Elliott Jaques Levels With You
The controversial Canadian theorist claims he can create the perfect organization. Has he found the key to management — or merely a justification for bureaucracy?
"Management is in the same state today that the natural sciences were in during the 17th century." The speaker was Elliott Jaques, best known as the author of Requisite Organization, at a talk at MIT's Sloan School of Management several years ago. He reminded his audience of the medical realities of the early Renaissance: Alchemy was still considered credible; bloodletting was a well-accepted cure; and barbers performed most surgical operations. "Today," he went on to say, "there is not one single, well-established concept in the field of management on which you can build a testable theory." People throughout the room gave a little sigh of recognition; everyone there knew that he was right.
Dr. Jaques (pronounced "Jacks") is still right. That's why the track record is so dismal for predictors of corporate performance (and why the recent dot-com bubble will not be the last). Superstitions about the New Economy or the value of "synergy" or "diversification" come and go, but there is no compelling, generally accepted theory reliable enough to predict profitability in the same way that, say, Harvey's theory of the circulation of the blood predicts the behavior of our circulatory systems.
If Dr. Jaques left it at that, he would probably have a very successful, conventional career as a management pundit. But he insists that he (and he alone) has that testable theory of management; and when he describes it, his audience immediately divides into those who love him and those who hate him.
One could argue that this 83-year-old, Canadian-born, psychoanalytically trained visiting professor at George Washington University, with a 55-year-long career, an 18-book body of work, and the mien of a character in Arsenic and Old Lace, is the most controversial management consultant in the world. The American Compensation Association (now called WorldatWork) has blackballed his theories. Some of Dr. Jaques's associates, particularly in the organizational development field, have been so bruised by flak from their colleagues that they no longer introduce themselves as Jaques associates. He has been called rigid, mechanistic, a fascist, and a Taylorist; some business school professors prohibit students from discussing his work in their classes. Recently no less a management authority than Gareth Morgan (author of the encyclopedic guide Images of Organization) was quoted in the Toronto Globe and Mail labeling Dr. Jaques with the ultimate sin in management studies: irrelevance. "He has a very powerful idea," Mr. Morgan sniffed, "but it's old-economy stuff."
For his part, Dr. Jaques is equally, and openly, contemptuous of his critics (and of everyone who doesn't follow his ideas). He argues that just about every other management concept in use today — from self-managing teams to performance appraisals to matrix organizations to empowerment to incentive pay to succession planning and more — is as unsupportable as alchemy. He makes short shrift of New Age business concepts like workplace creativity, "thinking outside the box," and organizational learning. As George Washington University professor Jerry Harvey, a friend of Dr. Jaques and a longstanding organizational change expert, puts it: "Once you've assimilated Jaques, you can't take too many other management theories seriously. You can't conduct a class on leadership styles with a straight face, and you can only talk about Myers-Briggs [personality typing] as a kind of parlor game."
The Requisite Organization
Given all of this mutual disrespect, why pay attention to Dr. Jaques at all? There are several reasons. His ideas may be useful in predicting not only which companies will be profitable, but which mid-level managers in any company will make the best CEOs 20 years hence. The Jaques theory can also explain the many reasons for management abuses and poor corporate performance, and it can help any company, anywhere in the world, become a place where all employees feel genuinely cared about. It offers a powerful way of distinguishing among the very different natures of (for example) boss-subordinate relationships, partner relationships, and customer relationships, and it teaches how to redesign organizational roles and compensation schemes so they operate in harmony, instead of undermining each other.
The Jaques theory is probably invaluable for anyone — from CEOs to general managers — trying to drive profitable transformation at the business-unit level. And it substantiates that precision with Jaques's own studies of people's careers over the course of decades.
But the most compelling reason is also the root source of the controversy. Dr. Jaques claims to have uncovered the predominant form of successful human organizations since the dawn of recorded (or, as he puts it, "post-tribal") history. He says that the organizational structure we know as the "hierarchy" or "bureaucracy" is not, by nature, a repressive entity. (To people who express disgust with hierarchy, he says, "Let me guess. You never had a job in a large organization which used your talents effectively.") To Dr. Jaques, the management hierarchy — in its pure form, almost never fully achieved in practice — evolved as a natural vehicle for expressing the capabilities and limits that are innate in each of us as Homo sapiens.
Hence his use of the term "requisite," meaning the opposite of arbitrary. You may not like his structure, he says, but there is no alternative that fits human nature.
In practice, a "requisite" organization (one that follows Dr. Jaques's design) automatically becomes a kind of large-scale device for measuring human potential. From the top to the bottom of the hierarchy, through a latticework of layers and roles that Dr. Jaques lays out explicitly, people are continually drawn into positions that fit them well — that are neither too simple nor too challenging. Variations in this structure are forbidden; more precisely, they are seen as going against nature. And whereas people inside the system tend to feel comfortable, and even exalted, people who merely hear descriptions of the system tend to feel suspicion and outright fear. Even allowing for the very obvious respect that Dr. Jaques holds for people at every level of a company — evident in his language and that of his colleagues — his theory is based, in part, on recognizing the innate differences among employees, particularly the differences that lead one person to become CEO while relegating another to the factory floor.
Inevitably, the Jaques work makes one think of the Alphas, Betas, Gammas, Deltas, and Epsilons — the people bred for different levels of competence — in Aldous Huxley's Brave New World. The analogy to Huxley's nightmare stratification may be unfair, but it's particularly hard to shake for those of us who are corporate high achievers. In our bleak nights of private despair, we must always wonder: Would we even want to be part of a company organized according to true competence, a company in which we couldn't flatter or bull our way up the hierarchy? And if we were in such a company, would we be Alphas, Betas, or Deltas ourselves?
Dr. Jaques tends to stick closely to the people who work with him. His wife, human resources consultant Kathryn Cason, publishes his books out of an office in Gloucester, Mass. His daughter illustrates them. His clients tend to stay with him for years, even when they switch companies. Besides Jerry Harvey, Dr. Jaques's associates include Betsy Watson, formerly the chief of police in Austin and then in Houston; Shell Oil internal consultant Bill Brenneman; and Tom Helton, a former Whirlpool human resources executive who is now a vice president at a $4 billion Fortune 500 company called United Stationers Inc. When asked why they hooked up with the requisite approach, they almost always say the same thing: Nothing else gave them a way to deal with the frustrations and futility of the conventional organizations where they had worked.
And then nearly all of them volunteer a startling fact: They speak to Dr. Jaques by phone almost every day. You'd search a long time to find another management pundit who inspires such reverence. The late "quality management guru" Dr. W. Edwards Deming was in fact one of the few thinkers for whom Dr. Jaques professes grudging admiration. But where Dr. Deming thundered at his CEO clients, "You're responsible for poor quality!" and walked out on them when he felt they weren't listening, Dr. Jaques has a different way of irritating people. He looks at them sideways, with a cherubic half-smile, and offers them a kind of patronizing commiseration for the state of their confusion. Or he falls into conversational games with them, toying with them in a schoolmasterish fashion, as if he can't help mentally ticking off demerits when they fail to measure up. Like Dr. Deming, he is occasionally overcome by outrage at the thought of organizations today. When I paraphrased him as saying that most conventional management approaches were irrelevant and obsolete, he replied, "That's not it. They're abusive and dysfunctional."
Although Dr. Jaques has consulted with dozens of companies and government agencies since the 1950s, and although his ideas have been spelled out at least since 1987 (when the first edition of Requisite Organization was published), no organization has put his ideas completely into practice. He considers it a great step forward that, in the last year or two, a half-dozen organizations have begun. Besides United Stationers, these include two major Canadian corporations, the Bank of Montreal and Hydro One Inc. (formerly Ontario Hydro Services Company), both of which went public with Dr. Jaques in a recent Toronto Star article; and the police departments of Oakland, Calif., and Washington, D.C.
The Oakland initiative began two years ago when the Jaques approach caught the interest of Mayor Jerry Brown. With Ms. Watson as consultant, the police department laid out smaller-than-usual precinct-like neighborhood boundaries in the southern third of the city (the area known as East Oakland), with a lieutenant accountable for all the police activity in each neighborhood 24 hours a day, instead of just for one 8-hour shift (as is typical elsewhere). Recorded crime levels in that area rapidly dropped 25 percent. The program is now being expanded to the rest of the city.
"My lieutenants can now give much more attention to crime reduction and community policing than I ever could as a captain," says Captain Ron Davis, who manages the area where the system was first put in place. "We're quicker and definitely a lot more responsive. Lieutenants know the community much better than they did when they only covered a span of time, like the graveyard shift. Now they can tell you that Mrs. Jones wants to work with the police to address blight on a street corner or to get rid of drug pushers. Under the old system that knowledge fell to the captain — who, to be honest with you, was at too high a level to handle it all."
The requisite organization theory in its entirety is quite complex, but it can be boiled down to two core insights. The first, which Dr. Jaques calls potential capability, has to do with an innate quality of human nature: the amount of complexity that we can handle when we make a decision. He first noticed this in the late 1940s, when he worked with the Tavistock Institute in London, one of the first psychological institutes to study group behavior in organizations. While conducting Tavistock studies at a British metalworking company called Glacier, he developed his lifelong habit of camping down next to factory or office employees, and confidentially asking what they were thinking as they went about their jobs.
The trade union leaders who had invited Dr. Jaques to do this were struggling with the perennial problem of pay inequity: Why would a production engineer deserve a higher salary than an account manager? Over the next year and a half, Dr. Jaques canvassed people throughout the company to find out what they thought they should be making if the company were really fair. He also asked what others around them should make, and (if they were managers) what positions their subordinates were capable of handling. To his surprise, everyone agreed — they all had the same idea of what a particular role (or position) was worth, and could make roughly congruent assessments of how well each individual fit his or her role.
But if everyone agreed on the value of jobs, what did that value depend upon? Dr. Jaques was stumped until, one morning, three shop stewards burst in to tell him they'd figured it out. The critical difference had to do with time. Factory floor operators were paid by the hour, junior officers by the week, managers by the month, and executives by the year. Within two years, Dr. Jaques had refined this insight to the concept of "time span" — the value of every job could be measured by the length of time it took to carry out its longest-running assignment. (He also called it a "by-when," his name for the explicit or implicit deadline embedded in every task.) A maintenance operator on a factory floor might wrap up all tasks within a 24-hour period, but a purchasing manager might need up to three months to finalize a contract, and a marketing VP might take two years to plan and implement the introduction of a new soap. The longer the time span, the greater the amount of "felt-fair pay" that was appropriate to earn.
"I realized it one week," Dr. Jaques recalled of his epiphany. "I'll never forget it, I had this funny feeling up my back. One man would smile knowingly about the $80,000 he got. Somebody else with a similar time span would say, 'I don't know what all the fuss is about around here. I'm getting $60,000 and it feels right.' And somebody else would plead with me, 'Doc, you gotta do something for us. We're getting $48,000 and the company doesn't see how unfair it is.'"
For the next 30 years, Dr. Jaques and a growing group of fellow researchers conducted surveys on organizational structure, performance appraisals, and felt-fair pay — not just in corporations, but in government agencies, and most notably in the U.S. and Australian armies. In the early 1980s, he codified his findings. The true fit between a person and a job, he has concluded, depends on the match between the "time span" of the job and the potential capabilities of the person.
At the heart of the Jaques work is this double helix of human capability in organizations. On one side of the helix are the "categories" (as Dr. Jaques calls them) of people's ability to handle cognitive complexity. Each of us is born with a certain potential ability to handle complexity. By the time we come of age (at, say, 18), if we've matured to that potential, then we can handle assignments of three months, a year, two years, five years, or more. This "time horizon" is more or less hardwired into us (not just in our minds, but in our beings, Dr. Jaques would say). Some people start out higher than others. On the bright side, we all continue to mature all our lives, making occasional palpable leaps in our ability about every 15 years, as we cross a threshold into the next level of capability. (If you realize that you can suddenly handle tasks that seemed unfathomable before, you've probably made such a leap recently.)
Of course, we may not fulfill our potential; we may be blocked by (for example) a physical accident like a stroke, the kind of emotional baggage that leads to neurotic self-destruction, a decision simply not to strive for success, or sheer lack of opportunity to develop our skills — which is one reason hierarchies are so important for many people.
That brings us to the other side of the double helix. Just like the time horizons (for people), the time spans (for jobs) break naturally, according to Dr. Jaques, into eight levels, which he calls "strata." The fit between time-horizon levels and strata determines how comfortable we will feel at various positions in a hierarchy.
In a requisite organization, each boss is assumed to be an individual one level of cognitive capability higher than the directly reporting subordinates at the stratum below. Different companies have different-sized hierarchies, depending on the time span of the CEO's job; and everyone working in most organizations can be placed accordingly:
Stratum I: These jobs might include shop floor operator, salesclerk, or general police officer; most work is routine, and supervision is commonplace for new tasks. Such jobs are good fits for "level one" people, who can cope with thinking about a time horizon of one day to three months.
Stratum II: First-line managers, shop-floor supervisors, foremen, proprietors of some small businesses, and police lieutenant positions have a felt-fair pay level of one-and-one-half times what a Stratum I employee might get. This job fits people with a three-month to one-year time horizon (who can handle assignments that take that long to fulfill).
Stratum III: Department heads, workshop managers, owners of multistore franchises, and police captains would make felt-fair pay that was three times that of a Stratum I employee. Stratum III managers typically know personally all the people below them in a hierarchy. Many professionals with high technical skill levels operate at this level, managing just a few people. People with a time horizon of one to two years can handle this.
Stratum IV: A plant manager, editor of a large media operation, lab manager, or any line leader with responsibility for diverse constituencies would earn felt-fair pay six times that of Stratum I. Appropriate time horizon: two to five years.
Stratum V: Positions at this level include large-company divisional executives, business-unit heads (at the vice presidential level), production directors, and CEOs of 5,000-employee organizations. Most "zealot" jobs are probably Stratum V positions. Felt-fair pay: 12 times Stratum I. Time horizon: five to 10 years.
Stratum VI: From here on out, the air gets rarefied. Positions include CEOs of companies with 20,000 people, or executive vice presidents and business-unit leaders of larger companies. Felt-fair pay: 24 times Stratum I. Time horizon: 10 to 20 years.
Stratum VII: Positions include CEOs of most Fortune 500 companies, high-level civil servants (like the Sir Humphrey character in "Yes Minister"), and other leaders whose decisions might (or should) be sweeping enough to take decades to fully realize. Felt-fair pay: 48 times Stratum I. Time horizon: 20 to 50 years.
Stratum VIII: The CEOs of General Electric Company, the General Motors Corporation, and other super-corporations have Stratum VIII jobs, with a felt-fair pay level 96 times that of Stratum I. If you are chosen for such a job, you'd better be one of those rare people (like Jack Welch) with an innate time horizon of 50 to 100 years, or your corporation will probably decline.
Stratum IX and higher: Now we move beyond the mere CEO level, to the geniuses who operate on behalf of society's far future, or whose work embodies extraordinary complexity … for example, Christ, Buddha, Confucius, Mozart, Galileo, Einstein, Gandhi, Winston Churchill, and a few business leaders like Konosuke Matsushita and Alfred Sloan, who graduate from running Stratum VIII companies to looking out for society's development. Most of us cannot count a single Stratum IX person among our acquaintances. And their felt-fair pay? Well, James Joyce spent his life in poverty.
Those placed by luck or chance above their appropriate stratum tend to live lives of anxiety and incompetence, staying put because of the salary but continually afraid of being found out. Our culture is full of such stories, from Dilbert's pointy-haired boss to Lawrence J. Peter's Peter Principle. For that matter, Macbeth was probably a Stratum II thane with a Stratum III wife facing a Stratum V dilemma. And the current outrage over CEO salaries makes lots of sense through Jaquesian eyes; people holding Stratum VI or Stratum VII jobs are making far more than 48 times the pay of their Stratum I employees.
Similarly, there are legions of people squelched down to a role below their stratum. They include the lower-level supervisors (a few in every company) who drive everyone around them crazy because they can't stop talking about what the senior executives should be doing. A few companies, including United Stationers, have even followed Dr. Jaques's advice and installed "talent pool control rooms," where Stratum IV 30-year-olds can be identified with tags on the wall and systematically groomed to develop into Stratum VI corporate leaders by the time they're 60.
"I spent three years trying to develop a system of participative management at a clothing factory," said one Jaques associate I know. "I now realize that I was imposing my views, as a Stratum III or IV person. To be sure, some workers were bored to death. They complained: 'You have to check your brains at the door around here.' But others were delighted with the old structure. They didn't want to work in self-managing teams; that would have involved them too much in looking ahead at the far-flung future. They were intelligent, and committed to the company, but they couldn't handle complexity. The company, in turn, benefited from having people who fit those operations jobs."
The explicit attention to capability is only part of the "requisite" game, and by itself it could be highly abusive. Hence the value of Dr. Jaques's second core insight: a shift in managerial accountability. Every boss is accountable not just for overseeing subordinates, but for their results.
This is another hard pill to swallow — this time, for bottom-line business people. It means that if people who report to you "screw up," you can't blame them. You either have to give them the support and coaching they need, or rotate them to other posts, because you will be held responsible. Moreover, you have to know their time horizons well enough to know how much supervision they'll need; and you'll have to step in early enough to make a difference. To make this work, in turn, you'll need sufficient authority (for instance, to veto the appointment of anyone who works below you, or to decide what kinds of coaching are needed, instead of having the training department dictate it).
And how do you protect yourself from abusive bosses (or just from bad luck in the draw)? Another Jaques innovation addresses that. Your boss's boss (or, as Dr. Jaques puts it, your "manager-once-removed") is charged with looking after your future, giving you opportunities to grow and develop, helping you move forward to reach your potential, and drawing you up through the hierarchy as you are ready for new levels.
At first glance, the Jaques system seems to be the most rigid form of hierarchy imaginable. In his scheme, even the largest corporation can have no more than eight management levels. There are no mixed-responsibility matrix structures or ambiguous chains of command; each person knows exactly to whom he or she is accountable. There are staff relationships (which Jaques delineates in his book), but they occupy well-understood boundaries. Paradoxically, however, the day-to-day effect is the opposite of rigidity. "People experience it," says United Stationers' Mr. Helton, "as 'the organization cares about me.' " Though you are accountable only to your boss, you can always appeal to your boss's boss, on the grounds that you are not being developed effectively. There is no more guessing what the boss wants or lying to "make the numbers," because you aren't accountable for your results; your boss's accountability over the long term gives him or her a built-in incentive to keep the numbers honest and the business growing. It also diminishes micromanagement; your boss has a built-in incentive to ask you what he or she can give you to help you produce the best results.
The result is a company where people trust the system and where the most tangled personnel knots naturally unravel. "When I go back over my memory banks and apply Elliott's theories to the decisions I made, then the most difficult decisions I remember would not have been difficult at all," says Ms. Watson, the former police chief.
To be sure, there are many more questions to be answered. How does he deal with independent contractors and other types of non-employees? (By setting up different types of salary and reporting relationships, and being explicit about the differences among them.) If he's so smart, why aren't all the Jaques-oriented companies wildly successful? (In fact, there's a European investment firm that predicts its share values by evaluating the strata of various CEOs. But like many Jaques-influenced business groups, it doesn't advertise its method.) How do we know Dr. Jaques's distinctions are accurate? (Among other things, he has tracked people's careers over time and found that they matched the strata prognostications.) What does Dr. Jaques's theory suggest about New Economy businesses? (It suggests that companies led by younger people, who haven't had time to develop complexity, will be in over their metaphorical heads, unless they happen to be led by geniuses. Indeed, that seems to be one of the key dynamics underlying the "children's crusade" stock fizzle of 1999-2000.) In the end, even if you don't buy all of his substantiation, the Jaques design principles are deeply useful. They show how to create companies that are set up to honor the lives and aspirations of everyone in them, not just the people at the top.
Darkness and Light
But there is also a heart of darkness in Jaques's work. It starts with his contention that we do not choose our level of capability. We are born at one level, and we cannot hope to progress much faster than one level every 15 years.
How, then, can you place yourself in the Jaques categories? In a well-functioning hierarchy, Dr. Jaques simply asks the people to whom you are accountable — your boss and your "manager once-removed" — "at what level could this individual work today in the organization, given the proper experience and training?" Most managers already know how to make that assessment. The Jaques language gives them a way to express it: "This guy is in a Stratum IV role today, but he could work in a Stratum V role if he had the experience and training. He is that smart." As Mr. Helton suggests, this is far less corrupt than answering the familiar human resources question, "Think about Jimmy or Janey. Where do you think they might be in five years in the organization?" That question requires managers to pretend they have an inner crystal ball; the Jaques question simply requires them to trust their innate feel for other people.
But what if you haven't got that kind of boss? What if you're one of the growing number of independent contractors or freelancers who make a living outside a hierarchy? Then Dr. Jaques has an ingenious way of assigning a stratum to you. He observes the logic you use in arguments, when they become so heated that you forget you're being watched. If you easily interweave several lines of argument at once, or argue from several perspectives, you operate on a higher stratum than someone who makes simpler assertions.
"You can analyze someone by looking at 15 minutes of videotape of them," he says. "And you can train someone to do the analysis in a few hours." But the test and the training to administer it aren't publicly available. "There are too damn many consultants around who would go along to firms and say, 'We can evaluate all your people.' Then the subordinates would have to face sessions where the boss says, 'The psychologist tells me you're a Stratum II,' and I'm not having it," Dr. Jaques says.
If Dr. Jaques has indeed broken the code that separates the potential CEO from the potential grocery store owner in a way that can be measured from elementary school onward, then it's no wonder he's so skittish. Left unfettered, the Jaques method of assessing potential capabilities could lead to tracking, to stereotyping people by category, to assumptions about the "time-horizon" capabilities of different races and religions — even to a new level of eugenics. Hence the "Nazi" label that Jaques can't seem to escape.
Elliott Jaques's own answer to this problem is to test every organizational design by one main criterion: Does it increase mutual trust, or does it increase suspicion? If a managerial hierarchy is set up so people can trust it, he says, "then they don't have to like or love each other. And, in fact, it's abusive to try to make us love each other." He is currently working on two books that end with chapters on "trust." The first manuscript, called A Theory of Life, is an effort to apply his theory of time horizons to all life forms, from amoebas to Einsteins; all develop in their ability to manage complexity. The second manuscript, The Great Social Power of the CEO, is an appeal to chief executives. It ends with the statement, "Organizational structures that support mutual trust are good for efficiency, good for people, good for the nation. It is the ones that induce and support mutual suspicion and mistrust that are nothing short of a social and economic curse."
It's fitting that one of the first tests of the Jaques approach will be in a system riven by mistrust: Local police departments in the ethnically diverse cities of Oakland and Washington. To Ms. Watson, the true test of the Jaques system will be its ability to handle the deepest problem in police work: to diminish the visible tragedies, the Rodney King and Amadou Diallo stories, by coupling "a decrease in crime with a decrease in complaints of police misconduct." All the lawsuits, bad press, and demonstrations in the world haven't been able to accomplish that; the Jaques approach suggests it can happen only when all (Stratum II) lieutenants are held accountable for the behavior of the officers in their territories.
"In these horrible tragedies," says Ms. Watson, "the chief and mayor take heat, and the officers involved take heat. What about the ranks in between? It's as if they don't exist. But if you take a look at the officers involved, invariably you find long histories of minor complaints that were not attended to. That won't happen if we are responsible for our subordinates' performance." There's an obvious parallel to corporate responsibility; until bosses are held accountable for, say, their employees' health, safety, and environmental records, instead of fobbing the responsibility off to a relatively powerless staff position, how can anyone expect significant improvement? And there are political ramifications as well; privatizing Social Security might turn out to be dangerous not because it's risky, but because lower-level people won't be fully equipped to navigate the complexities of long-term investing.
At 83, Jaques can see the end of his career approaching. "I've had a lovely 55 years in consultancy research, with just the right number of projects, and I've been able to get down inside stuff. I've had privileged access, of a kind I think probably nobody else has ever had — not just to industry, but to the Church of England, the National Service, and the U.S. Army. I have no complaints."
But of course, that's a little disingenuous; even in casual conversations, Dr. Jaques lets slip that he is bothered by the way he's been ignored and demonized. In the end, the "requisite organization" concept will be either proven or not, in the crucible of business experience. If it is proven, even if that happens after Dr. Jaques himself has personally left the scene, then his ideas will be finally treated as a template for social design.
Reprint No. 01109
firstname.lastname@example.org is the “Culture & Change” columnist and a regular contributor of “The Creative Mind” profiles for strategy+business. He teaches at New York University’s Interactive Telecommunications Program. His Web site is www.well.com/user/art. Mr. Kleiner is the author of The Age of Heretics (Doubleday, 1996); his next book, Who Really Matters: The Core Group Theory of Power, Privilege, and Business Success, will be published by Doubleday Currency in August 2003.