There’s been a reasonable amount of focus over the last few years questioning the value of strict hierarchical structures in business and asking whether, particularly in the context of today’s digital-empowered and networked operating models, this traditional approach to organisation needs to change.
It’s a good question to ask. Despite the fact that the context in which business operates has changed substantially due to the impact of digital technology, most businesses are still structured in ways that made more sense in an industrial age where control, efficiency, scale and minimisation of deviance were all important. But does that really make sense in a world that is increasingly characterised by horizontality, networks, data and value flows, systems thinking and platform business models?
The challenges inherent in hierarchy as an organising principle has already been challenged by some. A broad meta-study of 54 prior studies (covering analysis of over 13,000 teams) conducted by Lindred Greer, Bart de Jong, Maartje Schouten, and Jennifer Dannals at Stanford Graduate School of Business (‘Why and When Hierarchy Impacts Team Effectiveness: A Meta-Analytic Integration’) found that the net effect of hierarchy on performance was broadly negative. Whilst some expert-based hierarchies helped improve team performance, many others were dysfunctional.
As I wrote in my book, the digital era has brought with it a need for a level of continuous innovation, team and individual autonomy, customer-centric approaches and strategic and tactical adaptability and responsiveness that is simply not served well enough by strictly hierarchical organisation. Functional silos act against the ability to create joined-up, exceptional customer experiences. They hamper the ability to collaborate quickly. They get in the way of cross-functional design and innovation. They limit flexibility of job activity. It’s no accident that (often self-organising) small multi-disciplinary teams have become the engine of change in many forward-thinking companies. With near universal access to information, the old ideas of leadership characterised by the perception that all the answers and solutions exist at the top of the organisation and flow down, have become grossly outdated.
Yet there are challenges at the other end of the organisation design spectrum too. Some brave businesses have taken a radical approach to the adoption of flatter structures using methodologies like Holacracy right across the company. Yet in spite of Holacracy being around for over a decade there are still very few examples of it being applied successfully at scale.
But what if there was a way to successfully balance the benefits that can accrue from hierarchy (efficiency, clarity of authority, concentration of specialist expertise, clear lines of communication, simplified career path) with those of a more fluid, evolving structure (agility, adaptiveness, cross-functional collaboration and innovation, speed of delivery)? What if we challenged these long-standing orthodoxies about the optimal way to organise our teams and reinvented organisation design around a more nuanced understanding of where hierarchy is beneficial, and where it is not? What if we could design an organisation that could successfully balance these extremes, adeptly manage the interplay between them, and bring a new level of fluidity to structures that enabled far greater organisational agility?
I believe that this is very possible. Yet my contention is that few businesses seem to be thinking big enough about how we rewire structures for the world in which we now find ourselves. Traditional orthodoxies need to be challenged, but what does the new normal look like?
That’s what I’m interested in exploring over the next few months both here and over on my personal blog. As always, feedback, thoughts and ideas will be welcomed.
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