Flat, team based and empowered organizations have the potential to out-perform tall hierarchical organizations in most every competitive industry and that includes home building! I have always enjoyed conversations on business improvement with Tom Gillespie, a NHQ Award winning builder, NHQA Judge and consultant. In this blog Tom engages us in a conversation regarding the importance and impact of flat, empowered organizations.
A tall organizational structure has many levels of management which creates its own range of communication problems. This ultimately slows down the decision making process. Because of some of the problems of a tall organization many companies are converting to flat organization structures for faster responses, being better suited for rapid growth and changes in the business environment. A flat organization unlike a tall organization does not have the middle management layers their functions having been eliminated. This allows the top management to be in direct contact with their frontline salespeople. This organization allows a faster response time when conditions arise. (Answers.com)
It is clear to see that tall organizations possess problems when trying to communicate with the organization at large, particularly when trying to reach those people on the front lines. Messages can be diluted or interpreted differently and ends up different than its original form. In contrast, in a flat organization the leader is taking his message quickly and directly to the front line workers where he or she can ensure it is delivered correctly.
Steven Covey, the author of Seven Habits for Highly Effective People, has referred to insanity as doing the same thing over and over again, in the same way, expecting somehow a different result may occur. This is pretty much true, based on my experience with tall organizations. Each year tall organizations approach the same problems the same way as if somehow “this time” a different result will take place. On the other hand, a flat, team based organization who is empowered will not be bound by the same corporate thinking of the past and will find new and effective ways to solve problems. Ones such as we experienced in homebuilding.
A word of caution is in order. Although flat, team based and empowered organizations are very effective in today’s environment – it is not for the faint of heart. In a presentation by Paul Miesing, titled Organizational Structure for the Learning Organization it defines empowerment as: “Delegating or sharing a significant degree of decision-making authority to subordinates to tap their full potential.” The point being is that you cannot tap the full potential of employees unless you also share decision-making authority with them. There are new expectations of such an organization and an entire different set of psychological factors comes into play. This brings up a common question when moving in the direction of flat, team based and empowered organizations. Why? And the answer is very simple. To get closer to your customers, their needs, wants and desires. A tall organization, as ours was at Kennedy Homes, continually moved further and further away from our customers because of not only the layers of management but all the policies put in place to ensure the last mistake never happened again. The result was frustrated and angry customers who lost faith in the organization soon after signing on the dotted line. We had lost sight of how customer satisfaction is truly achieved, by face to face interactions between our employees and our customers. As satisfaction ratings fell and profits eroded we began to understand what W. Edwards Deming meant when he stated “It is not necessary to change; survival is not necessary.”
Our journey as an organization, and mine personally, began in 1993 and was very similar to fighting a raging fire. We were a typical privately owned company with an owner, CEO, directors, managers, assistants and enough bureaucracy that the government looked good. It was a typical chain of command, and no one dared to not follow the chain of command when a problem arose. At the time I was a field superintendent with a problem on a lot which had a rear yard with nine feet of fall in fourteen feet. Upon discovering the problem, which was an engineering error, I summoned my boss to the field to review the situation and provide me with a solution for the customer. He came out, took numerous photos and was never heard from again. With the clock ticking to the closing our customer asked me what I was going to do about the problem. With only a week left I made a decision which was way beyond my approved limit of $500 and authorized a $5,000 retaining was be built. The customer was very pleased, closed and even referred another customer our way. But the fallout from that decision was deep and although uncomfortable at the time, I knew it was the right decision for the customer and ultimately, I believe, lead to my being asked to be president of a newly formed company when we dropped the bomb of reengineering and downsizing.
Similar to the NFL draft, another president of another company and I sat down and selected our team members. He chose all of the “set in their ways” people while I selected all of the inexperienced but eager employees. As predicted, the other president continued his top down management style with all decisions going through him before execution. I on the other hand, chose a flat, team based and empowered approach. Within three years we had quadrupled profits and had earned the National Housing Quality Award, modeled after the Malcolm Baldrige Quality Award. The flat, team based and empowered organization, although blessed with a superior land position, prevailed while capitalizing on good market conditions.
The National Housing Quality Program was the methodology we adopted and covers eight categories for organizational success. The eight categories include leadership, strategic planning, customer satisfaction, performance management, human resources, constructed quality, trade relations and business results. In a flat, team based and empowered organization you are able to address each of the eight categories as a team and employees are empowered to make decisions to achieve the goals and objectives of the organization.
Some of the keys to a successful flat organization, as we learned, are trade relations. Trades and suppliers, for whatever reason, are treated differently than employees, yet their needs are the same as employees. To be treated with respect, be treated fairly, and to contribute to what the organization is trying to accomplish. And be recognized for those contributions. This perhaps was one of the most significant reasons we were successful. In addition, creating a visual Dash Board where our key business drivers were reported on a regular basis kept everyone up to date as to our progress. Tall organizations seem to withhold this information, or at best report out only the good data. A flat, team based and empowered organization publishes all the data so that those who are empowered may act upon it.
Perhaps the most significant improvement a flat, team based and empowered organization can make lies within processes. Tall organization, such as ours, had multiple redundant processes that sometimes lead nowhere. A case in point – when our newly formed flat organization mapped out all the processes we were burdened with from “corporate” we found a copy of customer color selections which passed back and forth between two people three times, with the last occurrence finally being filed. And no one could explain why. Simple change orders in the tall organization required no less than six approvals, taking days to process to add a light switch which a customer didn’t realize they needed. In the flat organization it only took the approval of the sales person accepting the change and was completed on the spot. Over the course of a year our flat organization eliminated nearly 64,000 non-value added steps to processes, reducing the amount of process steps the company had to complete daily to 513 from 752. In comparison, our sister company didn’t change anything. In fact they increased the number of process steps so that they could control every aspect of what was going on, which only goes to prove, an organization can be a tall organization but it does not mean they are an effective organization.
The results speak for themselves, key business drivers consisting of employee satisfaction, trade satisfaction, customer satisfaction, operational performance and financial results all excelled after making the transformation from a tall organization to a flat, team based and empowered organization. In addition, the application of quality control initiatives reduced the amount of down-stream warranty service dramatically. In tracking the number of warranty service items before implementation of a quality control system records indicated there had only been 5 homes who reported 20 or fewer warranty service items. Following the implementation of a quality control system reporting over a shorter period of time there had been 16 homes with 20 or fewer warranty service items reported. It is clear that the abilities of a flat, team based and empowered organization has the ability to transform the organization into a world class organization if they remain dedicated to their mission and have resources available to them. As stated by Kendra Cherry, in her article Leadership Theories, 8 Major Leadership Theories - “Participative leadership theories suggest that the ideal leadership style is one that takes the input of others into account. These leaders encourage participation and contributions from group members and help group members feel more relevant and committed to the decision-making process.”
I have learned from experience it is that people watch your feet after you have said what you have to say, meaning you had better walk the walk after you have talked the talk, and I could never go back to working in a tall organization. I’ve seen the other side and the grass really is greener.
Tom can be contacted at: tomgillespie14@yahoo.com
His website is: https://sites.google.com/site/tomgillespiesite/
Works Cited
Cherry, Kendra. "Leadership Theories - Eight Major Leadership Theories." Psychology - Student Resources - Psychology Articles. Web. 24 Apr. 2010. <http://psychology.about.com/od/leadership/p/leadtheories.htm?rd=1>.
Miesing, Paul. New York Library Association Home. Web. 24 Apr. 2010. <http://www.nyla.org/content/user_10/OrganizationalStructurefortheLearningOrganization>.
"Quotes from Steven Covey's First Things First." The Life of PK Shiu 2010 Edition. Web. 24 Apr. 2010. <http://www.pkshiu.com/pk/first_things_quotes.html>.
"WikiAnswers - Features of Tall Organizations from That of Flat Organization." WikiAnswers - The Q&A Wiki. Web. 24 Apr. 2010. <http://wiki.answers.com/Q/Features_of_tall_organizations_from_that_of_flat_organization>.
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