Hierarchy – Curse, Cure, or Clarification?

Decades of peace and democracy in the western world have inculcated a belief, or perhaps hope that majorities have the monopoly on right answers. Contemporary research into the use of crowdsourcing (e.g., for interview evaluations) continues to provide supporting evidence. Decades of plenty have produced generations to expect and even demand what they want as individuals. Together, these create an interesting challenge – we all believe that we can achieve what we want individually if we deploy the power of working together! 

Whilst there is strong evidence to support the value of collective and collaborative effort, there is also strong evidence to support the power of individual passion and commitment. The challenge for organizations is, “How we do we reconcile and harness these apparently competing for forces and drive up productivity without damaging the quality of products and services?” 

Why is that a challenge? Because, despite massive advances in technology and communications, our collective effort does not appear to have paid off – productivity is stagnant! So, organizations across the globe are wrestling with questions like What structure should we have? What processes will increase productivity and/or enhance capability? How do we meet organizational needs whilst also meeting the growing individual demands of employees?

Anecdotal evidence is flooding in to support contemporary solutions to these challenges, for example:

• Google, Deloitte, and even GE dramatically changing their performance management processes … scrapping annual performance appraisals and implementing real-time feedback;
  
  
• Zappos, Heiligenfeld, and Patagonia implementing some form of Holacracy¹;
  
  
• Start-ups co-locating to create innovation-culture environments;
  
  
• Depending on what you include, there are between 1,000 and 3,000 business books published each month, most claiming to deliver the panacea solution.
  
  

But such anecdotes are not new examples:

• Volvo, in 1974, implemented self-managing teams. Based on virtually doubling productivity, they expanded the concept in 1987;
  
  
• 3M during the post-war years through to the late 70s became one of the world’s leaders in innovation by encouraging individual bootlegging and breaking large, potentially bureaucratic units down into locally managed smaller operations;
  
  
• Semco implementing its own form of industrial democracy² to dramatic effect in the 80s.
  
  

Organizations are still largely falling into three camps:

• Implement the latest and greatest popular concept, often called ‘Best Practices;’
  
  
• Simplify the processes;
  
  
• Reduce the hierarchy.
  
  

Implement best practices

This approach is based on two apparently conflicting ideas. First, innovation in processes is the route to competitive advantage. Second, emulating the currently highly successful through benchmarking is the means to innovative processes. Whilst in product development, waiting for others to invest heavily in innovation and then pursuing less expensive refinement of their ideas often produces greater net profit, the same is rarely true for organizational development. Much of the ‘best practice’ benchmarking actually identifies ‘majority’ rather ‘best’ process, and attempts at replication often produce mediocre versions. 

Simplify processes

This school of thought argues that “So long as people are doing the right things right and that this is simple (Keep It Simple, Stupid or ‘KISS’), desired results will be achieved.” However, we have had decades of evidence to show that organizations usually trivialize rather than simplify and so struggle to make their processes effective. Performance Management is a key example. We have known since the 60s that traditional episodic performance appraisals and associated discussions did not, do not, and, cannot enhance productivity … no matter how simple the forms or process. 

Reduce hierarchies

Ah. This must be the answer then! We must restructure to reduce the hierarchy — to enhance information flow and empower employees so that they can develop a shared purpose, enjoy their right to autonomy, and achieve personal mastery!

Restructuring has long been a popular lever to pull. “We trained hard but it seemed that every time we were beginning to form up into teams, we were reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing. And, what a wonderful method it can be for creating the illusion of progress while actually producing confusion, inefficiency, and demoralization” — a quotation often attributed to Petronius Arbiter, circa AD60 but more likely to have come from around the late 50s. Oh, how true even today!

However, those in positions of authority still believe that restructuring, especially removing hierarchies, has a major positive impact. But, does it? 

In Reinventing Organizations, one of the most influential tomes on the subject, Frederic Laloux describes many different forms of organization structures and proposes that organizations can follow a human development path to achieve them. The descriptions of the forms or stages put forward are:

• Impulsive-Red or ‘Wolf Pack – very loose structure with power and fear exerted by the few to control the rest; e.g., gangs and organized crime groups
  
  
• Conformist-Amber or ‘Army’ – formalized hierarchical and bureaucratic structures with defined principles of right and wrong, rules and processes to control employees and ensure discipline; thinking and execution largely kept separate; e.g., government bodies
  
  
• Achievement-Orange or ‘Machine’ – similar to the former but inculcating the principles of achievement, typically short-term, and making the best use possible of resources including people; the importance of three concepts recognized – innovation, accountability and meritocracy; e.g., large banks and other ‘city’ firms
  
  
• Pluralistic-Green or ‘Family’ – empathetic; enlightened about their impact on the environment and on their employees. Employees are actively engaged collaboratively and empowered to ensure maintenance of the values and culture - to produce long-term sustainable success; e.g., values-driven organizations and not-for-profits
  
  
• Evolutionary-Teal or ‘Living Organism’ – the rights of the employees, a shared evolutionary purpose, and maintenance of the mission and values are paramount; power is vested in all employees on the basis of mutual trust, integrity, and engaging their fuller capabilities, interests, and aspirations; e.g., Heiligenfeld, Patagonia, Zappos. 
  
  

But, as the quotation above warned us, we have to take care. Yes, anecdotes are not always the panacea solutions that they seem to be, for example: 

• Volvo in the 90s went back to production-line manufacturing;
  
  
• 3M experienced a downturn and undertook major restructuring during the mid to late 80’s, even attempting to formalize processes for quality and innovation;
  
  
• Ricardo Semler of Semco repeatedly advised that other organizations should not attempt to copy his organization as it takes years and it may not work for them;
  
  
• Scrapping performance evaluations is fine … until you are faced with litigation from an employee over an HR decision, and you have no performance data with which to defend your position;
  
  
• Removing management is fine … so long as all employees actively embrace the principles and collaborate effectively, and the collective will of the employees serves the whims of the shareholders.
  
  

We have known since the 60s that traditional episodic performance appraisals and associated discussions did not, do not, and, cannot enhance productivity … no matter how simple the forms or processes

The reality

Believing that either structural changes or process changes will produce sustainable success is highly wishful thinking. Most so-called “success stories” are taken from unique organizations, unique charismatic leaders or relatively new organizations which, by definition, are unique and resourced by a tight-knit team with passion for achieving a shared vision. These are hardly characteristics of most organizations.

Let me be clear. I fully support the concepts of reduced hierarchies, Holacracy, self-managed teams, and truly democratic organizations, etc. I just don’t believe that it is easy, sustainable, or cost-effective to implement them in most pre-existing organizations. 

I would contend that in organizations that have successfully taken steps to remove or dramatically reduce their hierarchies, they have universally started with the following conditions:

• A very clear and precise long-term vision of what the organization seeks to achieve – a clear purpose;
  
  
• A very clear set of values (whether or not written down);
  
  
• An executive and senior management team demonstratively passionate about and committed to:(a) achievement of the long-term vision; and (b) living a set of positive values, especially when the going gets tough;
  
  
• A workforce that already:
  
  
  • Respects the organization;
  • Respects the leadership;
  • Respects the work and vision;
  • Respects their fellow workers;
  • And individually feel respected.
    
    

Dhah! In those cases, of course reducing the hierarchy and structure will work – everyone knows what needs to be done and is committed to achieving it together! 

So, perhaps focusing on getting those things in place is a good place to start. 

References

1. Holacracy is a registered trademark of HolacracyOne LLC 
   
2. See Maverick, Ricardo Semler, 1993 “SuperTeams: Using the principles of RESPECT to unleash explosive business performance,” Marciano & Wingrove, McGraw-Hill, 2014