Power, pay and passing the buck

Do non-hierarchical organisations get the best out of employees - or do they create resentment? Roger Trapp reports
Flatter, less hierarchical organisations are supposed to be the answer to many of business's current ills. Knock down the pyramids and give more responsibility to the workers, and you will have bustling centres of customer-directed activity - or so we are led to believe. The truth, though, is often very different.

This is partly because "empowerment" - which goes hand in hand with all this flattening - is widely seen as a new-fangled term for delegation. But there are other reasons why many organisations are seething with resentment and frustration rather than buzzing with motivation and initiative.

According to a recently published study by the Roffey Park Management Institute, Career Development in Flatter Structures, there are serious issues at stake. Employees in flat organisations are often demotivated and thus lacking the morale needed if they are to be responsive and committed.

One factor behind this is that they are not receiving the pay increases that, until recently, they regarded as their entitlement. But there are also signs that the disgruntlement stems from the fact that senior managers often say one thing while doing another.

Linda Holbeche, director of research at West Sussex-based Roffey Park and author of the recent survey, which involved 200 managers from a range of areas, including finance, manufacturing and the public sector, says many British companies have still to develop reward schemes that link pay and benefits to team performances and their contribution to "corporate values". These companies prefer to pay market rates and recognise individuals' short-term performance, but not long-term development.

In addition, companies still tend to reward those who take on new management responsibilities rather than those who gain further technical specialisms, she points out. So it is hardly surprising that employees tend- in Ms Holbeche's words - "to refuse to see lateral progression as anything but demotivating".

A recent report by the Institute of Management, which shows companies failing to match their promise of employee involvement with action, expands on Ms Holbeche's findings. Striking off the Shackles - carried out by the institute with the employee development specialists Blessing White and the London Business School - reveals that many companies which encourage staff feedback only pay lip service to involvement in decision-making.

"The challenge for most organisations is not to decide whether to involve employees more but simply to get on and do it," says the report. Nearly 90 per cent of the 1,100 respondents in IM's survey said their organisations used formal empowerment practices, such as team briefings, suggestion schemes and "design-your-own-job" initiatives, but 30 per cent said there was little employee involvement in decision-making. Senior managers perceive higher levels of employee involvement than actually exist.

The underlying tone of both surveys is of a creeping cynicism. Given that the continuing pressure on costs means staff numbers are unlikely to rise significantly, however, businesses and their employees must learn to live with the new structural concepts. For the organisations, this means they have to show a commitment to the ideas rather than just leaving them to develop. Ms Holbeche says it is ironic that producing a devolved organisational structure often requires a bit of command-and-control-style force to demonstrate that the organisation is serious about it.

One of the best ways of doing this is to link a substantial chunk of senior managers' pay to the issues that matter rather than adopting old- style incentives that are primarily dependent on the reaching of financial targets. Companies such as Rank Xerox and EDS claim to be seeing clear benefits from such an approach.

But there must also be a change in employees' attitudes. Because delayered organisations lack the management tiers of the old hierarchical structures, people are likely to spend longer in individual roles, says Ms Holbeche. "This has spawned a new 'psychological contract' between organisations and employees that focuses on enhancing employability through increased skills development and greater responsibility, rather than a guarantee of job stability."

It is up to those involved in human resources to design reward and recognition schemes that encourage such development, she adds. Many companies have schemes that reward high sales but fail to take notice of the "backroom" members of the teams who help to make such sales possible and also have to work harder as more sales are achieved.

Implicit in this is the idea of employees doing more for themselves, not expecting the organisation to do it for them. "Employees who successfully adapt to flat-structured organisations have accepted the responsibility of managing their own careers," says Ms Holbeche. "Such employees are architects of change, thriving in a flatter structure by constantly looking for new ways to improve their practices and challenge the status quo.

"These self-empowered individuals are motivated by teamwork and developing broader skills rather than just achieving conventional status. They actively negotiate development opportunities as part of their recruitment package."