DEVELOPMENT OF A RANK-BASED ORGANIZATION

Some of them had been with the company since it was a start-up. The founder, a very bright and charismatic fellow, held tight control of all decision making and expected absolute loyalty. He was tough to work for, but had great vision, and they thought because the work was exciting that they could overlook his command-and-control personality. The company grew very fast, and soon it was too much for a single person to manage alone. So, the founder looked around and hired an executive team, who pretty much saw the world the same way he did ”through the lens of the myth of leadership. They were all, however, very competent and used to giving orders, so they quickly imposed the right systems and structures on the growing business and growing number of employees . The company continued to do well in the roaring Internet boom of the 1990s.

Command and Control

The hidden problem, though, was that now instead of a single command-and-control personality sitting atop the company, there was an entire hierarchy of command-and-control personalities, all of whom felt they had the right to issue orders from above and get absolute loyalty from below. Communication began to suffer, as no one knew whom to trust, and little turf wars erupted between competing department heads. Information about business conditions and the state of the company became scarce and soon rumors were rampant. All of these factors caused a growing gap between reality and the rank-based leaders at the top of the company.

Effect on Productivity

Soon innovation and job satisfaction both began to disappear as the employees began to just put in their time at work while looking for jobs elsewhere. Even in a rank-based atmosphere they could survive as long as times were good. However, when difficult financial problems began to come up as the Internet bubble burst, the rank-based command-and-control responses of the senior executives undermined employee morale and productivity. The company's stock price was now in the penny stock range.

These employees were what Peter Drucker would call knowledge workers. Listening to these very dedicated and talented employees vent, I realized as never before that in the information/network economy, rank-based hierarchy could no longer be a successful form of organization. They had experienced their growth as a rank-based company, but now they were stalled both individually and as a company. In their hearts and minds, this group of bright and dedicated employees believed there had to be a better way.