How does your company really work? Gail Hering decided to abandon the traditional top-down pyramid for a more accurate -- and productive -- depiction
There are two doors in Gail Hering's office. One opens to the business offices. The other one opens to the factory. Neither is locked. "Don't tell me I'm unapproachable," says Hering, CEO of $5-million Atmospheric Processing Inc. (API), in Holland, Mich., which heat-treats auto parts. Approachability is a big issue for Hering, who has never been a fan of the traditional top-down organizational structure. She sees it as a vestige of a bygone management era that modeled itself after the military. "We have so many cross-trained employees that they don't fit into these little boxes," she says. It wasn't until Hering made herself and her employees look at their company the way it really works that she was able to maximize its productivity and competitiveness.
One of the big downsides to the pyramid organization is the false focus it tends to give employees. The CEO is protected on all fronts by key managers and line supervisors. Communication lines are drawn all too clearly: from top to bottom. And employees tend to see pleasing their superiors and building an empire as the keys to their advancement. "That mentality dooms a company," says Hering. "During our heyday, doing the work was about the last thing on my managers' minds. They were too busy looking over everyone else's shoulders and hiring more and more people to build their fiefdoms and give their own careers a boost." Hering has been bucking the hierarchical management structure for more than 10 years, struggling to get across to everyone from furnace operators to billing clerks that to get ahead at API, they must serve the customer, not simply get along with their supervisor. Then, in 1990, the rigors of a highly price-competitive industry in a recession caught up with API, and Hering was faced with laying off two-thirds of her employees. She was forced to give her organizational chart a long, hard look. "I discovered a cardinal rule of an organizational chart -- no names," she says. "Keep the chart focused on job functions, not titles or names. Don't get personal with it." When she took the names off the chart and looked at what people had accomplished over the course of the year, it was an eye-opener to discover who were the real workers in her company. Many middle managers were let go, while those who were really performing the work were kept on. When she was through, 56 employees remained where there once were 170.
"Now," declares Hering, "API is a flattened organization. No one's productivity is constrained by the structure." By 1991 Hering had control of her company again. She had learned that every job function at API had to be geared toward customer satisfaction, and her organization's structure had to reflect that. On the following pages Hering compares her new hub-and-spokes chart with the more familiar top-down tree she used to apply.
The Dangers of Empire Building
"With our old organizational chart, the employee saw the goal not as satisfying the customer or improving profits but as climbing up to the CEO's position. For us that manifested itself in a tremendous amount of empire building. Our operating costs went up, profit margins went down, and customers were dissatisfied. What was the problem? Customers told me there were too many people between them and the decision maker."
"When employees looked at our old chart, the first thing they saw was who was in charge, to whom did they report. I had an employee say, 'Just tell me what you want.' It seemed so reasonable and straightforward a request. Now I believe it was the worst possible question that could have been asked, because that person abdicated all responsibility. No one would risk going outside of his or her reporting line to make a suggestion that might help improve operations. My whole mission is to shift employees' focus from pleasing superiors to contributing to the company's goals. I want people to focus on job functions, not titles."
"As our organization became flatter, [the] line-and-box structure made less and less sense. When I tried to adapt it to how we really function, I had arrows going all over the place, from one department to the next. For instance, our traffic coordinator is now also our production scheduler -- the person customers call if they have a hot job."
"When new employees see this circular chart, they have no idea what's going on. They can't figure out who's in charge, or who is above or below them in the company. They're looking for their pigeonhole. This format confuses new employees. Then, during the two-week orientation, the logic behind the format emerges, and employees are straightened out. In a classically managed company, a new billing clerk would learn only what she needed to do to get the bills in the mail. That doesn't happen here.
"We require that new employees understand how the entire company earns a profit. For two weeks they travel around and see how the different departments function in tandem. The new clerk is all concerned about who her supervisor is. But during orientation we teach her that if she doesn't understand something on a bill, instead of referring it to her supervisor, she should go directly to the person from whom it came and solve the confusion herself."
"On the surface it doesn't look as if many people have much to do with billing, but that's not the case. We show employees who keep time cards that those time cards keep track of labor costs for the jobs they are working on and that that's the lion's share of the total bill."
"Every employee here needs to fill out purchasing requests for one thing or another. A furnace operator using a shovel knows that shovel is going to wear out soon. He knows if he doesn't fill out that purchasing request, he's not going to have a shovel and it's his own fault. It's not like a classically managed company, in which a supervisor would be responsible for making sure things are in stock."
The Spokes Are Job Functions
"To qualify as a spoke, the task must be something that every employee does on the job in some way or another. So really, this chart is a picture not only of how the company should function but of how each employee should function. It emphasizes to employees that their customers -- not their supervisors -- should be their focus. We still have supervisors, but they function less as maintainers of the status quo and more as change agents."
The Hub Is the Goal: Customer Satisfaction
"With the pyramid or tree chart, it seems as if everyone is focused on satisfying the CEO. That's not the focus of a healthy company at all. The central organizing principle of any company should be satisfying its customers, providing value. That's what keeps you in business, so that's the hub of our organizational wheel."
Customer Service, External and Internal
"Surrounding the internal operations is customer service. You may think it would make sense to have the customer-service people next to the bull's-eye, but that works against us. We are trying to promote more direct contact between customers and all employees. Besides, customer-service people need to see their fellow employees as customers, too. They need to deliver and exchange more information with line employees. That's why we don't call them 'salespeople.' We want them to look at API employees as their internal customers."
The Outer Rings
"Having these titles here diverges from our strategy of focusing on functions, but let me explain. I asked a lot of people for ideas about how to describe what the CEO and chief operating officer do. We tried to use terms such as 'administrative support' or 'senior staff,' but people didn't know what we were talking about. We still perform the job functions on the spokes, but we have another obligation -- to represent ourselves as a corporation. Originally, I didn't have a board of directors on the chart. I hadn't seen them as taking part in our day-to-day operations. They said, 'You call us at midnight! How much more day-to-day can you get?' "
"People here are required to share their expertise with others who could benefit from it. For instance, experienced furnace operators show new operators how to perform certain jobs. And while I'm the CEO, I also act as a consultant to the person who writes our newsletter. It took a while for him to get used to the idea that I was functioning in the capacity of an editor and not a CEO, but now he's comfortable with it."