I believe that very often the concept of hierarchy is ill-defined and misused. Because of ideological debate and personal ego, the function of hierarchy is not appreciated nor utilized where it should.
Also, describing the transformation from a hierarchical organization to a networked organization as getting rid of hierarchy is misleading. There is quite a bit of hierarchy also in networked organizations (see here). And the evolutionary progress in the organizational form happens by finding more effective ways to handle the three dimensions of organizational performance: clarity of intent, alignment of commitment, and autonomy of units.
But let’s do one step after the other. This post is triggered by the article ’The Organization is Broken‘, written by Clay Parker Jones. In my link share about the article, I wrote that I will follow up on the topic of hierarchy. So this post is about my view on hierarchy.
Clay mentions the following issues with hierarchy. His critique is widespread and commonly shared – in particular in the digital industry I work in:
- Our current (large) hierarchical organizations cannot cope with the speed and complexity of our (digital) world. They were only good in stable, predictable environments where one can separate (entrepreneurial) decisions from operational execution.
- Sticking with the rhetoric and mental model of hierarchical organizations – even though they become significantly more networked – ’prevents us from maximizing achievement and human dignity in the workplace.’
- Hierarchical structures create more complexity for individuals than they can cope with. Thus, ‘boss-led decision making makes little sense’.
- Most people in organizations are actively or passively disengaged. One reason for this is that most workplaces ‘resemble authorian dictatorships’. This comes to life through a bossy boss and hierarchical structures that tell people what to do.
Now, how do I think about hierarchy? In organizations, there are two important perspectives when you look at hierarchy: individuals and the organization as a whole.
Hierarchy viewed from an individual perspective
An individual member of an organization experience hierarchy through his boss and formal decision power along chains of command. Clay’s issue number 4 addresses this individual perspective. In this context, hierarchy is rejected with the argument that it limits individual freedom, initiative and motivation. And it is often said that bosses do not know better than than their subordinates or are just not capable to lead. Out of my personal experience as a subordinate and boss, I disagree with this general view.
In my experience, everybody at work has to find the right balance between two positive values (see framework No 6: the value quadrant): self responsibility and safety. We want to be the owner of our destiny. At the same time, we also need safety and reassurance. The balance is different for each individual at different points in time. Too much responsibility, and you end up being overwhelmed. Too much safety and you become dependent.
For each of us, a superior can and should play two roles: first, he should provide the right amount of safety. Many people want and need a fair amount of safety. They are happy to get a clear frame of responsibility and act within that frame. The boss takes the remaining responsibility and relieves the subordinate. Second, a boss can help to become more self responsible. You learn best when you are out of your comfort zone but not in your panic zone yet.
Not all people are equal. If your boss has a higher cognitive, motivational, or emotional capacity out of talent and experience, he can be of great help. I very much believe in the concept of master and student. This is in fact a hierarchical set-up. And a relationship that is chosen by the master and the student.
Of course, not all bosses are great. And no boss is perfect in everything. And maybe, the majority of bosses are just human beings who have difficulties in living up to the expectations I laid out above.
Now what? As an individual, you should not ask: do I like hierarchy or not? Rather, you should ask yourself:
Regardless of formal hierarchical power, is my boss helping me to find the right balance of self responsibility and safety, and thereby supporting my personal growth and fulfillment at work?
Or even shorter: Do I want to work with this person as a boss in this company?
If not and you cannot improve the situation: quit. Find another boss – either in your current company or another company; or become your own boss. People complaining about their boss but not taking actions are refusing to take responsibility for their own life. They are not leading themselves.
Complaining about hierarchy also hints to a misconception about the concept of power and its distribution in the ’boss – subordinate’ relationship. There are four possible stages in this relationship:
- Force. The boss can always force the subordinate out of the organization. This capability varies across different countries depending on the jurisdiction. Yet force is not power, and executing force leads to the end of a relationship.
- Formal organizational power. Most often this is the power that is referred to when people speak about hierarchy. But make no mistake: this power is given to the boss by the subordinate! Because the subordinate accepts that being a member of this organization means to play to the rules.
- Earned power. In addition to the formal power, it is possible that the acceptance of the boss goes much further. This can have many reasons: personal likability, competence, tasks, purpose. In any case, the subordinates choses to commit even more to boss than he is formally asked for.
- Flow. In the highest form, boss and subordinate are almost symbiotic. Formal power doesn’t really play a role anymore. From the outside, it is not always clear who leads and who follows.
As you can see, power is never unilateral. A boss has only the power it has been given to him by the subordinates. The boss’ power of decision making is overrated. As a boss, you always have to consider how your subordinates will react to a decision.
Hierarchy viewed from an organizational perspective
In our economy, each company always has at least two levels of hierarchy: the owner (or CEO as the principal) is always special and hierarchically above everybody else. The owner incorporates the company and can decide to liquidate it. And this owner can always decide how to run the company. Even if the the owner (or the CEO as a principal) decides to run a company in a formally non-hierarchical way: he always has the power to change the rules of the game. And it happens that (new) owners or (new) CEOs return to more traditional styles of management, especially in difficult situations. There are a few examples in the book ‘Reinventing Organizations’.
So the owner or CEO of a company has to decide how to run the company. Very often, the discussion is reduced to the question of having hierarchy (traditional org chart) or not (self organizing, networked company).
This misses the point. The real question to answer is:
How do I as an owner or CEO secure or even increase organizational performance in our world of increasing technological and social change?
At a minimum, this always existing minimal hierarchy of two levels means that the the owner / CEO uses his power as a system engineer who defines the rules and constraints of the system.
I agree with Clay on many trends and observations, in particular:
- Due to technical progress, especially the internet, barriers to enter any industry have decreased dramatically. Business models change rapidly, competitors are all over the place.
- For the senior management of companies, it is very difficult to cope with this situation. And many don’t. That’s why the average lifespan of companies goes down. This, by the way, is also true for small startups and unicorns. Most of the time, we only talk about the current winners – very seldom about the legions of companies that didn’t make it. The rise and fall of ideas is happening less inside overall stable large companies, but more in the small, independent economic entities.
- Organizations do provide value: concentrated domain knowledge | functioning processes | relationships, identity and trust (for customers and employees) | energy through purpose.
- There is a power and value shift from companies to knowledge workers. Peter Drucker has been talking about this for over 50 years. In order to be successful, senior management has to find ways to make knowledge workers blossom in their company.
- The more autonomous, small units (below 150 people) you have the better. Nothing ever works as planned and you have to be fast in learning and adapting.
In this other post which is mainly influenced by the work of Stephen Bungay, I have written about the increased friction we see and the three main task that must be done for a better organizational performance. You have to create
- Clarity of intent. This is about creating direction.
- Alignment of commitment. This is about managing resources, including money, people, emotional energy, and will.
- Autonomy for units. This is about leading people such that each person, team, and unit finds the balance of self responsibility and safety.
I do believe that in order to do these three tasks sufficiently and better in our current world, organizations will and should become more networked. At the same time, I do see merit in hierarchy for those three tasks. In fact, I believe that the best networked organizations will leverage hierarchy. (Side-note: it is yet another question, how to create and develop this hierarchy over time. In particular, by which mechanisms hierarchical power is granted or withdrawn.)
My belief on hierarchy is based in three fundamental personal observations:
- People are different. For any skill or characteristic, a group of people exhibit a bell curve in competence. Every person has a different potential for cognition, motivation, and social intelligence. They also differ in their capacity to cope with technical and social complexity. All else being equal, people with more experience are more rounded as a person. Because of these differences, in any social setting, including organizations, we will witness the formation of hierarchical structures.
- Problems are structured hierarchically, i.e. they exhibit different level of abstraction. In reacting to the environment, each company has to handle different level of abstractions. It is one thing to know your customer for a specific product and to come up with improvements for this product. It is another thing and level of abstraction to manage a portfolio of different products or markets. On top of that, deciding on how decide those things within your company is yet another domain – conceptually one level up.
- Hierarchy helps to see the wood for the trees. Standing outside and above any domain enables a general perspective and sees the blind spots of anybody inside the domain. This is helpful. Hierarchy can provide the bigger picture everybody needs. And hierarchy can push teams forward on things that really matter. Self organizing is great if it works. For self organization, you need a lot of competence and external direction.
In order to improve the organizational performance, I find it important to combine network and hierarchy elements. At the very least, managers must use their power to improve the capacity of the system. This is done through second order levers of intent (or purpose), alignment (or processes), and autonomous units (or people).
Clarity of intent
Sense making is a task that profits from higher connectedness. Senior management (i.e. hierarchy) has to support the flow and accessibility of information, in particular designing ways that relevant connections are created – not everybody uses or needs all information. In addition, the focus must be on insights rather than pure information. Creating insights means filtering, grouping, and ordering of information. It is important to create insights on the right level of abstraction.
Clarity of intent also means making strategic choices. These are the choices that are not clear, i.e. cannot be calculated, but are best-informed leaps of faith. Somebody has to make a call. This problem can be solved through a hierarchical structure. However, you should make sure that relevant facts and opinions have been heard. This again calls for the right structure of connectedness.
Alignment of commitment
There is no truth but only perspectives. Everything said is said by somebody from a specific point of view. In order to get buy-in and understanding, you have to create a shared context. This means more connectedness than we usually have in organizations. Hierarchy can help to create an environment that increases the likelihood of a shared context.
After that resources have to be allocated to different teams, units, activities. Allocation is difficult when the units are horizontally on the same level. You need mechanisms to come to a decision when agreement is not possible. Hierarchy enables prioritization across horizontal units – either directly or by defining processes for it.
Autonomy of units
The more you are able to create units that can act independently of each other the better. Hierarchy can support this setup in two ways: first, it can support the creation of meaningful units that can act as independently as possible. Second, hierarchy can make sure that the task those units are charged with get them out of their comfort zone, but not in the panic zone. Competence and responsibility have to be matched.