MANAGING WITHOUT:
Section Chiefs Squeezed in Corporate Overhauls

May 22, 1997

Shedding Tiers, Titles
The typical Japanese corporate organization is a pyramid with around four to six tiers. The top tier consists of department heads, while the rank and file at the bottom are known as regular employees. Between them are the various types of middle manager: section chiefs, and below them the chief clerks (or equivalent positions in a non-office environment). Companies are now making greater efforts to eliminate middle management, and to cut down management numbers overall.

In August 1996, a major glassmaker halved the number of grades in its hierarchy to three: department chief, group leader, and group member. Only the rank of department chief was retained from the old structure. Jettisoned were the categories of deputy department chief, section chief, acting section chief, chief clerk, and regular employee. Of 360 management staff below the rank of department chief, 120 became group leaders and the remaining 240 lost their titles.

As part of a similar organizational overhaul in July of this year, a major steelmaker will phase out the middle two tiers from its current four-tier hierarchy consisting of the grades of department chief, section chief, chief clerk, and regular employee. The plan calls for merging and abolishing of departments and for selecting some of the current section chiefs and chief clerks to take charge of "groups" that are to take the place of their previous fiefdoms. The result will be an effective cull of titles: Of a former 4,800-strong management corps of 300 department chiefs, 2,000 section chiefs, and 2,500 chief clerks, only around 180 department chiefs and about 500 group leaders will remain in the management tier after the reform.

Also planning to flatten its organization in July is an electrical power company in the Tokyo area. It will introduce the "group system," wherein employees are broken up into teams focused on particular functions, at its headquarters and 13 branch offices. It will also revamp its current five-tier hierarchy so that the three middle ranks are scrapped along with all the sections. They will be replaced by a system of groups with three ranks: department chief, group manager, and member.

These trends are evidenced by Management and Coordination Agency data. Looking at its index expressing the total number of management staff nationwide, set at 100 for 1989, we notice that it peaked in 1992 at 110 and had fallen back to 100 in 1995. But if the number of specialist and technical staff is quantified in the same way, we find that their index rose continuously to 120 in 1995.

Top Priority: Lean Organization
What makes companies want to streamline their organization to the point of stripping their employees of much-prized titles? The main aim is cutting the fat. During the days of high growth and the recent period of inflated assets known as the "bubble economy," many companies expanded and diversified. Their organizations became bloated and executive posts proliferated. With the slowdown that followed the collapse of the bubble economy and low growth, however, organizational and business restructuring have become imperative. Facing these pressures, and the need to reduce personnel costs, companies have begun to simplify their executive apparatuses.

At the same time it has become increasing important for them to speed up policy- and decision-making in the face of intensifying global competition. With the pyramid structure, in which approvals have to be sought up through the hierarchy of chief clerks, section chiefs, and department chiefs, it is hard for companies to respond to a business environment that changes constantly.

Along with these changes in organizational structure and middle management, companies are also trying to revise the traditional seniority-based promotion system and raise productivity by shifting fully to a system based on merit. The above-mentioned steelmaker is following a policy of disregarding number of years of service when appointing its group leaders, and of making merit the only criterion--an approach that could lead to some former chief clerks leapfrogging ahead of section chiefs. In a similar vein, the electricity company stresses that upcoming organizational and management changes are not aimed at simply cutting the number of management staff, but at fostering specialist expertise and making the company thoroughly professional.

It is clear that the weeding-out of middle management in corporate overhauls can have a range of goals, and is likely to gain momentum in the future.