Who’s In Charge?

Today’s flatter, leaner companies have created more situations where everyone – and therefore no one – is the boss. Some managers find “ambiguous authority” creative. Others find it confusing. Everyone finds it a lot of work.

By Robert Strauss

In the post World War II success story of the U.S. corporation, few things were more entrenched than a belief in the hierarchical style of management. A company’s organizational structure was built around clear, bureaucratic lines of authority based on the assumption that the longer you had been with the company, the more you knew, and the higher your place in the chain of command.

Supporting this type of hierarchy was a system that partitioned knowledge and experience into rigidly-defined organizational “silos” with few incentives or opportunities to work with colleagues outside one’s own group.

These days, however, more and more companies are turning from traditional, hierarchical structures to flatter and less defined work environments. In the process, an increasing number of managers find themselves less able to draw on traditional “legitimate authority” and more dependent on what business academics call “ambiguous authority.”

Ambiguous authority arises when a person’s knowledge of the task at hand and his or her need to negotiate consensus among differing opinions becomes more important than the traditional yardsticks of title, rank or seniority. As the organizational design flattens out, decision-making is pushed downward to include lower managerial ranks, and the emphasis is on people working together as a cross-functional, cross-departmental team. The advantages of such a system are faster, better, more cost-efficient customer service.

The term “ambiguous authority” strikes a chord with today’s managers as they cope with new technologies, increasing globalization, deregulation of whole industries, shifting markets, stiffer competition and downsizing. David Wilson, WG’89, director of pediatric health information systems at Kansas City-based Child Health Corp. of America, says his company hires people with the expectation that they “can operate in a flatter, team-based environment where decisions must be made quickly and it is not always clear what your responsibilities are and where the boundaries lie. Yes, there can be confusion, but it also means that we hear many different points of view. People in the company believe that managing with ambiguous authority results in better products for our customers.”

Leslie Dorman, WG’89, a compensation analyst at Liz Claiborne, Inc. in its New Jersey office, says her company is “going through the same reengineering process as everyone else. A new COO who came on board last year has made a lot of changes, including pushing authority levels lower in the organization. One result has been that the necessary approval signatures on most paperwork have been cut by about half.”

Ross A. Webber, professor of management, who has written extensively on this subject, sees “a greater need than ever before to bring multiple perspectives to bear on problems. Doing business in a global, highly competitive environment is too complex for employees with specialized backgrounds. Leadership these days requires one to make ambiguity tolerable by articulating an organizing vision out of the chaos people are experiencing.”

Like other management buzzwords — such as empowerment, reengineering, team building, right-sizing and total quality management — functioning with ambiguous authority can surface problems as well as efficiencies.

At its worst, redefining people’s roles without preparing them for the new environment causes chaos. If authority becomes too unclear, conflicting or overlapping, the new structure turns dysfunctional. “A company that expects its people to act differently, but doesn’t change the information flows, the reward systems or job descriptions, and doesn’t explain how decisions should be made, creates a paralyzing situation. People aren’t empowered; they are abandoned,” says Michael Seitchik, director, program development, Wharton Executive Education. “You need a leadership approach that lets people talk about negotiating their new roles and using conflict in a positive way.”

Nancy Drozdow, director of closely held business practice at the Center for Applied Research, a former Wharton research center, deals with questions of ambiguous authority as it relates to strategic and succession issues within family businesses. “Ambiguous authority often turns out to be absence of authority,” she notes. “Nobody is in charge. Everyone thinks everything is done by consensus, when in fact, nothing gets done.”

At its best, however, the move to set up flatter, less hierarchical structures encourages risk-taking, innovation and creativity, and breaks down functional and departmental barriers so that people work together as teams. “Whatever you call it,” says John Kimberly, Henry Bower Professor of Entrepreneurial Studies and professor of management and health care systems, “the fundamental fact is that you are trying to get people in organizations to think differently about their roles and responsibilities and, in the process of doing that, to become creative in finding new solutions to a variety of problems.”

To illustrate the concept of ambiguous authority, the Wharton Alumni Magazine interviewed several alumni who studied this subject in Ross Webber’s course, “The Individual in the Organization,” when it was first offered in 1989 and 1990.

A majority of those contacted agreed — wholeheartedly — that ambiguous authority was a phrase that describes some or all of their current jobs. Their situations fell into three general categories — managing cross-functional teams, working in multi-divisional organizations where the divisions compete for a limited resource; and operating in multinational companies where questions of regional autonomy and cultural flexibility create their own ambiguous authority environments.

In all of these situations, says Webber, certain management skills are needed. First, one must have the ability to empathize with other functions and other priorities. Inherent in that is the willingness to listen to other points of view and learn how other functions operate.

Second, one needs a “tolerance for ambiguity.” While most people prefer clarity and certainty in their jobs, those who can learn to manage in less well-defined environments have an advantage in today’s matrix organizations.

A third component, especially in today’s global marketplace, is the ability to operate well in a multicultural environment. Webber calls it “a sense of cosmopolitanism.”

CROSS-FUNCTIONAL TEAMS

Cross-functional teams pose unique challenges for mid-level managers, says Webber, “especially when a manager finds himself or herself the leader of one project team one day, but only a rank-and-file member of another project team another day. Or when a manager needs to reach a consensus within a team of peers, but has no direct authority over team members.”

Michael Seitchik poses the question this way: “If someone in charge of marketing is on a team with someone in charge of finance, when are you representing your function and when are you representing the greater good? Roles and authority aren’t always clear.”

Seven months ago, Thomas J. Sullivan, WG’91, was director of national planning and distribution for J&J Consumer Products, one of the five J&J consumer companies. He reported directly to the company’s vice president of operations at headquarters in Skillman, N.J. “It was a very functional, hierarchical group,” he says.

In January 1995, Johnson & Johnson instituted a pilot program in Irvine, Ca., that combines all five consumer companies — J&J Consumer Products, McNeil Consumer Products, Personal Products Company, Advanced Care Products and J&J-Merck — into one, and promoted Sullivan to director of logistics for J&J customer support center, western sales division. “We now approach customers as one J&J organization,” Sullivan says.

In his new position, Sullivan reports to both the executive director of the sales division (his matrix line) as well as the vice president of operations (his functional line).

In reality, no one in the Irvine office has any operations experience besides Sullivan. And Sullivan has no one working underneath him. “But there are a lot of people I draw upon, from customer service and warehousing to transportation and order entry.”

Ambiguous authority, he adds, “is an appropriate term for this situation … Basically my role is to facilitate the logistics process, from the day a customer decides to place an order to the day the customer receives the product at whatever shipping point is requested. That means, for example, that I am responsible for overseeing the performance of trucking companies, warehouse operators and others even though they are independent contractors with no functional relationship to J&J.

“We find that the key is to keep focusing on the ultimate goal, which is the customer. So when you meet with a contractor, instead of saying, `You have to do this or that’, we focus on what the customer needs and what we can do as an organization to make this happen. Then we derive everyone’s roles and responsibilities from that.”

Although Sullivan has only been in this position for several months, he says that everyone involved in the process “likes the idea that instead of being told what to do, they play a part in the decision making. It was the first time many of our public partners really felt like they were part of a J&J team.”

If there is a difference of opinion between Sullivan and a contractor, who makes the ultimate decision? “We pay for their services,” Sullivan says. “If a carrier decides they don’t want to be part of our program, we won’t use them anymore. But so far that hasn’t happened. When we sit around the table as a team, people can look and see that something may not be better for them, but is better for the customer.”

Sullivan says his biggest challenge “is always ensuring that you are getting the information you need and that you have good communications with all your constituents.”

And the biggest drawback, he adds, is the need for frequent meetings. “With so many teams, I spend 10 to 16 hours a week in staff meetings or communications meetings, just to make sure our network is tight. But it’s necessary, especially at the beginning. You have to make sure you have the right information and other support tools in place.

“A key part of that is the electronic network — e-mail, voice mail, data analysis software. That’s been the big enabler in managing with ambiguous authority.”

Sullivan says he loves his work. “Other companies may be operating like this, but for J&J, it’s a whole new platform. I feel like a pioneer, which is one of the things that makes this job exciting. I am doing something new.”

As a manager in consultant A.T. Kearney’s Atlanta office, David Jacoby, WG’89, sees ambiguity on several levels, especially in the nature of the consulting business itself.

Consultants are often called in with a substantial degree of influence and/or power, but their actual authority is less than that suggested “by a dotted line relationship on an organizational chart,” Jacoby says. So a consultant’s role is not to manage, “but to influence and lead. The idea is to understand who the key players on the team are, what their personal and team goals are, and whether these goals agree or conflict with others.” Laying out a “road map to the group dynamics in your team,” he says, is “worth a million bucks.”

Jacoby sees substantial change occurring in client companies due to the decentralization of information technology as well as the new management trends emphasizing empowerment and team-based organizations. Progress comes not through having authority over someone, but through “actually influencing people to change their behavior,” he says.

The move towards more team-based organizations, “while it can take longer to reach a decision, is generally positive, because once a consensus is reached, the power to achieve the goal is much greater. Everyone is on the boat.”

In his own company, Jacoby says, “project teams are staffed according to the responsibility of the individual as a member of the team, not according to the level of the person. You could have a project manager who is, in fact, a principal in the company, one level higher than a manager. You could also have a project manager who is an associate, one level lower than a manager. You could have a manager working for another manager.

“You could say that’s not ambiguous, that it’s clear, because you report to a certain team manager. But once you have conveyed the principal ideology that everyone is empowered to influence the team, then nobody has absolute authority. An associate could be having an argument with a partner, what people call ‘constructive dissent.’

“If you do in fact have an argument going on, that gets into the longer-term issue of training people. Associates don’t have a good sense of managing up. It’s a skill that you learn — how to manage your relationships with superiors so that you can achieve constructive dissent without angering others.”

COMPETITION IN MULTI-DIVISIONAL FIRMS

Some of the most difficult tests of management capabilities are in situations where the objectives of the independent parties are quite different, and often competing. An example would be where managers of equal rank are vying for a finite resource — such as limited production capability, space, or other employees’ time. The ability to negotiate in situations like these is considered critical.

David D’Arezzo, WG’89, is a group unit manager for Wegman’s, a $2 billion supermarket chain with stores throughout Pennsylvania and New York. He is in charge of 45 percent of the grocery department, including soft drinks, beer, paper goods and laundry products.

Ambiguous authority is a term D’Arezzo, who is based at company headquarters in Rochester, N.Y., knows well. “Just last week I met with our heads of candy and gum, magazines and cigarettes to negotiate over who has the rights to put what in the front end of the store. Cigarette people want cigarettes in front, candy and gum people want their products in front, I want soft drinks in front, and so forth.

“In the past, while there were buyers in the company who were relatively junior, and merchandising people who were relatively senior, there was nobody in mid-level positions who could really work through the nuts and bolts of these ambiguous issues. So what tended to happen was more senior time was spent on less senior issues.

“Now what happens is each group unit manager does a lot of soft selling and talking unofficially behind the scenes, trying to get people to see his or her side of the issue. At first you feel a little uncomfortable because authority is ambiguous. Nobody will make the final decision. So it becomes a matter of `getting to yes,’ getting to where everyone is happy. We did that. We all met in my office to find out what each manager wanted. I wrote things down on a chalkboard and kept at it until we came up with something we could all agree on.”

In order to reach a consensus, D’Arezzo says, “you need to put the customer first and try to minimize your own needs. Sometimes that means putting another group’s priorities ahead of yours. For example, we know it’s important for customers to be able to buy TV Guide at the front of the store. So any plan we came up with had to satisfy that customer-driven need. In my case, I wanted to put cold bottle soft drink equipment up front, which we had never done before. Immediately it was viewed as taking away space from cigarettes and magazines. We worked it out logistically so that four of the first 12 checkout places — where people tend to have fewer items but frequently these items include deli food, like sandwiches — would have a soda machine.”

What if you can’t agree? “Unfortunately, you either do nothing, which is a problem, or you retrench and come back with more data … The only place we all come together is the number three person in the company. You hate to go up that high for a dispute over where to put cigarettes and magazines.”

The group manager job was added to Wegman’s organizational structure two years ago when more emphasis was put on the role of category management. D’Arezzo is one of six group unit managers. He oversees a staff of seven, including two category managers, both of whom work with people on their level in other groups.

Wegman’s offers negotiation training to all employees. “It’s one of the most important skills we could possibly have — not just in terms of dealing with peers here, but also in terms of dealing with our suppliers,” says D’Arezzo. “They have certain needs, we have certain needs. If we can satisfy each other, we are better off. We want suppliers to look at us as a good partner.”

The structure at Wegman’s is one of the most appealing parts of his job, says D’Arezzo. “In the company I used to work for, I typically had to go through 8 to 10 layers of people before I got a store manager to even think about doing a promotion or a program. Here, we think it up and then implement it. Things can get done very quickly and you know right away if your ideas work.”

THE MULTINATIONAL ENTERPRISE

In multinational companies, the problems of ambiguous authority tend to be amplified because the ambiguity exists on several levels. For example, directives from U.S. headquarters frequently don’t apply to the business climate in another country, making traditional chains of command irrelevant.

Take the financial services industry, says Webber. “Here you have specialized people in charge of specialized products. What happens when you have a customer who wants to buy several products? These customers may be domestic or foreign, from developed, or developing countries. So you have a double matrix, between product specialists and between regional organizations. The person representing a U.S. firm in Europe will have to deal with multiple product people who may be housed in New York, London and Singapore.

“The question is: Where is the power? In the product line? In the regional organization? Or in the home office? It’s in all of them. And which people, from which teams, do you choose to work with in this particular situation? It takes a multiple negotiation to arrive at the best strategy.”

John Hotta, WG’90, is a product manager, international consumer long distance group, for AT&T. He is responsible for direct dial service between a consumer’s home in the U.S. and locations in Asia.

“It’s a market and a product which crosses throughout the U.S. and outside,” says Hotta, who joined the company after graduating from Wharton. “I am constantly interacting with people who play many different roles, from people who work with the phone companies in Japan, to people who do marketing on military bases, to people who do advertising here in the U.S. for Japanese-speaking customers. These are all AT&T employees in different business units, with different levels of responsibility, and yet I work with them all in what I call a team.”

The team — which usually numbers around 12 people — holds weekly conference calls, and includes people from customer service, telemarketing, marketing, advertising and carrier services. The focus is on both profitability and market share growth, and the discussions revolve around what customers are saying about the AT&T product. “It could be a pricing issue, an advertising issue, or whatever, but our goal is to meet or exceed customer requests,” says Hotta.

Although all members of the team are considered equals, sometimes a particular initiative “requires one of us to take the lead. In another instance, that leader would be in a supporting role. It’s not hard to switch back and forth because we work in an environment where people constantly take on different roles based on their function.”

One of the reasons the structure works is “because we realize that part of teamwork is conflict. You have to experience conflict and work through it to get your projects done. We use conflict-resolving skills every day.”

Those skills aren’t assumed. AT&T holds extensive training classes on such subjects as leadership for the future, interpersonal coaching and feedback, and negotiating. “It’s a process of continuous learning,” says Hotta, who is based in Morristown, N.J.

“I can’t imagine working in any other type of environment,” he adds. “There is no other way to involve all stakeholders in a decision and move towards an objective. When you look at the scope of the global markets that AT&T supports, there is no way that could fit within a hierarchy.”

IT’S EVERYWHERE

Managers who experience ambiguous authority in one form or another seem to be the norm these days, but the phenomenon does tend to be more prevalent in certain industries than others, often because of major shifts in competition or threats of government intervention.

Health care, for example. “Hospitals are prototypical situations where you have a strong need for administrative and management control on one hand, and on the other hand, strong professionals (doctors) who believe they and they alone are capable of evaluating the work they do,” says Kimberly. “Then on top of this you have strong cost control pressures which are operating on both those parties. The cost control pressures are winning out, but along the way there is a lot of organizational pain.”

Adds Tom Gilmore, adjunct associate professor of health care systems, “Doctors have historically been captain of the ship, and the administrative apparatus was the servant of the doctor. That is dramatically changing with the advent of managed care. Now doctors are told they have to discharge a patient after ‘x’ days or file an explanation. So it is less clear who is in charge of the choices — partially the patient, partially the doctor and partially somebody who is constructing clinical guidelines as part of the managed care initiative.”

In general, says Gilmore, you see ambiguous authority in industries where the rate of change is enormously complicated, like pharmaceuticals, biotech and telecommunications. It’s also common in firms that have a large number of highly professional employees. These tend to be service organizations, including accounting, consulting and law firms, financial services firms and educational institutions.

While some observers predict an eventual backlash against ambiguous authority — inspired in part by the stress of unclear job responsibilities and the desire to return to a simpler, even hierarchical, organizational structure — others contend that this type of management structure will become more, rather than less, entrenched. “It’s not a management fad, but a reality that comes out of many global megatrends,” including information technology and the ability of people to meet and communicate with ever increasing speed, says Jacoby.

The key seems to be ensuring that the processes work as smoothly as possible. Organizations that ignore the issues raised by unclear authority lines are in for trouble.

As Dave D’Arezzo well knows. He worked in sales and marketing for a soft drink company before joining Wegman’s. In his former job, he remembers how difficult it was for managers in his department to work with production staff on the introduction of new products.

Plant managers, for example, would agree to put a new soft drink only in two-liter and six-pack cans even though sales and marketing had asked for additional packaging, including 12-packs, 16-oz. bottles and/or one-liter bottles.

“The production facility would say, ‘Sorry, we don’t have the line time to add those variations’,” D’Arezzo remembers. “Yet part of the strength of carrying a new flavor is making it available in many different sizes and packages. If you don’t, the product either fails from the start, or doesn’t do as well as it could have.

“But nobody had influence over the plant managers. They had their functional silos and we had ours. We didn’t come together until we got to the president of the company. It wasn’t realistic to go to somebody that senior to get a minor decision made. So often we would do nothing. We would stay with the status quo.”

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