Taking over Semco, his family’s engineering firm, Ricardo Semler didn’t waste any time making some radical changes. The day after his father appointed him CEO, Semler junior fired 60% of Semco’s top tier leaders. This marked the beginning of a company transformation that has since become the posterboy for delayered organisations.
The results speak for themselves: under Ricardo Semler’s stewardship the Brazilian company’s revenue grew from $4 million in 1982 to $212 million in 2003. The new model required employees to take much more responsibility for themselves. Over time the HR team was almost eradicated. There was no need for it: no record was kept of holidays and salaries were set by individuals and their colleagues.
In this brave new world learning and development (L&D) also becomes the lookout of individual team members, says Semler: “We don’t think it’s an issue for the company – we think it’s an issue for the employee. If you feel that you’re ready to take on something else, you can request to do a six-month course and then you pay yourself more. That way you’re solving your own development issue.”
Of course this is still a pretty unusual approach. But Semco is perhaps just a more extreme version of what’s going on elsewhere. Tough economic conditions caused by the recession have meant fairly radical organisational design overhauls, with some roles replaced by external platforms such as online recruitment services, for example. The typical result is companies cutting layers, most commonly the middle management layer.
Not all companies will be adapting to and embracing these changes quite as whole-heartedly as Semco. But even for those organisations dipping a toe into different operating models, newly flattened structures present two key learning and development challenges.
From the perspective of the employee, the career progression opportunities that once existed may simply have disappeared, leaving employers with the challenge of managing career expectations. The second dilemma will be ensuring that, in the absence of middle management positions, there are still sufficient training and development opportunities to get those workers needed to fill senior positions up to the required skill level.
Philippa Barnes, global HR director at oil and gas recruitment firm Petroplan, explains that in a delayered structure employees often reach senior positions younger, which means skills typically best learnt on the job over time, such as people management, aren’t quite there yet.
“[Young high fliers] can be more emotionally immature. Although they may have been excellent in what they’ve done to get them to that point and have therefore been promoted, there are often still many skills and behaviours that are missing,” she says.
“Take emotional intelligence – the challenges they may have faced in previous roles are nothing like what they would face in a more senior role. Often things like dealing with rejection at a higher level can be much more challenging for an individual who hasn’t been through that.”
Barnes says that the best way to tackle this is to forward plan, so that younger employees on the path to senior positions can be equipped with the right skills for when they get there.
“It depends on how much notice you get. It’s obviously preferential that you know prior to them being promoted so you can prepare them for that transition,” she says. “Whether it’s formal or informal doesn’t really matter; I’m more of an advocate of learning internally, through experience at the desk and through other people.”
She adds that the assumption that there is little room for development in smaller teams is often incorrect, particularly in high growth companies. Businesses should take advantage of their perhaps now-smaller sizes when tackling the challenge of newly flattened structures, she explains.
“Because we’re not a large organisation employees have better access to managers and more senior people, and can learn through the experience of being involved in project work,” Barnes says of her 130-strong company.
She adds: “An understanding of the financial drivers of the business and the commercial elements is often missing when staff are promoted quickly so it’s about giving them the opportunity to have that learning and facilitating it if necessary.”
Regarding the other delayered company dilemma of no longer being able to offer traditional career ladder style progression to all employees, director of change management consultancy Andpartnership David Tomkinson reassures that in fact not all millennials will be seeking this kind of linear trajectory.
“The aim was always to be promoted and to climb the greasy pole but the younger generation has very different expectations and needs,” he explains. “That makes you approach it in a very different way. You can’t just walk up to somebody and say, ‘congratulations, you’ve got your promotion to the next level’. That’s not going to work in the next 10 or 20 years.”
But companies need to remain mindful of the fact that many millennials do still prize career progression highly. Indeed 91% of the millennials polled by recruitment firm Robert Walters in May said career progression was a top priority when considering a new job.
So employers will need to think laterally when offering development opportunities, not only so those rising to top positions can lead the business effectively, but so other staff are retained too. Businesses may need to follow in the footsteps of insurance firm RSA, which recently told HR magazine that stretch assignments are key now the company no longer has emerging markets where people can cut their teeth.
“In the old days you could send someone high potential off to an emerging market to run it,” says group director of talent and organisational effectiveness at RSA, Jeremy Phillips-Powell. “They could make mistakes without the world watching them.”
He adds: “We have got roles where 500 people report in to you, so it’s about seeing those as a chance to give people leadership skills you just don’t get in an underwriting job, for example.”
There is, however, also now a growing trend among millennials for project or freelance basis working. This of course adds to the list of learning and development challenges arising from rapidly evolving business structures.
So the L&D dilemma then becomes: do companies develop contractors or project workers the same way as permanent staff?
“I expect us to treat them the same as any other employee,” says Ingrid Eras-Magdalena, SVP of global HR at Belmond, the group behind the Orient Express and a business increasingly hiring staff on a project basis. “If I hire you for a period of six months it’s in my interests that I develop you, because in those six months you’re going to be working for me, in my property delivering services.”
Tomkinson agrees in principle but adds that it depends on the role. He says that organisations will often be selective about which employees qualify for training.
“It depends where they’re working. I used to work for Boots and the whole IT function bar about 10% of them were outsourced. They tended to work in the background providing a service to the organisation, so that’s not too bad, but if you start bringing contractors into helpdesks and frontline customer roles where they’re representing your brand or your customers, you can find they haven’t got the skills and engagement to do it. And that’s a very dangerous position to be in,” he says.
Kirsty Peacock, UK HR director at property company Cushman and Wakefield, says project workers and interims often take control of their own development: “They go to conferences because it’s good for their network and they can meet ‘people like me’ who might at some point offer them an interim job, but they’re also taking charge of their own development.”
There’s also, quite rightly, a question mark around whether workers hired for their specialist skillset will need developing further. L&D professionals may need to read just their assumptions in the most radical way here, to realise development may just not be relevant.
“These people are being brought in as workers who are already skilled in an area rather than people who need to train in it,” muses Peacock.
What it seems those professionals responsible for L&D must remember then, is that while some organisational structures are changing rapidly, so too are approaches to work, particularly among the younger generations. And in some cases, as with many millennial employees’ preference for unconventional, non-linear career progression, this can prove fortuitous.
In others careful thought will need to be given to providing enough scope for development and progression, through project work and stretch assignments for example, to compensate for the decline of middle management. In this way businesses can equip their bright young things, and themselves, for future success.