May 16, 2014
It is human nature for hierarchies to exist. Put two people together, and at some stage, one will take a more dominant position against the other. Organizations have evolved to use hierarchies — and these continue to be the dominant means of operating a business, even where matrix management and 360 degree systems have been tried.
However, a hierarchy needs to be sensible. Any organization needs to be the right “triangular” shape, with a few people running the organization with many more carrying out the day-to-day tasks that bring in the organization’s revenues.
In the olden days in the UK, before the CxO titles had drifted over from America, you would have a Chairman, a Managing Director, a Financial Director and a couple of others to run very large organizations. Now, things are getting a bit more opaque.
If you type in to Google a search for CxO, where x is any letter of the alphabet, you will get at least one hit on every letter of the alphabet in the top few hits – apart from “J”, “Y” and “Z”. Many will result in multiple different hits – such as Chief Development/Data/Digital Officer.
OK — a great chunk of this is titlism — an employee gets to a certain level where the organization wants to keep them but doesn’t have an existing position to put them — so they just create a new C-level title. Such title inflation does bring with it a set of problems, however.
A “C”-level title should be a main board position. This ceased to be the case a long time ago, but it does bring in issues around reporting structures. Is the CIO fully responsible for everything that goes on around the IT platform for the organization, or does the reporting line to the CFO mean that the ultimate IT decisions lie there?
What are the responsibilities of those with titles such as “Chief Data Officer”, “Chief Experience Officer” or even “Chief Happiness Officer”? If we take the data side of things, then it would be a good guess that the role would have something to do with data. OK, does this mean that the CFO’s role means that they don’t have to understand data themselves — they should just go and ask the CDO instead? Of course not — any board-level position has to be data-literate, and should be making use of people who report into them to ensure that they have the right data to hand for them to make the right decisions at the right time.
As for a Chief Happiness Officer… do we just assume that the CEO, CFO and COO are sitting there being grumpy all day and not caring about how the customers feel? It’s possibly not a question to dwell too long on, I admit, but the many organizations that we could all name that treat their customers like dirt are unlikely to see any change by having a CHO.
There is also the question of how flat a hierarchy should be. Title inflation has led to many organizations having far too many levels in their management structure. A simple way to look at this is that it is received wisdom that one person can easily manage up to 15 others. So, an organization with a Chairman should have no more than 15 people that are board-level or equivalent decision makers. These should have no more than 225 executive reportees, who can look after 3,375 supervisors, looking after a workforce of 50,625. If your organization is larger, an extra rank of middle managers will allow for a workforce of 759,375.
Or, six levels of title for over three quarters of a million people.
I believe that it is time to fight back against complex hierarchies where too many people have drifted upwards into C-level positions. Look at what is required for a core executive decision making board — a Chairperson, a CEO, CFO, COO. Decide what other areas are key to your business and have people who can make decisions within that area – maybe a legal or human resources person.
Then look at what skills these C-level people should have — should they understand how IT applies to their area; how data can help them make better decisions; how customer satisfaction can make or break the organization? Make sure that resources are available to them so that they have the right information available at the right time — a lot of which can now be done through using business process automation.
Where people are required, of course, make sure they are there. Just make sure that you have not pumped their title up to the wrong level: they do not need to be drowning in the “C”.