The document discusses the limitations of traditional pyramidal organizational structures, including vertical career progression, top-down communication, overvaluing tenure over skills, internal competition, siloed thinking, and an obedience orientation. These limitations block organizations from fully utilizing their employees' knowledge, skills, alignment, insight, cooperation and initiative. The document argues that companies need flatter, more flexible structures where managers facilitate networks and connections between employees. This allows for alignment on results, sharing of insights and knowledge, and empowering employees with initiative. The document provides examples of how companies have implemented more flexible structures through reducing hierarchy, improving leadership, enhancing career development opportunities, updating compensation, and focusing on continuous learning.

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2. Limitations of a pyramidal structure
Pyramidal structures were originally designed to
manage poorly educated; ill-informed people who
needed supervisors to tell them what to do and how
to do it. But these days, high levels of education and
access to information mean that such structures
often negatively affect people’s behavior and
motivation – and consequently organizational
performance. The worst limitations of the traditional
pyramidal structure are:

3. Vertical career progression
Tending to be the only model for professional
development, climbing the hierarchical ladder
frequently becomes a system in itself. People may
choose a particular career path simply to enter top-level
management, even if it does not match their
profile or skill set.

4. Command communication
A top-down command mode, where orders are swiftly
executed without being questioned, has long been accepted as the
most efficient way to produce results. But by not discussing the
expected results, alignment is achieved between the superior’s
expectations and the action instead of between the action and the
expected results. This communication style also assumes that
people at lower ranks cannot contribute to strategies and
objectives.

5. Company experience
While experience is obviously valuable, length of
experience and seniority have often been confused. The cost of
promoting people into leadership roles mainly because they
have been with the company for years has become
unaffordable today. In addition, these days experience (like
knowledge) can rapidly become obsolete and a killer of
creativity and initiative.

6. Internal competition
The traditional managerial principle puts employees in
a competing mode, which can restrict and even discourage
knowledge sharing and cooperation. This can be costly with a
well-educated, informed workforce: by not bringing together its
people’s knowledge and insight, the company misses out on
efficiency and result orientation.

7. Silo thinking
The traditional managerial role of centralizing
information and being the sole point of communication between
the team and top management is still embedded in the
mentality of many managers today. This, together with
reporting lines to one superior and the tendency of internal
competition to create strong “allegiance” to the superior,
automatically creates silos.

8. Obedience orientation
With the quality of task execution defined by the
superior, it is more important to be obedient and conform to the
superior’s expectations than to display initiative and
concentrate on results. These days it is a sheer waste not to
raise the level of initiative and optimize all the skills and
insights available in a well-educated workforce.

9. Delegation of tasks rather than
authority and responsibility
Traditionally, the manager retains decision-making
authority and is often the “correcting” manager as well as the
only judge of performance quality. But in trying to maintain their
superiority, most managers tend to stifle others’ self-confidence,
leading to lower motivation and efficiency.

10. Building on human potential
These limitations block four key factors that
modern organizations need from their people in order
to take full advantage of their knowledge and skills –
and thus ensure long-term profitability and sustainable
company development. These are:

11. Building on human potential
Alignment – a clear sense of the expected
results and company values, with everyone convinced
and engaged
Insight – the process of transforming
experience into action

12. Building on human potential
Cooperation – the genuine sharing of insights
and knowledge
Initiative – improved efficiency through
motivated, self-confident employees
When these four factors come together, silos and the silo mentality disappear. This
alone is worth the effort and will unlock additional efficiency and effectiveness. There is also
improved alignment with results – exactly what companies wish to achieve.

13. New management structures needed
The question is: how can companies break out
of the pyramid structure and achieve alignment, insight,
cooperation, and initiative? We believe the answer is
through flatter, more flexible structures where
managers are more like “hubs” that connect people and
combine skills, managing through a network rather than
a traditional hierarchy.

14. New management structures needed
High-quality processes are needed for decision
making and debate, as are new ways of assessing
people to give priority to insight over experience.
Barriers to cooperation must be eliminated, and
working climates must foster self-confidence and
provide breathing space to encourage initiative.

15. New management structures needed
Implementing flat and flexible structures
– An in-depth examination of corporate structure
and functions was undertaken, and the number of
hierarchical levels was reduced.

16. New management structures needed
Inspiring management
Programs were implemented to improve the
leadership skills of managers, starting at the top level,
as well as to reverse their role from “passive judge” to
“committed developer”, and so make them responsible
for the development of their people.

17. New management structures needed
Long-term development
With fewer hierarchical levels, fewer promotion
levels are now available. Interregional and interfunctional
moves were therefore enhanced to stimulate both
personal development and organizational learning, and
new roles were created that cut across traditional career
paths. A talent pool was also developed in line with the
company’s development needs.

18. New management structures needed
Dynamic compensation
Also in response to the flattened structure,
horizontal remuneration models were developed that
allowed increased remuneration even without promotion.

19. New management structures needed
Lifelong learning
Always held a strong belief in the need for
continuous learning, both through internal and external
programs.
SOURCE :IMD - www.imd.ch BREAKING OUT OF THE PYRAMID
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