GMAT Essays : AWA / AWM Issue Essay 2.1

Issue Topic 2.1 Organizations should attempt to remove the large number of positions and salary levels that categorize employees by skill and experience because a flat structure is more probable to foster a congenial working environment within the company.

Discuss whether you agree or disagree (partially or totally) with the view expressed providing reasons and examples.

ESSAY (Contributed by Herb)

In addition to delivering great value to customers and increasing the wealth of shareholders or owners, today's corporations must provide a satisfying working environment for employees. One of the issues that needs to be addressed with regard to providing such an environment is the organizational structure in terms of the number of positions and salary levels. Having too many ranks and salary levels may result in employees focussing on their own self-interests and promotions rather than the overall good of the business. On the other hand, having too few ranks and grades may cause employees toward the top of the promotion ladder to stagnate because there is not sufficient incentive for growth. On considering these tradeoffs, it is logical to argue that there is an optimal number of levels which defines the salary structure for a particular organization. The actual value of this optimal number depends on the size of the organization and the nature of business. By and large, a small organization would work well with few levels, say three or four, whereas a large-sized organization would require relatively many grades, say ten to twelve. When there are many ranks, it is meaningful to classify them into major ranks such as managers, presidents and so on. These major ranks may then be further subdivided into minor ranks such as assistant manager, deputy manager and so on.

Over a period of time, organizations have naturally developed a structure in terms of number of positions that they consider optimal. It is imperative that this naturally-reached structure be examined periodically to see whether it delivers the best to customers, shareholders or owners, as well as employees. Some of the parameters on which the optimal organizational structure needs to be designed are examined below starting with a flat structure and systematically progressing to an organization with many levels.

At the outset, it must be emphasized that it is not meaningful to have an absolutely flat organization. Everyone in an organization cannot draw the same salary. The remuneration of each employee in a corporation must be commensurate with the value the individual brings to the table and the contribution he or she makes to the productivity and growth of the organization. For example, the upper management draws high salaries because they make top-level decisions that have a major and direct impact on the profitability of the business. In contrast, workers draw small salaries because the tasks they perform are typically routine and mundane.

Let us consider an example of an organization with only a few ranks, just three or four. A classic example is a college or university which is in the business of imparting higher education. The example is unique because most large organizations have many ranks and levels; however, even a large university typically has only three positions, those of assistant professor, associate professor and full professor. The primary reason for just three posts is that the nature of work all professors are involved in is the same, namely teaching and research. In other words, the expertise of faculty at different levels does not vary significantly. What distinguishes a faculty member from another is the years of experience and the reputation earned in terms of research output or teaching excellence. It is this experience and reputation that needs to be recognized and rewarded over the years in terms of a higher rank and salary. Furthermore, the relatively flat structure assumes that a faculty at the topmost rung of the ladder, namely a full professor, will continue to deliver at his full potential and not lose his motivation.

Next, let us consider an example of an organization with relatively many ranks. Examples are ubiquitous. However for the sake of concreteness, take the case of a corporation into discrete manufacturing of goods, say cars. The primary reason for a large number of posts is the wide difference in skill levels and expertise of different workers and employees. Moreover, the nature of work being more related to hands-on experience varies from worker to worker. Workers require short-term targets in terms of small salary increments to motivate themselves. These promotions being a recognition of the worker's skill and experience help in the personal growth and well-being of the individual. They also ensure that the motivation of the employee remains high over an extended period of time because the top of the long promotion ladder is often reached only toward the end of one's professsional career.

It may be argued that too many ranks lead to internal rivalry among employees. This is probably true with a few individuals who have a 'I win only if you lose' mental makeup. Organizations should strive to foster a congenial working atmosphere aiming at excellence and a 'I win, we win' attitude to motivate workers. On the whole, competition and challenge are more beneficial than detrimental to organizational growth.

It is thus clear that organizations must have optimally flat structures in today's competitive world. What is optimally flat for each organization depends on various parameters such as size, nature of business, employee expertise, geographical location, sectoral trend, and overall growth.