Hurdles

You will encounter resistance while redesigning your firm's management structure. Some of this resistance will be due to a lack of understanding by managers, and some will be due to an unwillingness to change; let's address these two cases sequentially. We'll begin with a deeper discussion about managers, so that we fully understand why redesign is important and necessary, and so that we can explain our motivation in detail to employees.

It is likely that anyone reading this text is a manager. How did you become manager? Did you go to management school, and then accept a position as a manager in a company? Probably not. The typical career path for a manager is to begin as an apprentice in some area of the company and work for many years to become a knowledgeable, competent professional in that area.

For example, a young person graduates from college with a degree in accounting, works for a company many years in the tax accounting department, and eventually, maybe 10, 15, or 20 years later, becomes one of the most competent and senior members of the department. Let's refer to him as Senior Accountant. When the current manager of that department retires, Senior Accountant is tapped on the shoulder to be the new manager of that department. This is a typical path to a manager position.

Now that our Senior Accountant has management responsibilities, the company will likely encourage him to have manager training. Over the next few years, he takes courses in public speaking, organizational dynamics, leadership, and some annual Personnel Department training on how to run performance reviews. He still spends much of his time doing tax accounting, but he also spends some of his time doing his manager work: he has a weekly staff meeting, assigns work to his staff, reviews their work, goes to his manager's staff meeting and gives updates, occasionally deals with an employee issue, periodically hires a new person, and does performance reviews annually. Senior Accountant may not believe that he will ever be promoted to his manager's position because he doesn't have the breadth of knowledge and experience to manage areas outside of tax accounting.

Recently our Senior Accountant has encountered an issue with one of his best employees, a junior accountant who we will refer to as Junior. He started in the tax department several years after Senior, but he is a quick study, ambitious, successfully completes every assignment, and now seems bored in his role. Recently Junior has been hinting that he has learned everything he can in Senior's group and he is thinking about moving out of the group to a position that will add to his portfolio of skills. After several discussions, Senior learns that Junior would like to get experience as a manager, something he has not yet had the opportunity to do. This is problematic for Senior because he is the only manager in his group, and Junior can't have his job because he has nowhere else to go in the organization. He decides to create a new management position for Junior; half of his group will report to Junior, who will still report to him. This seems like a perfectly obvious way to handle this situation. Junior gets his management experience; Senior keeps Junior in the group.

Junior has not yet had any management training, but he has just learned his first big (and incorrect) lesson on management from Senior – if you have an unhappy employee, divide the group and create a new management position for that employee. It seems so smart, it didn't cost Senior a cent; he just rearranged lines in his organization chart. Senior's span of control was halved and a new management layer was created. There is a cost to the company, but it is difficult for Senior and Junior to see it in isolation. It is a cost that adds up across the organization.

A manager, according to the dictionary, is a person who controls and manipulates resources and expenditures. Are Senior and Junior managers? Not by this definition. Instead, they are tax accounts with some supervisory duties. They have spent their careers being tax accounting experts, their tax accounting expertise has been responsible for their promotions, and tax accounting remains their central interest and their source of power in the organization.

Senior's and Junior's promotions and manager training experiences are typical, and occur every day all over the world. Unfortunately companies typically do not set strict rules about organizational structure and don't have groups responsible for keeping their management structures lean. Instead, manager promotions blossom throughout an organization until the company has a cost problem, then layers of middle management are eliminated, the managers are terminated, and a restructuring charge destroys several years of earnings. If you closely follow some large companies over many years, you can watch the periodic cycle of building managerial bloat, followed by an army of consultants descending on the company, heavy cost cutting and layoffs, and then a large restructuring charge. Through an example we have portrayed the current situation in many companies. Now we will describe a preferred scenario.

Senior follows the same path as before, working his way up through the ranks of the tax accounting group and is then promoted. Senior never thought much about a manager role until now; he was always focused on his tax accounting work. Senior takes some time to reflect on the consequences of his promotion. He looks around at the different managers in the company, he observes them in company meetings, he looks at their organizations in the company directory, and he tries to understand their ascent through the ranks of the firm.

The senior managers seem alike in many respects: they're great communicators, they know how to inspire the troops, they manage many people, and they seem knowledgeable about many different subjects, such as research, engineering, marketing, finance, operations, distribution and personnel issues. Senior makes a startling observation: the CEO and the senior managers don't seem to do any "real work" -- they only manage other people. They control and manipulate resources and expenditures.

Senior is inspired to be a senior leader of the company someday, maybe even CEO. In his new role as manager he delegates his old duties to others in his group, and spends his time learning how to make his team perform at its highest level possible. As his management skills improve, he welcomes any opportunity to increase his span of control and his influence in the organization. When he has the opportunity, he spends time learning about other areas in the company and building his network. He realizes that spending half his day on the intricacies of tax accounting is not going to get him to the next level in the company. He is working for an opportunity on the next layer of the organization and he is trying to demonstrate that he has the broad knowledge and the management skills to handle it. Other executives notice Senior's rapid rise in the firm and they begin mimicking his attitude and approach. Over time these ambitious executives begin consolidating the low-span manager positions, which leads to a high-span, low-layer firm.

Through our example we have illustrated a common organizational state and what could be its future state. Migrating from one state to the other may be difficult because you will likely have to change the culture of the firm regarding the role of managers. Starting at the top of the firm, managers on each layer should be responsible for educating the layer below them. On every management layer you will likely encounter the same questions and objections about organization redesign. Below we have listed the objections we have encountered and our replies:

"Our managers are player-coaches" – this is an excuse for having many low-span managers. In addition to doing 'real work' (player), they also manage staff (coach). This is a poor excuse; player-coaches don't have enough time to be great managers. There is a reason why sports teams have dedicated coaches and are not coached by players. No person can optimize their performance and the team's simultaneously.

"Giving a high-performer a few people to manage gives them a feeling of advancement" – forget it, there are better ways of rewarding and advancing high-performers without creating a bigger problem for the organization. If Junior is a high performer and the firm believes he has the potential to be a great manager, then it should train him to be a manager and then give him a real management assignment. Giving him a small group, while expecting him to continue to be a high-performing individual contributor, does not teach him to be a real manager and does not help the firm.

"Our managers like to stay in the game" – managers need to keep abreast of developments in their field, and constantly expand their scope as well. But they should not be doing their subordinates' work. In the case of our fictitious employee Senior, he needs to keep abreast of changing tax laws, but he shouldn't be filing tax returns. Many high-performing employees are given management roles, but they don't enjoy or excel at managing – these employees should be given the opportunity to return to their individual contributor roles.

"We can't afford to not have our managers do real work" – this is the surest sign that the firm has too many managers. The firm should pare the management staff until the managers have no time to act as individual contributors.

"Corporate doesn't give us what we need" – that may be true, but replicating staff functions through small shadow organizations in the businesses creates more work, communication headaches, and destroys economies of scale. A better approach is to require Corporate support functions to serve the firm adequately.

Some managers will not embrace the new culture. They will be threatened by it, they will dismiss redesign as a fad, and they will try to thwart your efforts. Typically in any redesign effort there will be managers who no longer have roles within the company, and the uncooperative managers remaining in the parking lot are likely to be the managers who need to leave your company.