Updated: Sep 18, 2020
Hierarchy effectively dates from the Middle Ages. Grading systems, which essentially perpetuated the middle age tradition during the industrial revolution, is largely based on work stemming from the 1920’s of the previous decade and millennium. Since the industrial revolution, the world of work has changed and significantly so. Not only have we moved into a technologically advanced era, we have also moved into a more sophisticated workforce era where people can think and act for themselves and start to e.g. ask questions about organisational hierarchy. This questioning of what happens in organisations, regarding equal pay for equal generated value, will continue to put organisations under pressure until such time as organisations find solutions doing away with issues that have nothing to do with value generation e.g. mere hierarchical position in the structure based on pay requirements, span of control, size of budget, etc.
Current status of hierarchy and grading systems in companies
The current organisational hierarchy and its supportive grading systems, have a very long history probably dating back to the pre-industrial and even middle ages. It was in this era where kings, lords and noble-man and later-on landlords were seen to be at the “top of a pile of the uninformed”. They were the people with the power, the money and the owners or controllers of underlings (or slaves). The size of holding and property, financial mass and numbers of people (seen as property that you can shift around at will) were determining factors in the hierarchy of importance. When people, from lower down in the hierarchy, became too powerful in the perceived hierarchy of power, a “side-lining” strategy was often considered and the “spoils pocketed”. This entrenched the notion of “the more (in monetary value, property holding, and numbers of underlings), the higher”. It came with the notion that people “lower down cannot be equals”. Even “knowledge workers” of the time “belonged” to the powers (the kings), being appointed by and exposed to the control of the king’s court.
The parallels between large corporations and organisations today with the above are remarkable. Organisations are still hierarchies of power, money and size. These are encapsulated and engrained into organisations through formal job grading systems that came into being approximately 100 years ago.
Grading systems, still practiced today, assist in entrenching practices around organisational structures that adds no significant value to the organisation in the current world we live and work in. Current practices still result in a vertical-hierarchical view where:
One level cannot report to or interface with certain other (higher) levels without a person (or mediator) in between despite the fact that contextually they deal with work in a similar way, adding similar value;
The span of control and the size of budget, that has nothing to do with value generation, still are important factors in determining role hierarchical importance as well as remuneration;
The hierarchy, although there was an effort to base it on the challenges of the work, is largely pushed into a framework of hierarchy based on power, money and numbers;
Activity definitions and language semantics (sometimes “word fudging”) are being used to differentiate hierarchical layering without clear differentiation in the nature of work and generated value. What is for example the difference between “solving problems within existing systems” and “solving problems in existing systems on a global scale”? The essence of value delivery is still “problem solving in existing systems”, be it for one area or multiple areas.
The result is the failure of most current grading systems in differentiating on any new grounds, thereby essentially continuing the tradition of hierarchy, power and size.
This tradition is being perpetuated through academic and other institutions where refinements to existing ineffective systems are being made. Limited new thinking, based on new global trends, is embarked upon, leaving modern organisations with systems that, more often than not, destroy value.
Trends - already a new reality
For decades now the world has been in a process of shifting away from traditional power based hierarchies. The momentum increased with the dawn of the knowledge era and became “super-charged” with the emergence of the information and information technology era that pushed democratization, personal control and access to information, never imagined possible and unlikely to be reversed. The impact of these global transitions resulted in people increasingly challenging the traditional power hierarchy’s value contribution, or for that matter, its justification for existence. The general sense, and growing consensus, is that the power hierarchy, in its current format, is outdated and no longer appropriate to the world or world of work today. The hierarchy has shifted away from power towards value delivery. No longer are the questions about how wide your control, how large your budget, how high up in the organisation, what is your power base. The questions that now get asked more often are focused around the value you generate and the value you add. Differentiation now takes place based on value contribution. Value contribution goes hand in hand with output delivery and not activity or tasks. Activity or tasks are only relevant insofar as it supports actual delivery.
Organisations response to the changing world
Very few organisations have embraced the challenges and adapted a more flexible approach in the way it applies its systems, be it grading, pay, or others. Various processes started pushing companies for some response, e.g. sudden arrival of global skills scarcity, retention of specialized skills that demand advanced benefits, value generation that takes place “at the bottom” of the organisations, the need for better parity between managers and specialists - the latter sometimes generating and adding more value through developments. However, the vertical-hierarchical mind-set continues to guide the response and effectively maintained the vertical-hierarchical status quo. Typical organisational responses included:
Unjustifiably inflating a role’s content and “grading” or hierarchical position to justify pay (as higher is better);
Creating of parallel remuneration streams for managers and specialists (still maintaining a “pecking order of hierarchy and importance);
Adding to the scope of the role, more of the same, to justify its grading (as size equals importance).
Re-writing roles with better word and terminology (“word fudging”) without a change to the real essence of the job.
Essentially, nothing has changed in the way organisations deal with the challenges and changes in the context of the world around it. The notion still remains: more is higher, bigger is higher, important is higher.
A new challenge
The world around us poses significantly different challenges. Roles at lowest levels of vertical challenge (complexity) can potentially generate much more value, in terms of its horizontal content depth value (difficulty), than people in certain vertical contextual management functions. The world has shifted towards a recognition that value generation is possible across vertical (contextual/complexity) as well as horizontal (content/depth/difficulty) domains in society and organisations. Traditionally, organisations were so caught up in the vertical-hierarchical debate that it never differentiated between complexity and difficulty, context and content vertical and horizontal challenge. Everything was grouped into one basket of vertical hierarchical thinking.
A lack of recognition, by organisations, academic and other traditional institutions, that the world operates on different parameters has resulted in maintaining an “old guard” in a new environment. This causes immense frustration amongst people, especially the younger generation, working in and for these entities. While experiencing a diverse democratized world outside, they are subjected to a bureaucratic world of power and a pecking order of control inside. This dichotomy will put strain on organisations going forward, will continue to plague organisational effectiveness and value generation, will continue the disconnectedness between organisations and (key) employees, until alternative and more appropriate solutions are deployed.
This developing void has been identified from the mid 90’s, but for various reasons companies were far from ready yet to consider any alternatives to the traditional in terms of e.g. setup, design, job grading, pay. The comfort zone was and maybe still is too comfortable to consider any change. The comfort zone, however, has been and will continue to be under siege from various angles:
Society - in terms of deepening democratization and an increased challenge of the non-value adding hierarchical view – “why does the top continue to enrich themselves at the expense of the masses without adding significant value or changing the lives of the masses?”
Individual - in terms of the ease of access to information and the challenge to the notion that only people at the top, or a selected few, “knows” – “information is accessible to anybody that can use technology”
Organisational - in terms of:
a clear indication that deep level experts on “low complexity” challenges are as sought after, if not more than senior managers in companies;
the skills exodus from companies due to people “feeling done in” and not properly recognized for contribution;
the visibility of people at “lower levels” who often delivers high value to companies, sometimes even higher than senior managers.
Market - in terms of its volatility/flexibility pushing the demand value on certain skills for certain periods before it becomes less valued again, requiring a more flexible approach.
At this point in time of the contextual life cycle around companies, value clearly gets generated on more than one axis: Contextual as well as Content based. The world clearly has also moved beyond a vertical-hierarchical world of power and more towards a world of value generation or value contribution that is distributed across the organisational spectrum. This reality is something that many large corporations and other entities, e.g. political structures of government, either fail to, or are slow to realize.
In this brave new world, vertical hierarchy only becomes relevant in relation to its contextual value generation and value contribution. Horizontal is becoming equally important in relation to e.g. the recognition of peoples’ “depth” of contribution to companies. This has resulted in new developments in the “grading and pay” space, breaking the centuries’ long focus on a vertical-hierarchical view of organisations with the frustrations and ills it brings.
The new era of distributed value generation
Value is generated across the spectrum of the organisation and sometimes lower level positions often contribute as much, if not more, value to organisation than some senior positions at the top. Historically, however, the only way for recognition was either:
To move “up” (vertical hierarchical) in the management hierarchy, losing touch with personal passions and potential value contribution from hands-on applied expert knowledge work;
Becoming a senior manager whilst personal influence and value generation, through teams in an operating environment, might have rendered more significant value;
Changing to a different organisation for more pay at the same level of work thereby receiving recognition for value generation;
Moving out of the organisation to pursue passions outside the hierarchical constraints of organisations, thereby gaining the required recognition and financial benefits not possible in the current vertical-hierarchical world of corporate life.
It needs to be stated clearly that in this “new world of work” environment:
higher or bigger is not necessarily better,
higher or bigger is not necessarily more complex,
higher and bigger does not necessarily address a higher context of challenge,
higher or bigger does not necessarily equate value.
These are all old notions that potentially derail organisational strategy, restrain organisational growth, efficiency and effectiveness, impede retention strategies and result in discontented employees that tend to harbor a sense of dissatisfaction and a feeling of being treated unfairly.
A new Alternative
In this space the Kontextit Contextual Job Evaluation/Grading and Pay System entered the market. This system:
Is aligned to global change - moving away from non-value adding hierarchies;
Recognizes value generation on vertical as well as horizontal axis. This implies pay at lower levels can be similar to pay at higher levels based on the differentiation of value on various measurements directly related to value generation.
Does away with superficial inflators of job grading and hierarchy that has nothing to do with value generation e.g. size of budget, size of team, impact (which is a judgement based on values - lower level decisions can have as equally a devastating impact on companies as decisions made on higher levels).
Is a more equitable way of grading and pay based on value generation that maintains the integrity of managerial and specialist value contribution and skills.No longer do you need to become a manager to get recognized and rewarded for value.
This new framework recognizes the fact that work and value should, at minimum, be recognized on two primary axes (with multiple other built in factors): A vertical axis that clearly deals with contextual value add and a horizontal axis that deals with content depth value add. These axes are defined and quantified to drive a fairer appreciation and valuation of work based on the multiple built in factors.
The new approach can be used to:
Implement a completely new value generating based job differentiation system.
Calibrate a company’s existing job and pay differentiation system to focus on value generation, without having to do away with the internal organisational language.
Is aligned with the new world of work where:
Value generation manifests itself across the spectrum of the organisation;
People can think and act for themselves and no longer submit to hierarchy for hierarchy’s sake;
Hierarchy is questioned for the value it generates.
Does away with the drive to justify everything based on a vertical-hierarchy;
Does away with the need to create separate structures for managers and specialists, within which further differentiation sometimes needs to be made, based on other factors, resulting in very cumbersome and clumsy processes;
May even call for a new job naming protocol, finding new Vice-Presidents at lower levels in the organisation due to value being recognized all over and not just vertically at the top;
Leaves the position at the appropriate vertical level, where its value contribution is required, and recognize it for its horizontal depth in content value generation and contribution;
Spreads value generation equity on both horizontal and vertical axis without the need to:
super-inflate the position to justify reward;
lose critical specialized skills by becoming weak managers to justify positional reward.
The time has arrived to think differently about grading and pay. The world demands this as the nature of work and the nature of people has changed. With people no longer being the un-informed mass, people starting to question the value of traditional hierarchy, people expecting recognition for equal value generated and contributed, existing outdated and hierarchical systems no longer provides appropriate answers. Some systems are not only outdated and ineffective, it actually destroys value in companies. In some countries these systems are even used by business partners and people interest groups to hold organisations at ransom, manipulating the system to fit people rather than addressing the organisational requirements.
The Kontextit Grading and Pay System brought a new dynamic into this domain. It goes a significant distance in addressing some of the problem business experience in the current environment. It goes a long way in:
Making sure that grading and pay systems serves the purpose of the organisation, not the organisation serving the purpose of the system;
Undoing of the long-standing inappropriate notions that rank (hierarchy), more money, size of team or budget, should be at higher vertical order;
Recognizing value contribution across the spectrum of the organisation;
Protecting organisational value through an appropriate and equitable approach to real value contribution.