Category Archives: Organization Structure

Dilemmas in the Construction of Hierarchy

With a group of competent people assembled in the same room at the same time, now what? Why organize, how to organize?

Without a why, there will be no coordinated effort toward anything. Most organization founders begin with a personal why, a defined mission and that’s the beginning. The mission may shift over time based on market conditions, maturation of the CEO or maturation of the organization.

How to Organize?
With a defined mission, someone still has to decide what to do, sequence of what to do and resources required to do. In the beginning, it’s the founder. As the organization grows, decisions are distributed from the founder to others. But to whom? And with what authority? We now have a hierarchy, intentionally or by default, based on some value. The nature of that value will determine the nature of the hierarchy and determine its energy flow. Organizations get to pick that value. If the value is power, we create a power hierarchy, not sustainable.

If we create a competence hierarchy, decisions made about what to do, sequence and resources can now be based on competence. The proper distribution of decision making and problem solving goes to those roles the organization identifies as requiring the most competence.

Degrees of competence determine which roles make which decisions. If we draw this on a piece of paper, this is organizational structure. But, what is the design criteria for competence? How do we determine, or consider who may be more competent than another? In a competence hierarchy, we certainly contemplate that we are going to have more than one competent person, so who gets which decision?

These questions determine how we divide up the work, who will have the authority for which decisions and who will be accountable for the outcome of those decisions. At some point, we run into conflict. The conflict may be about the priority of a resource, priority in a sequence or if a task needs to be completed at all. If there are layers of decisions, how many layers? Who decides?

This seems like a ton of questions to answer, and the questions keep coming. How do we define the working relationships between people and keep it all straight? What is the framework to guide us? What are the metrics in that framework?

We started with chaos and order. How do we examine the chaos to find the lynchpin that brings order to the organization? I am a structure guy. If you get your structure right, your issues related to motivation and management largely go away. What’s the lynchpin?

Integrated Competence

To create a hierarchy of competence, we have to understand the nature of competence. “I will know it when I see it” is not really helpful. Elliott defined these four things as absolute requirements for success in a role, any role, no matter the discipline.

  • Capability
  • Skill
  • Interest, passion
  • Required behaviors

Competence is the integration of these four factors. If we want to build a hierarchy of competence, we have to understand each and what that integration looks like.

Capability and Skill
Competence is a combination of Capability and Skill. If I do not have the capability for the work, no amount of skills training (technical knowledge and practice) will be helpful. And, if I don’t have the skill, you will never see my capability. Competence is a combination of both.

Interest and Passion
Interest and passion for the work will influence the amount of time for practice. The more interested I am, the more time I will spend in practice. And if I don’t practice a skill, the skill goes away, competence goes away. Practice arrives with many qualities, frequency of practice, duration of practice, depth of practice, accuracy of practice.

Required Behaviors
Something as simple as showing up for work on time is a required behavior. I may have the capability, skill and passion, but if I don’t show up for work, competence is invisible.

Desperately Seeking Competence
Building a competence hierarchy begins at the individual level.  It’s a basic building block. Competence must be identified, selected, developed, improved and practiced. For competence to flourish, it must be placed within a hierarchy where the value, the energy and the flow is based on competence.

Flow in a Hierarchy

Hierarchies are naturally created as a sorting process using a defined value. If the value is power, it’s a power hierarchy. If the value is command, it’s a command hierarchy. If the value is control, it’s a control hierarchy. If the value is competence, it’s a competence hierarchy.

Flow
In a power hierarchy, energy flows from those with the power. Authority is assigned to those with the power. Decisions are made by the person in power. Problems are solved by the person in power. Critics of hierarchy likely have this value stream in mind and complain about top down, command and control. It’s not a bad argument, but their angst is directed toward hierarchy, not power.

What’s so bad about a power hierarchy? There are a number of problems. First is organizational speed. If all decisions have to made by those with the power, the speed of decision making will slow down or stop. If all problems have to be solved by those with power, the speed of problem solving will slow down or stop.

If decisions require local knowledge about the subject at hand, those with power must stop to learn the local knowledge. If decisions require technical expertise, those with power must stop to learn the technical expertise. The decision slows down.

If the power hierarchy vests power in those who have the power (circular reference with a purpose), how do those in power remain in power? The only basis for remaining in power is by edict, corruption or tyranny. The justification resembles the parent response, “Because I said so.”

The initial response from a child is obedience because the child is dependent on the parent, but the impact on the psyche of the child is none too positive. “Because I said so,” eventually creates counterproductive sandbagging, passive aggressive behavior, outright defiance. The endgame for the child is to create a condition of independence and leave the family, sometimes not so amicably.

The impact in a power hierarchy is that team members will seek to become the person in power or they will leave. Except for those employees who remain dependent on the structure for their own survival.

Those who seek power in a power hierarchy will use whatever means to gain that power, which may include intimidation, tight control, harboring knowledge and deception. Those who leave create a turnover statistic which eventually gets noticed by HR. And those who stay, because they have no other option, will behave in all manner to remain in the good graces of those in power. None of these scenarios create the culture of a thriving, forward looking, innovative organization.

But, what if the value in the organizational hierarchy was one of competence? A hierarchy of competence.

Water Flows Downhill

It’s a plumbing analogy, but demonstrates a law of physics.

Hierarchy is a value sorting process to bring order to the chaos of the world, order being what we know, chaos being what we don’t know.
Hierarchy, in a functional organization, is a value stream characterized by competence. We build the organization based on the competence required in the roles in our design. A visual picture of our design, on a piece of paper, looks like our organizational chart, our organizational structure.

Organizational structure is the way we define the working relationships between roles, related to accountability and authority. The way we define the value in the hierarchy determines the energy flow and whether that organization is functional or dysfunctional.

If the value is power, the organization will be a hierarchy of power and its energy will flow based on power. If the value is command, the organization will be a hierarchy of command and its energy will flow based on command. If the value is control, the organization will be a hierarchy of control and its energy will flow based on control.

And, if the value is competence, the organization will be a hierarchy of competence and its energy will flow based on competence.

Water still flows downhill. 

Chain of Value

Chaos and order. The purpose of organizational hierarchy is to bring order in the pursuit of a defined goal. Often we misunderstand hierarchy, some define it as a chain of command. In a functional hierarchy, it is not a chain of command, it is a chain of value. That value being competence. Hierarchy is not a chain of power, it is a chain of authority.

Authority and power are quite different. It has been well established that a parent has the authority to tell a child to eat their broccoli, but it is the child who has the power to determine if broccoli will, in fact, be eaten.

In a functional organization, authority comes with accountability. A role with authority also assumes accountability. Only in a government oversight committee is authority assumed without accountability (It is a broken power chain, ultimately, the committee’s authority is also broken.)

In a functional hierarchy, the value chain is competence. Authority comes with accountability. Organizational structure is the way we define working relationships related to authority and accountability. A manager may be granted the role authority to make a specific decision, and simultaneously is granted the role accountability for that decision.

Hierarchy as Framework

From the Ask Tom mailbag –

Question:
Can the hierarchy change based upon the nature of the work?

Response:
Hierarchy is just a framework. The framework gets populated only by those functions and roles necessary (Lee Thayer) for the work of the mission. So, yes, it changes.

A painting contractor with 20 employees is likely an S-II organization. Team members play roles as painters, and helpers at S-I with a supervisor and a scheduler at S-II.

A software developer may have no team members at S-I, with coders at S-II and S-III. If it’s complex software, likely a senior project manager at S-IV, CEO at S-V.

Structure may also change over time. Many years ago, I worked for a CPA firm who made most fees from bookkeeping services at Hi-S-I. Review of the books was done by supervisors at S-II and the work product delivered to the client by a manager at S-III. Between 1986 and 1990, computer accounting systems emerged inside of our client companies and all of our bookkeeping services disappeared.

So, hierarchy is the framework, but the business model (the work) defines what sits inside the framework.

Hierarchy of Competence

Hierarchy, of anything, is based on a defined value. In a proper organization, hierarchy is based on competence.

Competence in relation to what? Competence in relation to the work.
Work, defined as decision making and problem solving. Competence begins with the potent combination of capability and skill. A competent person must possess the necessary cognitive capability and the skill to exercise that capability. Skill is a potent combination of technical knowledge and practiced performance. Practiced performance is the expression, the application of competence.

The first question in organizational structure is, who should be the manager? Hierarchy in an organization is based on a value of competence.

Natural Hierarchy

Order out of chaos. What we know and what we don’t know. There are people in the company now. As the mission was discussed, some left, some stayed, some enrolled. Those that are left have to work together, but in what way?

Organizational structure is simply the way we define the working relationships between people. Some of those relationships are vertical. Vertical working relationships are described as managerial and define two things. In that relationship, what is the accountability of each person? In that relationship, who has the authority. Accountability and authority. And, so, a manager is born.

But, who should be the manager? The instant the founder selects a manager, a hierarchy emerges. Some modern companies decry, that because they are modern, they have no managers and thus no hierarchy. Some modern companies believe that hierarchy is an evil social construct that should be banished for social good. But, if there is no manager, there is no hierarchy. If there is no hierarchy, there is no accountability and no authority. And chaos re-emerges.

Hierarchy is a natural sorting of value. Hierarchy is a product of nature, not a social construct. Value can be placed on many things. For mate selection, the value may be attractiveness, physical, chemical, economic. The Tinder swipe is based on a hierarchy of value.

For a company, the value is competence. The organizational structure is a hierarchy of competence. A person climbs the ladder of organizational hierarchy based on their ability (capability) and expression of competence.

In the Beginning

Order and chaos. What we know and what we don’t know. No material successful output is accomplished alone. The most spectacular achievements require a team, a company, an organization.

Prior to a team, prior to an organization, there is chaos. There is no order. Defining and planning an organization brings order. The design is an analysis of what we know, or what we think we know translated into thoughts. This is thinking and the most important part of every CEOs role.

Fielding the organization, hiring people, introduces more chaos, uncertainty, ambiguity, because real people do not follow the perfect design. This is the bane of every startup.

People must be adapted to the organizational design, but there is no motivation to do so. The founder first tries to be the parent, with impatient instruction, repetition and increasing volume. “If I told you once, I told you a thousand times.”

After some time, the founder realizes that motivation will only come by enrollment of the people into the purpose of the enterprise. Next to the perfect organization design emerges the perfect purpose in the form of mission. And the founder has to talk about it. Without people, the founder only had to think. Now, the founder has to communicate, but the thoughts are ill-formed and people have questions. A discussion ensues and, if successful, a company is born. This is the constant struggle of order out of chaos.

Role of the CEO

Order and chaos. That is the balance beam, one foot in order and one foot in chaos. Order is what we know. Chaos is what we do not know. We bring order to chaos by exploring its value in relation to what we know. Assigning value is the framework of hierarchy.

The role of the CEO is to bring order from chaos. The most significant chaos is the future. The future remains chaos because it remains unknown (in spite of economists and futurists who claim to know).

That solitary role at the top must make decisions today in the face of that chaos. Why do some (very few) people land in that role? It is not mathematical logic, only one CEO per company that explains why there are so few, relative to the population. It is the value stream of hierarchy. There are not that many people with stamina against the unknown. CEOs are accountable five to ten years into the future. Most people can hardly make plans to account for the uncertainty of next week. Some people can make effective plans for the uncertainty of next month, or next year. But five years is a very long time. Elements of what we know now and call by name are only concepts in the future of five to ten years.

The primary role of a CEO is to think. Think conceptually. Most people are not very good at it. Some people who land in the role of CEO may not be very good at it. Successful CEOs are those who stand in the face of uncertainty, make decisions today, solve problems today understanding the risks of chaos in five years.

Successful CEOs are those with the capability to bring order out of chaos.