Jason Fried, co-founder of Basecamp, runs a flat company. Instead of the corporate ladder, he encourages what he calls horizontal ambition. He wrote in Inc.: “Employees who love what they do are encouraged to dig deeper, expand their knowledge, and become better at it. We always try to hire people who yearn to be master craftspeople, that is, designers who want to be great designers, not managers of designers.”
Basecamp isn’t the only company to rethink the org chart. For years, companies have used promotions to show employees that they value their work. The funny thing is, each promotion is disruptive and often asks the employee to apply skills that they don’t necessarily have. The employee gets a great title and better pay, but after the promotion they’re often miserable because they’ve been taken away from the work they love and are now failing in their new role.
Maybe it’s time to take a closer look at the costs of tying rewards to hierarchy and how the corporate ladder can send some employees tumbling.
Organizational Disruption
A promotion means a new role. In that new role, the employee must rethink and renegotiate their relationships with peers, former supervisors, and new supervisors. It takes time to form a new identity and for people to understand how to work with the employee in their new role. This kind of friction can slow progress and stand in the way of people doing their best work.
Promotions also can be seen as negative feedback if others who were seeking the same promotion don’t get it. Those who are passed over are likely to leave your organization. Sometimes that’s addition by subtraction, but more often you lose someone who’s great at their job.
And promotions can sometimes kick off a round of musical chairs. If you fill the old position with another internal promotion, then there’s still another position to backfill. And it’s possible that you have to hire externally for one or more of these positions, which adds even more process and time just to get back to normal.
Imbalanced Rewards
Promotions often go to people who take chances, work quickly, and play to win. These aren’t always leadership traits, especially if the employee is more focused on personal gain than team success. The people who often get overlooked for promotions also work hard but might be more detail focused and are good at solving complex problems. In a promotion system, their skills don’t get as much recognition, even when those skills are incredibly valuable to the company.
Rewarding ambitious, high-energy employees in the wrong ways and underappreciating quieter, nose-to-the-grindstone types can lead to a dysfunctional organization that doesn’t maximize the potential of either group. It can also mean that your organization is imbalanced, making mistakes and creating inefficiencies because there aren’t people there to check risk-taking impulses.
The Peter Principle
Developed by Dr. Laurence J. Peter, the Peter principle asserts that, in a hierarchical organization, people will be promoted to the level of their incompetence. This is not because they’re inherently incompetent. In fact, they’re probably very good at their jobs—their old jobs.
The Peter principle succinctly describes the paradox of promotion. Good employees deserve to be promoted. Promotions often move people out of roles their good at and into roles they’re not good at. Using promotion to maximize employee recognition and compensation means your reward system reduces the ability of some employees to succeed at work and reduces the effectiveness of your organization.
Motivation
Do titles motivate people? Reaching the next title is motivating in the short term, but long term, a title isn’t enough. Shared goals, a shared vision, and opportunity to grow their income are much stronger motivators for employees. And none of these depend on a hierarchy.
Better Than Hierarchy
What if companies managed the work, not the people? You’re likely to get a roster full of talent, a portfolio of amazing work, high employee satisfaction and low turnover. But how do you do it?
- Compensate based on value, not job title. This might include more frequent performance-based bonuses and team-specific benefits.
- Develop a culture that prizes ability, not titles.
- Create the freedom for employees to grow in their current role and to explore interests that can be helpful to the company.
- Provide mentorship so that employees can continue to learn from and support each other.
- Treat management as a skill, not a reward.
- Provide training and professional development that puts employee needs first.
Flat organizations aren’t built overnight. It takes time to establish teams that find satisfaction in good work and aren’t caught up with chasing titles, but it’s worth it to reimagine how you reward good work and the organizational structure that will put everyone in the best position to succeed.