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  • Working at the Right Stratum Level for Growth

  • For companies to grow it is important that all employees can work at the right stratum level for cognitive ability. Over fifty years of research by Dr. Elliott Jaques determined that there are eight levels of cognitive requirements. The highest level is the cognitive ability required by CEO of super sized companies such as IBM, GE, Exxon, Rio Tinto and H.P. These stratum eight super corporations require a CEO who can understand some of the most complex global issues in order to steer their organizations towards opportunities for growth and away from threats that can harm the growth of the organization.

    Mark Hurd is the CEO of Hewlett-Packard, the largest technology company in the world, with sales exceeding $100 billion. In a recent New York Times interview Mr. Hurd said: “When you hear me talk, I have four quadrants in my head simultaneously, operation quadrant 1, products quadrant 2, business and technology trends quadrant 3 and competitors quadrant 4.” More fittingly the New York Times reporter said that when Mr. Hurd speaks: “visions of metrics dance in his mind, and he speaks of them with a passion and devotion that has clearly filtered through the ranks.” The reporter adds that: “Mr Hurd enjoys riffling through a flip chart, tracing and disgorging panoply of figures with the ease of a symphony conductor.”

    Actually what the reporter is describing is Mr. Hurd’s ability to parallel process on a global basis. Only stratum 8 capable individuals can do this. This is an ability possessed by only .01 of a percent of the adult population. As a result, since Mr. Hurd’s appointment in 2005 when HP was floundering, the company has managed to grow revenue in a very competitive market. For example, H.P. has expanded its computer division sales by $15.6 billion to $42.3 billion while Dell rose to $35.8 billion from $35.2 billion. Thanks to mega-acquisitions and strong growth H.P. has emerged as the largest buyer of many components that go into computing systems. Prior to Mr. Hurd’s hiring, Carleton S. Fiorina was the CEO of H.P. The H.P. Board had come to the conclusion that they did not have the right CEO following the controversial acquisition of Compaq and a steady decline in earnings and share price.

    Why does one CEO excel and another CEO flounder? Why does an employee excel and another cannot meet his basic responsibilities? This is no doubt a complex question. One major reason is an individual’s cognitive ability to work at a level that matches the organizational level that they have been appointed to.

    Let’s look at the distribution of cognitive ability for the general adult population. As you will see Mother Nature has not been kind in allocating an abundance of high cognitive ability.

    General Distribution of Ability to Process Information in Adult Population
    Stratum Level Role % Distribution
    IX and Above Global Geniuses .0003
    VIII Super Corp CEO .01
    VII CEO .05
    VI Group EVP .10
    V Bus. Unit President .50
    IV GM/Business Unit VP 1
    III Director 7
    II Manager 40
    I Front Line 40
    Pre Level 1 Limited Capability 10.2
    (Percentages do not add up to 100% due to rounding)

    The ability to process information at level five or above is akin to winning a lottery and many companies have lost their way by hiring a CEO who did not possess the requisite level for understanding the complexity of that CEO role. It may also explain why a CEO of Mr. Hurd’s ilk is paid $25 million in salary.

    As in the case of H. P. starting to grow profitably once Mr. Hurd took over as the CEO the same holds true for employees working at each layer of your organization’s structure. For example, if too many of your stratum II Managers are only capable of understanding complexity at stratum I then your company is losing too many opportunities for productivity and growth in the sections or departments that these managers oversee. Also the higher the mismatch is the more opportunities for growth and productivity are missed. A VP Manufacturing in a stratum level IV role but only capable of working at level III can cause tremendous harm in lost productivity and growth to a company because that individual is not capable of understand the complexity of the role. Furthermore there are many examples of CEOs and Presidents who destroyed their business by not understanding the complexity of their role. There are also a number of companies that have foundered because the son or daughter or grandchild of the founder did not have the cognitive ability to run these complex companies.

    A case in point is Seagram’s, once the largest liquor company in the world that was headquartered in Montreal was allowed to be swallowed up by the grandson of the founder on the whim of transforming Seagram into an entertainment giant. You just don’t leave an industry that has addictive and pleasuring attributes to your customers and that you have been the world leader in since prohibition. Billions of dollars of shareholder value were lost as a result.

    The secret for growth and personal success whether you are a President, VP, Plant Manager, Director or Manager is in having a team made up of individuals who have the right cognitive ability for the stratum level that they are working in.

    There are ways of assessing the cognitive ability of individuals (click here)

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