OPINION: Vertiginous Corporate Ladders Are Holding Back Asian Companies

OPINION: Vertiginous Corporate Ladders Are Holding Back Asian Companies
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What you need to know

It is no wonder employees seek to move jobs so quickly when the ladder above them stretches to the sky.

While other parts of the world may have a corporate ladder, companies in Southeast Asia have a corporate skyscraper, mostly because these local offices are managed by the HQ or their main campus usually in the U.S. or Europe. There are levels upon levels upon levels. To the people at the top -- the C-level executives and vice presidents -- the people at the bottom are nearly invisible.

The rank-and-file employees, team leads, and supervisors on the lower levels, on the other hand, look up and do not see distance but time: It will take many, many years for them to make any meaningful progress toward the top. They’ll be middle-aged and gray-haired before they even become a manager. Why bother?

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Extremely vertical organizations are unfortunately not a recent phenomenon. This organizational chart depicts the structure of a stove manufacturing company back in 1914.

The issues with unnecessarily tall organizations

In the jargon of the human resources, the system of ranks that govern the structure of the organization is called job leveling. Worldwide, there is a trend toward flatter organizations, but unlike in startups and most tech companies, this is uncommon in traditional and legacy businesses. The verticality of these corporations are some of the steepest I’ve seen, and there are very real problems that result from this. Here are the biggest issues.

1. Your people will leave.​

At first glance, the proliferation of titles may almost seem like the start of a joke (who picks up the lunch tab between a first vice president and an executive vice president?), but it presents serious challenges for a business. The most immediate is attrition. If your organizational chart looks like a skyscraper, it may send the wrong message -- instead of inspiring employees to be part of worthwhile projects to gain new experiences and skills, it will push them to think that the only way for team members to advance their careers is to get promoted. If you fail to earn a promotion, you are not successful, and the only way to remedy that becomes to leave for another organization. In this way, people rise to their “level of incompetence,” as the Peter Principle states.

The pressure to progress through promotions has no doubt contributed to the rise of job-hopping in the Philippines. Before they can even settle in an organization, they’re already gathering the energy for a leap to their next position, and so on -- you’ve made it more practical to jump out of a building than to climb the stairs.

2. Your communication will break down.

Because there are so many ranks in traditional companies, communication can turn into one expensive game of telephone. The rank-and-file digital marketer will pose a question to his supervisor, who then asks his manager, who then asks the vice president, and upward the query goes until it reaches a decision-maker. That the question in this case could easily have been -- "Can I make a group email for the marketing department?" -- should illustrate how poor chain-of-command communication is. Such communication only gets worse for more formal requests. A simple ask for a new laptop might need to go through several layers for approval, including the immediate supervisor, human resources, procurement, finance, operations, and IT -- many global treaties have fewer signatories.

In an official memo to Tesla employees, CEO Elon Musk called this practice “incredibly dumb”. I’d like to call it “extremely dense.” Employees and executives should be able to speak to whomever they need to, regardless of rank, title, or seniority. A business organization should not operate like a military brigade.

3. Your employees will be forced to learn on the job. ​

The third problem with extreme verticality in an organization is the most important. At most companies, pay and rank are tied to one another. To earn more money, you need a higher rank. When the type of work remains the same, say a junior graphic designer getting promoted to senior graphic designer, the correlation between pay and rank makes sense. The pairing of pay and rank begins to break down when a team member is promoted to a level beyond his competence, which is unfortunately necessary in some large organizations.

For example, the only way for a software engineer to increase his pay is to become a software engineering manager, even though his expertise is in coding programs and not managing people. According to the Peter Principle, this newly minted software engineering manager - like many others across the organization - will have risen to his “level of incompetence.” Each person will be learning on the job, in a gloriously uncoordinated trial-by-fire.

4. Your company will fall by the wayside. ​

Hotels and cabs were once thought to be industries immune from disruption, until Airbnb and Uber entered the picture and turned their respective worlds upside down. Companies across the world should get the message: No industry is safe. Digital disruption is happening everywhere, and it will hit your industry sooner rather than later - if it hasn't already.

Brands must innovate, but the bureaucracy inherent to large organizations will always stand in the way. How can you execute new product ideas if it takes seven signatories to even get permission for a simple request, like signing up for a web-based software? You need to reduce the bloat in your organization to maximize your agility. Then and only then will your company truly innovate. Refusing to optimize your company’s organizational chart will ensure that your brand will die a slow death at the hands of more nimble, tech-savvy competitors.

Hacking away at corporate hierarchy

Understanding that pay and rank do not need to be tied to one another is the key to restructuring the bloated organization -- a lesson I learned first-hand. When I first assumed the country manager role at TaskUs in 2015, I encountered an organization with many unnecessary ranks. I eliminated the junior / senior distinction at every level, and I applied a rule of thumb that looks more obvious in hindsight: If you do not have direct reports, you’re not a manager.

Though I was tempted to consolidate more job leveling, I was not about to turn TaskUs into a holacracy, the self-management style advocated most famously by Tony Hsieh at Zappos. While holacracy may work for some organizations, such as those that have the luxury to recruit the type of people who would thrive in that type of freewheeling environment, it would not work for most companies. A completely flat organization like a holacracy is just as disadvantageous as a very vertical one - you need to find a balance between the two poles, especially for an organization like ours that is now 11,000-strong.

By far the biggest change I made was in divorcing pay and rank: You could earn high compensation so long as you had the skill. If, for example, you were a front-liner, but you spoke fluent German, French, Spanish, and Mandarin, you would be compensated accordingly. By meriting pay to skill rather than rank alone, we at TaskUs were able to curb the tendency toward the Peter Principle. Since you did not need a promotion to earn higher pay, team members felt no pressure to aim for roles which would be the next logical step up at most organizations but with which they may have no expertise. Instead, they tended to focus on developing core skills relevant to their current position or profession, while others even dedicated themselves to empowering passion projects.

Have we created the perfect job leveling at TaskUs? The answer, of course, is no. How we structure our organization is a work in progress. Just as our organization is ever-changing -- from our efforts to offer subsidized employee meals that benefit charities or to leverage our very own esports team to reach our tech-savvy audience -- so, too, will how we shape its structure.

Ultimately, our goal is both passion and purpose: While there should be clearly defined roles from top to bottom, team members should still feel that their career can grow upward in many different directions. Unfortunately, traditional corporations do not have this feeling at their current organizations, given how they are structured like skyscrapers.

My challenge is for leaders to pave the various roads for growth of their employees. Their companies will benefit from it, I guarantee. But most importantly, it is time for corporations to lessen the height of their ridiculously sky-scraping corporate ladders. If they do this, employees then will be less likely to hop from one job to another because they don’t need to strain their necks to see their future in their current company.

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Editor: David Green (@DavidPeterGreen)