strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: April 14, 2009

 
 

Getting Rid of Grades to Boost Performance

Accountable jobs provide the platform for leadership development. Accountable work has consequences: rewards for work well done and sanctions for work that is not well done. A promotion in such a system is a move from one level of accountability to another. Performance has consequences; employees are promoted only by serving customers well and productively.

Unilever PLC was the first company to introduce such levels of accountability (or “work levels”) on a global scale, more than 10 years ago. The company carried out extensive fieldwork in its operations around the world to verify their number of work levels. I described this approach, based in part on the early work of Elliott Jaques, in The Healthy Organization: A Revolutionary Approach to People and Management (Kogan Page, 2004). The fieldwork involved researching hundreds of jobs at Unilever in both developed and developing countries and evaluating them according to seven criteria related to accountability. More than 500 top executives in about 40 countries were asked: “What decisions do you make that your subordinates cannot make, and in addition, what decisions are you making that your boss does not need to make?” The samples included labor-intensive, capital-intensive, and knowledge-intensive work, in such settings as laboratories, large head offices, and international consumer and trading operations.

The result was that, for 20,000 managers, 17 existing job classes or grades based on job evaluation were replaced with only five work levels based on accountability. These levels became the basis for compensation, organizational design, and career development in 100 countries — a global overhaul of the company’s people management policies and systems that significantly improved Unilever’s international competitiveness and made it a leaner, more nimble, and customer-focused company.

Getting the Number of Levels Right
Every organization, if it follows this type of accountability analysis, will end up with a different array of layers and reporting relationships; some parts of the organization will be deeper than others (with fewer people reporting to one person). Accountability varies in response to the demands of situations, depending on the quality of the work to be mastered, the changes to be managed, the objectives to be achieved, and the environmental circumstances and geographical range of the company. But some aspects of hierarchical design are universal, for example, only one layer of management is required in each level of accountability above the customer front line.
Even a giant global organization like Unilever needs no more than six or seven layers of management.

In July 2001, Tesco PLC also began replacing its management job grades with work levels. CEO Sir Terry Leahy was concerned about his managers wasting time arguing over their job evaluation points. Leahy said, “I want a system that is simple, clear, and transparent, which managers understand, trust, and then forget about and get on and serve our customers.”

Tesco has a tough touchstone against which any new initiative is evaluated. It must be “simpler, cheaper, and better for customers.” Work levels met that challenge. To emphasize this message, Tesco inverted the structure pyramid in its work level workbook. The base of the pyramid — at the top — was “customers,” with Work Level 1 and so on following, down to the top levels. To reinforce the importance of being close to customers, work-level organization charts were similarly inverted, with the customer on top.

Although initially introduced to solve a compensation issue (fair pay for accountable work), work levels have subsequently been applied in Tesco to drive more effective organization design, reduce cost bases, and help control costs in a time of great organic growth. They also now underpin the company’s leadership development program, with key differentiating competencies linked to levels.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Brian Dive, The Accountable Leader: Developing Effective Leadership Through Managerial Accountability (Kogan Page, 2008): The implications of clear accountability for leadership.
  2. Brian Dive, The Healthy Organization: A Revolutionary Approach to People and Management (Kogan Page, 2004): The problems that result from poor organizational design.
  3. Brian Dive, David Mader, and Adam Pearce, “Leadership Levels — Empowering Leaders to Deliver Customer Service,” Booz Allen Hamilton white paper, February 2008: Case study of an organizational redesign of a major U.S. utility company by Booz Allen Hamilton and Panthea Strategic Leadership Advisors.