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Is it time to replace Hierarchical Structures?

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The hierarchical org structure, the one most of us work in, is a result of world of work where workers were labor and managers told them what to do. Now is a perfect time for a new paradigm for management, a new way to organize and lead organizations. How should we organize ourselves around work?

The world around us is changing and large organizations find it difficult to evolve, finding  themselves losing portions or all of their markets to smaller, more agile competition, quicker to recognize opportunity and react. The edge these young start ups have is that they were born and therefore naturally operate in this ever changing environment. While those organizations with over a decade of existence are burdened with structures and modes of operation born of past decades, not all of which are effective in the new world.

I spent some time this week with leaders in a large veteran organization, who are evaluating themselves and wanted to hear more about the full range of possibilities available to them to restructure work. This is a very brave question, understanding that the changes in objectives, the way work is happening and even the expectations of people in the organization, all these require that we re-evaluate the way the organization is structured and operating. And in doing so, that minor changes on the sidelines will not get them where they need to go.

The end of the hierarchical org structure

The hierarchical org structure, the one most of us work in, is a result of world of work where workers were labor and managers told them what to do. We are all familiar with the org charts, boxes and lines representing the way the organization and its processes are organized. The boxes, representing also the job descriptions we use in hiring processes, define for the employees the boundaries of their work. The lines define who owns these employees, who allocates their time, who gives them resources, who they go to when they need to remove obstacles or find solutions to a problem.

This was a highly effective structure for the period for which it was created. The processes were usually known and repetitive and this type of organizational structure enabled organizations to tackle larger, more complex work in highly efficient and effective ways. The economic value it creative benefited many of its players for a long time. It allowed Ford to pay the famous 5$ a day wages, which were higher than the typical wages at the time, because he had the production line to earn much more for himself.

We are no longer in the Ford organization. Innovation created in R&D departments does not flourish in a structure where managers tell workers what to do. Over the past few years, the role of managers has evolved to ensure we are all aligned towards a common goal. In the knowledge economy, this was aided by the corporate culture or, to quote Peter Drucker “culture eats strategy for breakfast”. Why? Because it helped align us all to get the right work done when the “telling us how to do the work” was no longer applicable.

And yet, even in the knowledge economy, we still work in hierarchical organizational structures. And for a few years now, we’ve been experiencing the limitation of these structures. In the post Managers in the human economy we’ve already reviewed the many studies talking about the falling rates of employee engagement in the workplace. Employees, as well as managers, show up to work with their bodies but not with their hearts, for a paycheck but without passion and commitment. Managers reporting fatigue from email overload, whole days in conference rooms, work politics, ego, bureaucracy and stalemate decision making.

A new structure around shared values

Maybe it’s time for a new way to organize ourselves around work?

According to the LRN How Report, leadership of organizations typically falls under one of three categories:

  1. Blind Obedience – control and compliance, hierarchical leadership, based on regulations and enforcement
  2. Informed Acquiescence – the typical 20’th century organization, hierarchical leadership structures combined with structured management processes. Employees operate by set rules and follow a leadership who sets the direction. Motivation is mostly driven by meritocracy
  3. Self Governance – these are organizations based first and foremost on values. Values and purpose are at the basis of all decision making processes and set the behavior of all in the workplace. People operate on core principles which inspire everyone to align with the organizations purpose.

Will we discover that organizations with self governance capability are more successful than those operating in the old business models? LRN claim they already outperform other types of organizations but they are still very rare. Interestingly, senior leadership often thinks their people can make all the right decisions, but employees are less likely to agree. That is not surprising given that self governance means the organization really trusts the employees to organize themselves and make the right decisions, trust which depends on common values and purpose and a deep commitment to a common cause. LRN’s conclusion: we are no longer in a business world of “it’s just business, it’s not personal” and the “how” the work gets done is no less important  than the “what” the work is.

We’ve seen this shift being called different names including the age of humanity, behavior, values. What it isn’t, for sure, is a business model of control and compliance. For many years now we’ve watched the steady shift towards flatter structures and attempts to generate processes in support of horizontal collaboration, including dual reporting structures, matrices, horizontal roles, project-based task teams etc. All these are attempts to work around the limitations of the hierarchical structure relative to the changing needs of the world in which we operate.

Maybe it’s time for a rise of unusual and new types organizations?

The search for alternative organizational structures is mostly driven from the bottom, from the rank and file. Slowly, with the understanding of the limitations of our current mode of operation, new paradigms are emerging for how work gets done and how we should organize for it. And why wouldn’t they? In the last few years many new worlds emerged around technology, customer relations and economics. Now is a perfect time for a new paradigm for management, a new way to organize and lead organizations. There is still no clear “winning” alternative structure but most emerging success stories put a question mark around the role of managers…

The changing roles or leaders

Albert Einstein once said “we cannot solve our problems with the same thinking we used when we created them”. Which is why many visionary leaders around the world are watching the changes in our economies and societies and asking themselves questions about their role in all those. If you are at the head of any large organization today, you already know it is extremely difficult to navigate the hundreds or thousands of workers in alignment with the ever shifting challenges and objectives. In the past, you could rely on a clear strategy, a strong management team, a supportive board and the capability to manage resources and processes as well as differentiate products or services. Today, even if you have the ability to make decisions at the top, you probably already see the signs that these past tools of success are not enough to get you where you are trying to go.

Thus, more and more leaders recognize that they cannot move forward facing backwards. They cannot organize themselves for the future while keeping a strong attachment to plans and modes of operations created based on the past. The new normal does not look anything like something we’ve seen in the past and therefore the tools we had to lead the past, the organizational structures, the decision making processes, the culture, all these need to change and adapt for work in the future.

Pause for a minute and test your own world of work. In your organization, do you feel that work can happen in better way? That there are areas of responsibility and tasks falling between the chairs since no one owns working them? How about inefficient and unnecessary processes, meetings, reports?

In the hierarchical organization, once you’ve identified any of the above, the normal way to work them would be to take them to your manager. And the more central or critical they are, the higher up the hierarchy they will need to go to get resolved, and the more likely they are to get stuck on the way there. Decision making is the greatest bottleneck in today’s hierarchical organizations. And in some cases, we try to get around that problem using consensus decision making processes or influencing through organizational politics. And if we can’t make those work, we run into turf behavior, where different parts of the organization protect what is right for them, in their eyes. That might have worked once, but today’s world of change and complexity requires a new level collaboration by the different teams, more than one unit can manage alone. So we create horizontal structures, liaison roles and task teams. And the work goes even more slowly, yet again…

You probably read about  Holacracy, an alternative organizational mode of operation which claims to restructure organizations without managers and received a lot of press especially when it was implemented at Zappos. Basically, this structure is intended to remove barriers to the work, in order to enable it to move faster, with more autonomy and greater clarity. The employee, instead of needing their manager to solve issues, attends a special meeting and proposes to take upon themselves the responsibility to do that work. This meeting is structured to enable continuous improvement in the workflow and managed such that everyone has a voice. Thus, decision making is not done by a single entity or consensus. In this way, Holacracy intends to distribute decision making throughout the organization.

Holacracy won it’s publicity since it is the first structured operating model with no managers, which can be implemented in different types of organizations. That, however, is also the catch, since it requires the entire organization to move as one unit and does not allow parts of an organization to explore its value to learn and adapt before committing.

It is, however, only the beginning, a clear sign that we are in search of a new mode of work for organizations, and a sure indication that one will surface in the next few years. What is already clear, is that this new mode of work will include enablers for better decision making and removal of the dichotomy of managers and workers, owners and employees, doers and deciders. And one more thing to consider, our history is full with shifts into new ways to organize work. So the question is not whether it will happen, only when, and will you be ready?