Hierarchies Have Many Layers Adding No Value
The hierarchy's many layers are "throughputs," not outputs that really matter to the "front line" where product or service meets the customer. People perched on any layer and who cause problems look to other layers for placing blame. Layering creates a chain of command and control, and the commanded and controlled people lose their initiative. Layering requires costly caring and feeding of the managerial class and constipates the business process. Communication gets distorted with just too many mouths and ears on top of each other, made worse when each of their heads has its own separate agenda. Layering thwarts quality improvements in services and products. People are concentrating more on managing their careers up the ladder and lose sight of managing the corporation's performance.
Hierarchies Are Overly Compartmentalized
The false premises lead to excessive compartmentalization such as thousands of occupied positions. They are tiny compartments that effectively imprison potential by narrowly prescribing roles and responsibilities; provide the excuse, "it's not my job;" require a complicated and costly position classification system; and, because management is considered first and foremost a position rather than a process, provide jobs for far too many managers.
Other compartments are the classical corporate silos or functional departments (e.g., procurement, inventory, engineering, manufacturing, etc.), each with its own layering, its own goals, its rivalries and blame games with the other departments, its impossible coordination with the other departments, and its substandard contribution to overall performance.
Hierarchies are Too Big
Corporations tend to grow too big partly because of the false premise that bigger is better, which in turn is based on several rationales such as the belief that economy of scale lowers costs and raises efficiency and the belief that product and market diversification is more profitable or at least more enduring than is market specialization. Additionally, corporations grow too big because of layering and compartmentalization.
Bigness hampers performance. Bigness, for instance, keeps the corporation from being more agile and innovative. Bigness, however, is good, not bad for corporate members of the corpocracy. Why is that? Two reasons; they thrive on government handouts and thus do not need to perform better; and they can operate illegally with little worry about accountability because of the government's hands-off policies. Indeed, if this corporate welfare and immunity were to cease, so too would today's corporations unless they reformed themselves.[2]
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