Several hundred large organizations around the world have applied an approach to organizing themselves called “Requisite Organization Theory”. This includes over 20 of Business Week’s “Most Admired U.S. Companies”. And yet you have probably never heard of it? This is not surprising as Requisite Organization Theory is not generally taught in US business schools and it is somewhat counter cultural in the current “flat is good” organizational design culture.

Requisite Organization Theory was developed over forty years ago by Eliott Jaques, and it has been refined and improved ever since. Jaques discovered through his extensive research that people organize themselves naturally into hierarchical layers to get work done. The key to this layering was problem-solving capability. Each higher layer must be able to solve the work problems the layer below cannot solve. Each higher layer also must be able to design work and goals that the next lower stratum can accomplish.

Jaques found he could measure this capability by the time-spans of the assigned tasks. He identified eight levels (he called them strata) with the following problem solving time horizons:

• Level 8 – 50 to 100 years
• Level 7 – 20 to 50 years
• Level 6 -10 years to 20 years
• Level 5 – years to 10 years
• Level 4 – 2 years to 5 years
• Level 3 – I year to 2 years
• Level 2 – 3 months to 12 months
• Level 1 – 1 day to 3 months

The role of CEO of a Fortune 100 company, for example, would be at Level 7 and only a handful of the largest organizations in the world would require Level 8. In his interviews with employees Jaques found they sought out a problem solver at the next higher level of complexity when they were stumped at work. It was the employees who defined the next higher stratum of problem solving. These levels were boundaries between the time-horizons of the employees and their “real” managers. Jaques did not set these boundaries—he discovered them from the way people behaved when they needed help.

Using Jaques approach to organizational design he claimed that we can design and build an organization structure using layers in which:

• People are clear about the capabilities they need to do the job at the assigned level and they know the decision making discretion they have in their jobs. This reduces interpersonal strife and conflict. For example, employees report to a “real manager” at the next level who can solve their problems and not a supervisor with limited power and knowledge.
• Work and goals are clear at each level thus increasing effectiveness, and
• Work problems are solved quickly thus increasing efficiency.

Requisite Organization Theory also covers issues such as compensation, promotions and succession planning through the levels. This approach to organizational design has been adopted much more widely in Europe, Australia, and Canada than in the USA. So perhaps the concept of organizational hierarchies is not dead but waiting in the wings for the popularity pendulum to swing away from flat organizations (the pendulum always swings back). Who knows, maybe in the future we will see a more widespread adoption of Jaques empirically based approach to organizational design here in the US.