In an upside-down organizational chart (inverted pyramid), the guests are located _____________?

The traditional hierarchical view of organizational structure lends itself to a style of leadership where division of labor, chain of command and top-down communication dominates. While an org chart with the CEO/President at the top may still have its place, we believe that the way organizations should increasingly operate is with empowered employees playing a more prominent role in taking ownership of success. Employees should have the clarity and autonomy to decide which work will deliver the best results. They should be enabled to collaborate across hierarchical levels to get the support they need to be successful. And employees should be able to assume leadership as much as the management team. We believe this is a key new paradigm for a more agile and engaged organization.

There are Three Major Problems with Top-Down Hierarchy

• Lack of agility
• Ignorance
• Demotivating

Lack of agility

Digital transformation is disrupting every industry. This has significantly increased the pace of change in business as a whole, requiring organizations to be agiler. Organizations must respond and reposition themselves quickly to meet new challenges.

But it’s not just business that’s being disrupted. Technology is also driving changes in how we work and our expectations in the workplace. New collaboration technologies break down geographic, functional and hierarchical silos. Expectations about where and when work happens are changing. Employees expect a compelling and flexible workplace and a sense of mission and purpose at work. Contingent, contract, and part-time workers make up almost one-third of the workforce. Organizations must also be agiler in how they respond to shifts in human capital strategy.

These trends are putting pressure on organizations to adapt. Executives surveyed in Deloitte’s 2016 Human Capital Trends see a need to redesign the organization itself. 92 percent of survey participants rating this as a critical priority. To become agiler, leaders want to shift organizations to be built around highly empowered teams, a new model of management, and led by a breed of younger, more globally diverse leaders.

Ignorance

In his acclaimed study “The Iceberg of Ignorance”, consultant Sidney Yoshida concluded:  “Only 4% of an organization’s front-line problems are known by top management, 9% are known by middle management, 74% by supervisors and 100% by employees…” Sydney identified the phenomenon when he asked a cross-section of workers in a large factory to note all the significant problems they were aware of and subsequently asked other levels of management to do the same.

James Surowiecki also wrote a book called “The Wisdom of Crowds” which explored how crowds can often be smarter and make better decisions that the smartest people in them.

This is one major issue with a traditional top-down leadership. Decisions are made on an inadequate amount of information because the organization doesn’t have a way to collect and manage insights from employees across the organization. This leads to poor decisions that decrease confidence in leadership within the organization.

Demotivating

Ensuring employees are engaged and empowered to act on issues and opportunities translates to value for customers.  Studies have also shown that employees become more motivated when they have some control over their work and environment and feel that leadership is actively listening. The inverse is also true. When employees are simply told what to do, it decreases the motivation they bring to their job.

The Answer = Inverted Organizational Structure

The idea of an upside down organizational structure isn’t original. In fact, there are many other types of organizational models that move away from the traditional hierarchy. Holocracy, managerless organizations, and the lattice organization are some examples. But the basic premise is the same: To stop thinking about your organization as a top-down structure for how work gets done. Instead of employees supporting management’s objectives, managers serve employees and leaders serve the broader organization – all with the goal of better supporting customers.

The book, “The Conversational Firm” explores how one software company upended traditional bureaucratic hierarchy by giving all employees a voice.  It’s the idea that organizations can have far more open dialogue across the corporate hierarchy than we ever before thought possible. Using software and some ew processes, organizations can make better decisions, improve productivity and become agiler as a result of collaborating more effectively between employees and leadership.

We have been thinking a lot about leadership development lately

Theories of leadership are helpful, but experience suggests that when others model leadership principles for us, we are more likely to uphold and honor the example of our mentors.

I was exposed to the idea of the inverted pyramid while at Home Depot. Founders, Bernie Marcus and Arthur Blank, had expressed this concept as they built the culture and company that dramatically transformed the home improvement and retail industry. The inverted pyramid is a way of approaching a company’s organizational chart – a way of thinking about one’s place in the hierarchy – in which the traditional leader, the CEO for example, is on the bottom, not the top.

Herb Kelleher, CEO of Southwest Airlines was once asked if he prioritizes shareholders or employees. His response showed both a contrarian viewpoint, but also embodies the inverted pyramid perspective. "Employees come first. If employees are treated right, they treat the outside world right. The outside world uses the company's product again and the shareholder is happy."

While Home Depot started out with a strong entrepreneurial culture, it went through an incredibly difficult cultural shift when the founders retired and former GE executive Robert Nardelli became Chairman and CEO in 2000.  By the time I joined the company in 2004, the inverted pyramid was spoken of in hushed whispers, wistful of a bygone era and employees had become resentful of the CEO having asserted himself at the pinnacle.  Rather than have the CEO and executive team carry the burden of responsibility for their decisions, Nardelli placed it on the associates.  The company had lost its way, resulting in lost market share and declining customer satisfaction, which had once been an untouchable strength of the Home Depot. Though Nardelli tried to course-correct and regain customer trust, it became clear that he did not have the moral authority to repair the damage and was forced to resign in 2007.

When Frank Blake stepped into the CEO role, he promptly reverted the burden of responsibility back to his shoulders and that of his executive team through the inverted pyramid. Though he had to divest Nardelli's merger and acquisition consolidation adventure of HD Supply due to the financial pressures of the Great Recession, he bucked the trend of cutting employee wages and made sure they received merit increases and 401(k) contributions. By investing in people during the downturn, Home Depot came out of the recession stronger than ever thanks to Blake's servant leadership approach.

I happened to meet Bob Nardelli during my time at Home Depot. We were in an elevator together and I was bold enough to stick out my hand and introduce myself.  Though I was sure to thank him for the Olympic Job Opportunities Program and the incredible vision that I benefited from, he seemed repulsed by my forwardness and was quick to shut down the conversation. By contrast, Frank Blake was known to eat lunch in the cafeteria with the rest of the associates, picking a table at random and spending time asking questions and getting to know people.

It is encouraging that the culture that Bernie and Arthur founded was able to survive a misfit CEO. While the company as a whole was chaotic and experiencing massive upheaval, I personally had the amazing experience of working for incredible servant leaders who operated on their own core values. These managers acted as coaches, not bosses, in which they put the interests and development of the people who worked for them ahead of their own interests.

What does it mean when an organization is viewed as an upside down pyramid?

What is an inverted organization structure?

What is a pyramid organizational structure?

Who are at the apex in the pyramidal organization structure?