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Farewell To The Pyramid Chart


Editorials

FAREWELL TO THE PYRAMID CHART

When it comes to new ideas for managing companies, it's not always easy to sort out the one-day wonders and fads from the true innovations. But more and more, the notion of a "horizontal corporation," where workers concentrate on satisfying customers rather than bosses, is looking like the real thing (page 76). Top U.S. companies such as General Electric, American Telephone & Telegraph, and DuPont are flattening out their hierarchies and getting improvements in speed and productivity that cannot be matched by old styles of management.

To be sure, companies have recognized for a while that they need to become nimbler competitors by eliminating layers. But what American businesses are learning is that real horizontal corporations go much further than that. Companies have to organize workers into self-managing teams, altering management and employee responsibilities--and everybody's compensation. Senior managers must relinquish control, something rare in the absence of a guillotine or a voting booth. And lower-level managers must take more responsibility for wider issues--anathema to the organization man. Nothing less than a corporate cultural revolution is needed.

The conversion will be agonizing. Since the Industrial Revolution, business has often taken the army as its model, a system that relies on a clear-cut chain of command. Information flowed up from the bottom, and orders flowed down from the top. Generations of managers could point to pyramid-shaped organizational charts and tell you exactly where they stood.

Given the 100 years of phenomenal success that the hierarchical corporate model has had, real change is far easier to talk about than to implement. The vertical corporation is a dinosaur--still breathing, but too slow to thrive in the fast-paced age of global competition and quicksilver information. That means a genuine shift to the horizontal model could have a huge payoff--both for companies and the whole U.S. economy.


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