Building a Management Structure

The first concern in building a management structure is the requirements it has to satisfy. What are its typical stresses and strains? What performance does it have to be capable of?

There are three major answers to these questions.

It must be organization for business performance. This is the end which all activities in the enterprise serve. Indeed, organization can be likened to a transmission that converts all activities into the one “drive”, that is, business performance. Organization is the more efficient the more “direct” and simple it is, that is, the less it has to change the speed and direction of individual activities to make them result in business performance. The largest number of managers should perform as businessmen rather as bureaucrats, should be tested business performance and results rather than primarily by standards of administrative skill or professional competence.

Organization structure must not direct efforts toward the wrong performance. It must not encourage manager to give major attention to the old and easy but tired products and business while slighting the new and growing, though perhaps difficult, products. It must discourage the tendency to allow unprofitable products and businesses to ride on the coat tails of the profitable lines. It must, in brief, make for willingness and ability to work for the future rather than rest on the achievements of the past, and to strive for growth rather than to put on fat.

Hardly less important is the requirement that the organization structure contains the least possible number of management levels, and forge the shortest possible chain of command.

Every additional level makes the attainment of common direction and mutual understanding more difficult. Every additional level distorts objectives and misdirects attention. Every link in the chain sets up additional stresses, and creates one more source of inertia, friction and slack.

Above all, especially in the big business, every additional level adds to the difficulty of developing tomorrow’s managers, both by adding to the time it takes to come up from the bottom and by making specialists rather than managers out of the men moving up through the chain.

In several large companies there are today as many as twelve levels between first-line supervisor and company president. Assuming that a man gets appointed supervisor at age twenty-five, and that he spends only five years on each intervening level both exceedingly optimistic assumptions he would be eighty-five before he could even be considered for the company’s presidency. And the usual cure a special promotion ladder for hand-picked young “geniuses” or “crown princes” is worse than the disease.

The growth of levels is a serious problem for any enterprise, no matter how organized. For levels are like tree rings; they grow by themselves with age. It is an insidious process, and one that cannot be completely prevented.

Here, for instance, is Alfred Smith, fairly competent as a plant manager but hardly good enough to be promoted. Under him, however, is Tom Brown, first-rate and “raring to go” – but where? He cannot be promoted around Smith – there is no job even if the company were willing to let him leap over his boss’s head. Rather than see Brown leave in frustration, management kicks Smith upstairs into a new job as Special Assistant to the manufacturing Manager in charge of tool supply; and Brown is put in as plant manager. But Smith knows enough to get busy in his new assignment; soon a veritable avalanche of mimeographed papers rolls out of his office. When he finally retires, one of the bright young men – Tom Brown II – has to be put in to clean up Smith’s mess; being a bright young man, he soon makes a real job out of what was originally nothing but the easy way to solve a personality problem. And when something has to be done for the next Alfred Smith – and, like the poor, they are always with us – a new job has to be set up; he is to be a “coordinator. And so two new levels are created both soon essential and both in no time hallowed by tradition.

Without the proper organization principles, levels will simply multiply. Yet, how few levels are really needed is shown by the example of the oldest, largest and most successful organization of the West, the Catholic Church. There is only one level of authority and responsibility between the Pope and the lowliest parish priest: the Bishop.