Company structure may contribute to poor success

Posted by Andy Huggins on January 28, 2016

So let's setup a typical company structure. (Spoiler Alert: it looks like a pyramid (scheme))

You've got the CEO at the top, next level down some Executives...or Vice Presidents or something.

Under them maybe some Directors, under them Managers, and under them you might start having real employees/supervisors, then at the lowest level regular employees.


But the problem is not the structure alone. It's the unintended consequence the structure creates. 

From a structure and "control" perspective this typical setup makes a lot of sense. It's essentially trickle-down leadership. People at the CEO and President level like it because it gives them clear control and recognition.

A companies purpose though, is not to manage control like the military. This is also the most limiting structure I can think of in terms of optimizing employee engagement, flexibility, and distilling the best ideas. Once an employee loses interest, for whatever reason, their contribution also deteriorates. If an employee feels as if they can not contribute, what is the point in trying? I think you have to understand that as a Leader.

This sort of structure also creates a false sense of importance for the the people at the top. They feel as if they are more important, or they are responsible for making decisions...mind you they often make decisions that they know nothing about but sometimes interject their opinion because of the perceived position and feeling that they need to make the decision.

What about the unintended consequence?

So if the Leadership is trickle-down, the distillation of ideas to action is actually very hard. I actually see it as putting in a filter to weed out bad ideas. And the unintended consequence of this filter is that the person making the decision not to pass along an idea, again may not be aware of the implications of the idea. The idea will die, the employee loses interest and the company suffers, or at least may not be as optimal as it could be.

Another unintended consequence of the structure is that the company is essentially betting big on the people toward the top. Sure you hope to have good people in those positions, but Custer was commander and it didn't really work out too well for him or those under his command. Betting big on any one leader may not have dire consequences like Custer, but may lead to mediocrity.

In my experience, I see those toward the top view their roles as "avoid failure." And this is where being a leader is tricky. Avoid risk/failure too much and you end up being average...nothing special, on the contrary, take too many risks and you are "reckless."

I recently watched the movie The Big Short, and this concept is shown perfectly in MIchael Burry. The ten second explanation is that Dr. Burry ran an investment fund, did some research on mortgage-backed-securities and found that most of them consisted of bad loans. His analysis showed that the failure rate was much higher than people thought and the value of the security would eventually go to zero. So he figured out a way to short the securities and invested heavily. (He probably was a little aggressive on his position...or at least the movie made it seem that way.)

Once Dr. Burry had secured his position, the fund's partners and investors were very concerned and threatened legal action. Eventually, his theory began to workout and after a couple hiccups with the ratings agencies, he ended up being right. The partners and investors made huge sums of money...but had also failed to see what he saw (and researched) and were not hesitant to express their concerns about the investment.

The point of this is that had Dr. Burry changed his position, the investors would not have made money and would have lost money. Had he been wrong they would have lost a lot of money too. I guess the point is, everything is a risk, avoiding risk may avoid failure, but I think it also avoids success.

Do you wake up each morning and say "How can I be mediocre today?" Of course not. But you aren't going to achieve success without some risk...you just try to not risk everything.

Your decisions are bigger than you

I think one of the big epiphanies I had at a job a few years ago, was that as an employee my financial stability is tied to the company I work for. The Leaders of a company should be aware of this too.

A Custer-esque leader means that the employees die too...or are at least out of a job. Some of these Leaders may use this as justification for their salary or the importance of their job. But I really see this as a reason to allow the employees to participate in the decisions of a company.

Everyone at the company is out of a job if the Leaders make bad decisions.

By allowing the employees to participate in decisions, it keeps them engaged. When ideas are discussed, all employees that need to be included can help point out good points and bad points and the ideas can be distilled into good ones. This takes the pressure off the Leaders per se. It makes it a team.

One of my biggest issues with work was when a boss denied a request of mine for a piece of software that I knew would increase my productivity and give me experience with analytics to show results. I realized that him denying me at that point, meant I would not gain experience, which might later become a part of my career later.

Essentially, his decision was limiting my future potential.

Regardless of the fact that the data I would have had, in my opinion, was easily worth the money...in a marketing department...this limiting of my future by someone else's decision, did not sit well with me to say the least.

I really questioned why a boss would want to limit an employee. I know there are budgetary concerns, but we are talking $2,000 a year, with costs possibly going down over time in a department with a half million dollar budget.

To be continued...