.
In contrast, the flat organization allows, encourages and even requires managers to make operational decisions without going to the owner or CEO for the answers to every micro issue. A flat organization requires that managers be held responsible for success and also be held accountable for their achievements or failures.
Employees can also be empowered to contribute to decision making. This way, you involve the entire team in the responsibility and accountability for success. Holding periodic department meetings, managers can frankly and honestly discuss the workings of the operation and ways to improve it.
This approach works best when the employees are rewarded for success on an incentive basis. It puts everyone in the same boat, all pulling together trying to achieve the same goals.
To become a flat organization, start from the top. If you select a strong management team and let them manage, if the managers can create quality teamwork in each department, and if the departments can work together to create a larger team effort, success will be assured.
This requires a significant discussion with your managers to agree upon goals and objectives, but the managers are responsible for achieving them. Each division or group acts as if its manager was the chief executive officer of that group. The manager's answer is the final word, and he or she does not have to retreat to the mother ship for ratification, affirmation or permission.
It further requires a CEO who will expect that managers will make errors in judgment and will support them when this happens. This is critical since every decision will not be correct or the best. As long as enough of the decisions are appropriate, then the CEO should cultivate decision-making by supporting managers.
Managers should be encouraged to occasionally take risks and experiment, and maybe they will hit a home run, bringing additional profits into the company. They should be supported in their efforts and encouraged to try again if they fail, even if they fail more often than they succeed, as long as they reach their objectives and projections.
Ask your managers to draft their own department business plan and supporting budget, and then give them the authority to implement it. You will have the basis of a very successful flat organization, with far less management and babysitting for you.
Why not even leave hiring decisions to your managers? It's their team. Allow them to pick their own players.
This begs the question, what does the CEO do if he or she is no longer responsible for the operation and is running a flat organization with the managers controlling and operating the game? Plan, train, and review: That is the CEO's real job.
- Plan. Chart the future course and goals. Plan for capital investments, growth and development.
- Train. Make certain your managers are constantly learning new skills and acquiring additional capabilities. Provide training opportunities and make them mandatory.
- Review. Always monitor the results and the key indicators so you have a pulse on your progress and success. If faltering, you're there as soon as possible to help make corrections. You're supporting your managers' efforts, not doing their job for them. Inspect your managers' work, often and deeply.
That's a flat organization. Can anyone do it? It requires a CEO who can resist being a control freak and who can let go in exchange for the benefits of greater success with less work effort. Let your managers do their job. Why pay them to watch over the employees when they should really be managing them?
Finally, learn from the masters: Jack Welch, the most successful CEO in modern history, spent his career flattening General Electric, one of the most successful organizations ever. He spent years converting a huge pyramid to a flat organization, division by division, and he claims flat is the only way to go.
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This article is an excerpt from the book Successfully Navigating the Downturn available from Entrepreneur Press.