Chapter 24: Going Round the Pyramid

The Pyramid StructureRicardo was trying his best to simplify Semcos structure and bring a change
in the culture. Despite the efforts, there were problems that the pyramid
structure was posing:
Birth certificate of the organization- It dint lead to increase in
productivity or profits, it was just the birth certificate of an
organization, nothing more and nothing less.
Rewards few who climb, demoralizes the rest- The pyramid
structure gets narrower as it rises, thus rewarding the few at the top
and demoralizing the rest. Opinions of employees at the lower level do
not matter and no explanations are given to them. They know that the
decisions that affect them are taken at the top.
Dissatisfaction to ambitious peoplePeople who want to rise up quickly, are ready to take up more
responsibilities, are dissatisfied because the progress in such a
structure is slow.
Pollution of titles, levels and bossesIn order to satisfy such ambitious people, more levels are created
even if they cannot be given more responsibilities. There was a
pollution of levels, bosses and titles at Semco.
Conflicts, jealousies and confusionsPollution of titles lead to nothing but confusion and conflicts.
Shop floor workersThe workers at the lower level did not have a clue about the business
and their contribution towards it. They knew that their opinions dint
matter.
Hinders financial advancementEmployees who wanted to take up additional responsibilities could not
do that because their bosses were already doing it and it was not
possible for them to earn the same or more than their bosses.

What Ricardo Wanted:

Example In 1986, companys food service equipment plant provided a vivid case
study on downsizing (now called rightsizing). Six positions were
eliminated: the managers of marketing, finance, administration, data
processing and technical assistance. Together they comprised the

entire 2nd tier. Even without them the sales and profits of the plant
increased. So less was more.
The marketing manager left. She was responsible for representing the
company at trade fairs and she supervised the work of her team: 4
members. After she left, the team divided the tasks among themselves
without any confusion. 1 handled trade fairs; the other handled
advertising and so on. There was less confusion.
Keeping the above 2 cases in mind, Ricardo wanted the following in his
organization:
Less levelsWhen we talk about levels in organizations, on an average there
around 8 levels. Organizations even have 12-14 levels. Ricardo wanted
only 4 levels in his company. It would have ensured more flexibility and
less clutter in the organization.
Employees to take control of their working lifeHe wanted the employees to react in a new way, to be responsible for
their actions and take full control of their working life.
Faster thinking and decision makingThe above 2 points would lead to faster thinking and decision making.

Going Round the Pyramid:

In order to achieve the above objectives, Ricardo came up with the following
circular structure:

Counsellors:
This circle consisted of half a dozen people including Ricardo, equivalent of
vice presidents and higher in conventional companies. They would
coordinate Semcos general policies and strategies.
Partners:
This circle would enclose 7-10 leaders of Semcos business units.

Associates:
This circle would include everyone else- cafeteria people, machine operators,
salesmen, security guards, etc.
Co-coordinators:
They are the triangles floating around the last circle. These people would
comprise the first, crucial level of management- the marketing, sales and
production supervisors, the engineering and assembly area workmen, and
anyone who had a basic leadership role in the old system. There can be
maximum 6-12 triangles for each business unit and they are movable.
Meetings:
MondayAll associates were empowered to take decisions on their own but if they had
any confusion, they could consult their respective coordinators. If the
problem could not be solved by the coordinators, they would consult their
partners. These discussions happened in Monday meetings.
TuesdayDecisions that affected all the business units like company-wide wage
increase, or decisions that one business unit did not think it should make
alone, such as large investment in new equipment, etc would be forwarded
to another meeting on Tuesday. This meeting would be attended by
representatives from each unit and all the counsellors.

Features:
Associates and coordinators could interchange their positions.
Movement between these 2 levels could be encouraged.
Associates could earn more than the coordinators.
People could act as leaders when they wanted and could go back to
their position when the need was fulfilled.
Coordinators would only be coordinators, there would be no
departments attached to their titles. This would avoid confusion and
keep everybody on the same plane.
Associates were encouraged to take up more responsibility as there
was a limit on the number of coordinators in a business unit.

 The circles changed the way the organization interacted. Coordinators

could not report to other coordinators and same was applicable for the
associates.
Because of the weekly meetings, shop floor workers could be heard
and their problems could be solved in a matter of days. In these
meetings all the 4 level of employees had the same power. Everybody
was equal.

Implementation Issues:
Just another bit of silly symbolism- when these charts were put up
in each business unit, the employees thought they were just on papers,
nobody took them seriously. Moreover, people wondered what they
would write on their business cards.
Trendy new names- once foremen, supervisor, department head,
now they were all either coordinators or only associates.
Breaking the established chain of command- there were reduction
in the number of bosses, levels, jobs and people who were in
supervisory positions had problems. The structure also changed the
way the employees interacted. But still people followed the
management layers, for example, a machine operator would first goto
the foremen who in turn would go to the supervisor before approval.
These are referred to as ghost layers.
Loss of talent- many employees left, many were dismissed and some
went to their old jobs. The company lost talent but they were ready to
pay this price for bringing the change.

Class Inputs:
Pyramid Structure and Ricardos CirclesSimilarities-

The top management is now the counsellors. They have the same set of
responsibilities. The middle management is the partners and the junior
management is the associates and coordinators. There is still hierarchy and
the basic structure.
Differences:
Pros
The levels under the junior and middle management have been
abolished. The coordinators under all the departments are only
coordinators, nobody is senior or junior. Same is applicable for the
associates.
In the Pyramid structure, junior and senior management are not
movable and interchangeable. While in the circles, a coordinator can
become an associate and vice-versa.
In the Pyramid structure, once an employee is promoted, he can be
demoted but his compensation package cannot be reduced. But in
Ricardos circles, a coordinator can work as an associate for the same
salary and an associate can work as a coordinator for a higher salary.
They can go back to their positions when they want.
There is more participation from the lower level employees and
decision making is faster in Ricardos circles.
Cons
In Ricardos circles, promotions mean moving to a partners position because
associates and coordinators are interchangeable. It might take a very long
time. So in order to motivate the employees, there is profit sharing for them.
In the Pyramid structure, employees expect promotions every 2-3 years.
There are no best or worst strategies. They vary from company to
company and each strategy has its own pros and cons.