In most small businesses, the employees have no job titles (or creative titles that don’t translate to the outside world). This makes sense because everybody is just working to build the company. Roles don’t need to be clearly defined and can’t be because everyone does a little bit of everything. This environment is great cause there are no politics and nobody is jockeying for position or authority, which is nice.
So why do all organizations eventually create job titles?
Employees want them.
While you as the entrepreneur plan to work at your company forever, most of your employees need to plan for a life after your company. Your employees will need titles to interview and be competitive for future opportunities.
People need to know who is who.
As growth occurs, everybody won’t know everybody else. Employees won’t know what each person does and whom they should work with to get their jobs done. Job titles provide an excellent shorthand for describing roles in the organization.
Have you ever worked or engaged with a company where you have thought to yourself about some overly promoted executive, “How did they get to be a vice president? I wouldn’t let them manage a lemonade stand.”
Here is how something like this happens. The Peter Principle holds that in a hierarchy, members are promoted so long as they work competently. Sooner or later, they are promoted to a position at which they are no longer competent (or better said promoted to their level of incompetence) and there they remain being unable to earn further promotions. This principle is unavoidable, because there is no way to know beforehand at what level in the hierarchy a manager will be incompetent.
The other challenge is the Law of Incompetent Talent. This phenomenon entails that any title level in a large organization, the talent on that level will eventually converge to the level of the most incompetent person with that title. The rationale is that the other employees in the company with lower titles will naturally benchmark themselves against this level of incompetence with the person at the next level. For example, if Sam is the worst vice president of the company, then all directors will benchmark themselves against Sam and demand promotions as soon as they reach Sam’s level of incompetence in the role.
The best way to mitigate these traps is to establish a properly constructed and highly disciplined promotion process. Let’s use the promotion process of a karate dojo. In top dojos, to go to the next level (brown belt to black belt), you must defeat an opponent in combat at that higher level. This guarantees that a new black belt is never a worse fighter than the worst current black belt. There is a level of top grading with promotions that are necessary to make sure quality control is held to a high standard and your team isn’t riddled with “C+” players.
#themoreyouknow