Flattening organizations

It's easy to talk about eliminating hierarchy; it's much harder to do it effectively.

By Mike Loukides
July 8, 2015
Tangram Tangram (source: Licensed image via iStockPhoto)

Do companies need a managerial class? The idea of a future without management takes many forms, some more sophisticated than others; but at their most basic, the proposals center around flattening organizational structure. Companies can succeed without managers and without grunts. Employees are empowered to find something useful to do and then do it, making their own decisions along the way. That vision of the future is gaining momentum, and a few businesses are taking the fairly radical step of taking their companies flat.

The game developer Valve‘s employee handbook is outspoken in its rejection of traditional corporate hierarchy. There is no management class. Teams self-organize around specific tasks; when the task is done, the team disappears and its members find new tasks. All the office furniture has wheels, so groups can self-organize at a moment’s notice. Employees rate each other, producing a ranking that is used to determine salaries.

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More recently, Zappos and Medium have been in the news for adopting similar (though apparently more formalized) practices, under the name “holacracy.”

There’s a lot to like about this model, but I also have concerns. I’m no friend to hierarchy, but if I’ve seen one thing repeatedly in my near-60 years, it’s that you frequently are what you reject. By rejecting something, whether it’s hierarchy, lust for power, wealth, whatever, you make it very difficult to be self-critical. You don’t change yourself; instead, you turn what you dislike most about yourself into your blind spot.

We see this all the time. When someone says, “I’m not a prejudiced…”, you don’t even have to wait for the “…but” to guess what comes next. There are plenty of other examples, though. I grew up in a small Protestant sect that rejected many of the trappings of traditional churches: denominations, clergy, and more. But we clearly had a notion of who was “in” and who was “out,” and the denomination even had a name (the Plymouth Brethren), which was never, ever used by the people who were “in.” There were several different flavors of “in” because, well, it isn’t fun being a sect if you don’t have a schism or two. We didn’t have pastors, priests, ministers; we had “full time workers.” We also had a lot of good ideas about how to run organizations, some of which are reappearing in companies like Valve: specifically, the idea that rather than promoting people to positions of leadership, you recognize them for doing what they are already doing. But on the whole, our self-imposed blind spot prevented us from thinking about our own practices, and enabled us to look down condescendingly on the poor unenlightened outsiders. Ultimately, we were crippled by the inability to realize that our practices didn’t match up to our ideology.

Organizations have hierarchy. Like it or not, it’s inescapable. A non-hierarchical organization inevitably develops an informal hierarchy that can be as burdensome as an explicit hierarchy. All too often, that hierarchy is based on popularity, coercion, or the ability to suck up to superiors. Yes, formal hierarchies aren’t all that different; we’ve got many years of bad management practice to prove that. The only real question is whether a hierarchy can be understood, criticized, evaluated, and changed. Can an organization become self-critical? Can it evaluate its leadership? Can it adapt to changing conditions in its market? Will abandoning hierarchy mean perpetuating stereotypes and work environments that are hostile to women and minorities, because “we’re all fine, but some people just don’t fit in”? That’s obviously tough with traditional management, which more often than not has failed all these tests. But it may be even tougher if you pretend that the hierarchy doesn’t exist.

Valve’s employee handbook makes it clear that they aren’t naive. They realize that leadership arises from within groups, and that group members evolve, dynamically changing job descriptions. They’re aware that hierarchies — even informal ones — can encourage “rent-seeking behaviors that take advantage of the power structure” (p 17). And, though they trust employees to make their own decisions, “we constantly test our own decisions” (p. 13).

Similarly, if you look at a more detailed description of holacracy or, better yet, its lengthy constitution, you see quickly that it doesn’t eliminate organizational structure — it’s actually more structured than a conventional company. At least superficially, holacracy maps onto traditional organizational hierarchies, with “circles” and “subcircles” instead of groups and “lead links” instead of managers. This isn’t necessarily a bad thing: this structure is designed to enable people to have multiple roles, to reflect on what they’re doing, and make good decisions independently. It’s an organization in which clarity, awareness, and independent decision-making replaces obedience to a centralized authority. At best, holacracy represents a significant re-thinking of corporate management and enables badly needed criticism and reflection on organizational structures and roles. Decision-making isn’t vested in a permanent privileged managerial class. My fear is that holacracy will become yet another “cargo cult,” in which people think they’ve changed their organization by changing some of the names, without changing any organizational behaviors.

It’s easy to talk about eliminating hierarchy; it’s much harder to do it effectively. Be careful what you reject because all too often, that’s what you become. Will Valve, Zappos, and Medium, following their respective paths, succeed? It’s too early to tell, but one thing is certain: eliminating hierarchy, or coming up with a new set of names and procedures, isn’t enough. They’ll succeed to the extent that their institutions, whether described by an employee handbook or a holacratic constitution, allow them to be more aware of their organizational structures, to criticize those structures, and to shape an environment that treats all employees with respect. And in doing so, they will serve their larger goal: delivering value to their customers.

Post topics: Business, Future of the Firm, Next Economy
Post tags: Commentary

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