A railroad man named Daniel McCallum is generally given credit for creating the modern organization chart in 1854. But McCallum's chart was not the top-down, pyramid-shaped design to which we've become accustom. That was later developed by Alfred Chandler, a Harvard professor. Chandler advocated a top-down hierarchical approach that consolidated power and control in top management.
It looks something like this:
Interestingly enough, McCallum's org charts were created to combat a new issue facing management: too much information. According to an article by Caitlin Rosenthal published in McKinsey Quarterly1, the growing use of the telegraph ushered in a new era of "big data."
For management, trying to capture this information, process it into decisions, and get it into the right hands in the field proved an immense task.
McCallum knew that trying to move this new mountain of data up and down a chain of command was inefficient. So he devised a new strategy: delegation of power at the local levels. The organization chart he developed took on the structure of a tree:
A more detailed view at the local level is shown below. McCallum knew that the supervisors here were nearer the action, had the most up-to-date information, and were best suited to make timely decisions.
But McCallum's goal was not simply to decentralize everyday tasks and empower line supervisors to make real-time operating decisions. He also set forth a plan whereby they collected relevant statistics on a timely basis, such as cost per ton-mile and load per car. These were then delivered to upper management for use in analyzing business strategy and finding opportunities to improve results.
Norstrom hierarchy of important peopleMany organizations have long understood the need to put decision-making power in the hands of their people on the front lines. Upscale retailer Nordstrom is well-recognized for this practice. In fact, during the orientation of their newly hired associates, Nordstrom management gives them just a few basic instructions. One is to instill their hierarchy of importance, with customers at the top. This is shown in the sales funnel chart to the right. Directly below the customers are floor sales staff. Why? Because they are the ones who deal with the company's most important people—customers—every minute of every day.
As a result, Nordstrom management gives these people authority to make customers happy with their shopping experience. This includes their very famous return policy (which isn't, in fact, an actual policy). New sales associates are told to follow one simple rule: use your best judgment. (They are also told that one of the reasons they were hired was that they met Nordstrom's exacting demands in this area.) This approach has clearly served the company extremely well from a customer relations standpoint.
The "big data" issue has come full circle in the 160 years since McCallum designed his first org chart. Maybe it's time to rethink things and re-examine the applicability of a more decentralized structure.
Many organizations already operate this way, or at least in a manner that isn't a rigid as the "command and control" pyramid. Perhaps, then, it just makes sense to put our view of the organization into a more practical visual structure. Here's a rethinking of the traditional organization chart that was presented at the beginning of this article (click here to download a copy of the file in SmartDraw format):
As you can see, the org chart been inverted to more closely emulate the pattern of McCallum's trunk-and-roots structure. It also adopts the Nordstrom paradigm, placing the importance of customers (and prospects) at the top of the hierarchy. Recognizing where these people touch the front lines of the company's organization could be important in hiring decisions. It will also determine how the organization strives to empower them in the proper handling of customer relationships.
I recommend you read the article by Caitlin Rosenthal below, which inspired this article.
Big Data in the Age of the Telegraph by Caitlin Rosenthal. McKinsey Quarterly, March 2013.