- 1B1. Vertical Management 1.0 (VM 1.0) is an outdated OS that aligns the organization vertically, around functions, and optimizes individuals first and functions second. VM 1.0 was invented in the 1950s and 1960s as a formalized system1 for running an organization.
- 1B2. VM 1.0 is based on an old paradigm for how you run an organization, which includes the following premises and principles.
- 1B2i. VM 1.0 organizational premises include:
- 1B2ia. An organization is a nonsystem. Therefore, the parts or elements (individuals, functions) of an organization are independent.
- 1B2ib. There is only one dimension—the vertical.
- 1B2ic. Productivity results from maximizing the individual parts or elements (functions or individuals). Productivity is the ability to produce goods and services.
- 1B2id. Leaders need authority to be accountable and to get things done.
- 1B2ii. Based on these premises, specific principles are in place for managing at the organizational level. For example:
- 1B2iia. Optimization in VM 1.0 entails optimizing each part, because in a nonsystem, the whole is the sum of the parts. To optimize the organization is to make it as effective and efficient as possible.
- 1B2iib. Each part is an isolated unit.
- 1B2iic. Goals are broken down by function and each functional leader is accountable for reaching his own goals or objectives.
- 1B2iid. Competition between parts leads to a stronger, more optimized organization. Therefore, VM 1.0 creates competition between people, between areas, between business units, etc., to increase the productivity of the organization.
- 1B2iie. Optimization begins with optimizing the individual, then the function, and finally the organization as a whole.
- 1B2iii. VM 1.0 leadership premises include:
- 1B2iiia. Individuals do not like to work. They work because they have to (to make money) and therefore seek to avoid working whenever they can.
- 1B2iiib. Individuals are extrinsically motivated.
- 1B2iiic. Leaders need authority in order to control their direct reports.
- 1B2iiid. A system of rewards and punishments is how people learn to do better.
- 1B2iiie. Competitive leaders who like to win are the best leaders.
- 1B2iv. Based on those premises, specific principles are put in place for VM 1.0 leadership. They include:
- 1B2iva. Employees need constant supervision.
- 1B2ivb. If something goes wrong, the solution is to find out who caused the problem and correct them, so they don’t do it again.
- 1B2ivc. Create incentives for people to work harder.
- 1B2ivd. An individual can only be classified as a “leader” if she has direct reports.
- 1B2ive. The more direct reports one has, the more powerful a leader she is.
- 1B2ivf. A leader must be a technical expert in order to supervise her functional team members.
- 1B2v. Key features of the VM 1.0 OS include:
- 1B2va. Structure is vertical only.
- 1B2vb. Goals are decomposed down through the vertical organization.
- 1B2vc. Authority is the primary tool of leadership.
- 1B2vd. An individual is given assignments by her boss.
- 1B2ve. Accountability is individually based.
- 1B2vf. Accountability is reactive, i.e., determined after the fact.
- 1B2vg. Accountability equals blame and is punitive.
- 1B2vh. Performance planning and evaluation is based on individual results only.
- 1B2vi. Governance happens within functions.
- 1B2vj. A leader’s value is measured by his “span of control” and is equal to the number of direct reports he has.
- 1B2vk. The focus is on optimizing and maximizing the performance of the individual (whether he is an individual contributor or a positional leader).
- 1B2vi. The VM 1.0 OS is obsolete because the premises are no longer true. (See Section 1A12 for a list of symptoms caused by using VM 1.0.)
- 1B2i. VM 1.0 organizational premises include:
[1] Peter Drucker was one of the major architects of the system. Concepts were drawn from earlier VM 1.0 pioneers, including Frederick Taylor and his Scientific Method.