I Unchained My Chain Of Command

There's a right way and a wrong way to delegate authority.The author's now much happier and more in control with the right structure.

By Thomas Barrea | 
 

When I began my data processing service, the Thomas National Group, in 1968, I was determined to delegate authority.So I set up a management structure under which our managers reported to our vice-presidents, and our vice-presidents reported to an executive vice-president. The executive vice-president reported to the president, and the president then reported to me, the chairman.

All I had to do was sit back in my ivory tower and feel like a monarch whose kingdom is being run by others. I could get all the glory for the company's successes, and I didn't have to take the blame for any of its problems. The only trouble was, I felt less mine. I had no sense of achievement, the fire that a small company chairman needs to keep him going. What's worse, my people didn't have it either.

There's a right way and a wrong way to delegate authority, and in my company the vertical chain of command was definitely the wrong way. Today, now that we've restructured our management system, I'm exhilarated by my job. I'm able to plan for the company -- to review personnel policies, to look into business opportunities, to discuss new products, and to work toward the public offering we hope to make in the next three years -- without stepping on anyone's toes. I have time to do more creative work, and I enjoy my job a lot more. The same can be said, I think, for the 70 people who work for me.

For the first seven years of our company's growth, the vertical system worked pretty well. Between 1968 and 1975 growth was slow: It took us that long to reach $2.8 million in sales. But the advent of minicomputers made the services of data processing bureaus less necessary, and by the mid-'70s we began looking for a field in which to specialize. We developed a software program to help administer profit-sharing/thrift plans and another for processing of medical and dental claims.

The first of these, ImpleFacts, took off like a rocket. Eli Lilly, Polaroid, Xerox, Chemical Bank, and Colgate-Palmolive were among our first customers. Our sales have grown dramatically; they were over $8 million in the year that ended in February 1981.

But along with the growth came problems, and by the time our first program was ready for the market back in 1975, our people were overworked, cash flow was a headache, turnover was too high, and about 10% of our orders were being delayed.

The vertical management structure didn't allow us to deal efficiently with those problems. It didn't grant the vice-presidents enough authority or responsibility for their departments' successes or failures. No one was responsible for finding out what was causing delays, cash problems, or high turnover. And under the strict chain of command, I was inaccessible to everyone but the president, so I couldn't find out what was causing the problems, either. If I called a vice-president in for a discussion, I was stepping on the toes of his superiors, the executive vice-president and the president. A vice-president couldn't approach me with a problem without appearing disloyal to his bosses -- and risking his job.

The trouble with the structure became clear to me one day in, of all places, the stock room. I casually asked one of the vice-presidents why a certain very talented programmer had quit. Practically in a whisper, he told me that an explosive situation was being created in his department by the policies his superior had dictated. I listened in amazement, not only at the policies he described, but also at the fact that he couldn't come to my office to tell me about them.

"Management," he told me, had refused the programmer's request for three days off, after the programmer had worked long and hard on a project, and had done it well. The programmers didn't even know who "management" was. What's worse, neither did I. When I tried to find out who was responsible for turning down the programmer's request, I discovered a set of rigid, rubber-stamp policies that enabled everyone to escape the blame for unpopular decisions.

Employees were not being treated fairly or with sensitivity. People were being good soldiers, following orders, playing the game according to the rules. The high degree of morale and motivation any small company needs to see it through a period of dynamic growth wasn't there. I was determined to see that the situation changed.

It took me several years to create the horizontal management structure that I finally implemented in mid-1979. I did a lot of thinking about what each of my managers was contributing to the company, and became convinced that no executive is good at everything. If 90% of a manager's effectiveness is in one area, he or she shouldn't have to stretch to do the other 10%.

Under our new structure, eight vice-presidents of our wholly owned subsidiary, Erisco, which administers benefits programs, report directly to me. Job descriptions were completely rewritten, to maximize each vice-president's talents. The vice-presidents of systems and operations were given full responsibility for profit and loss and for daily operations including scheduling. Each of them knows that when there's delay, I'll be in his or her office asking why.

The vice-president of development for the ImpleFacts division, Charlie Hanlon, and the vice-president for marketing, Charlie Klein, no longer have to think about nickels and dimes. They're top planning and marketing people, and it's their job to bring in the business.

My second-in-command, Pat D'Amato, plays a role roughly equivalent to a president, but our vice-presidents still have direct access to me to discuss their problems. When I revamped our management structure, I made Pat part of the four-person staff that works directly under me in the parent company, Thomas National Group, to administer the Erisco subsidiary. Pat is best at putting a deal together for a customer so that the customer stays with us. He's a terrific marketeer. He also has an excellent feel for product development and is a great sales manager.

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