Hierarchy works

There has been a lot of excitement about Zappos new hierarchy free, self-organising, boss-less organisation. The holocracy, as it’s known, is all very zeitgeisty. My Twitter timeline is full of articles about smashing corporate hierarchies and getting rid of executives. Last year, Gary Hamel, described in Fortune magazine as ‘the world’s leading expert on business strategy’, told the CIPD conference that “management is a busted flush” and organisations should be getting rid of their managers. And, of course, everyone knows that Generation Blah don’t like hierarchy. Executives, reporting lines, procedures, organisation charts – all that stuff is just so square, daddio.

At what looks like the other extreme of management philosophy, Amazon has gone for a neo Taylorist model with high control over workers at all levels in the organisation. It’s not very trendy and, on the whole, my Twitter timeline doesn’t like Amazon. 

But, of course, Amazon owns Zappos. Under one corporate roof, what looks like a social experiment is taking place. Two rival philosophies of management are being tested out. As Jon Evans of TechCrunch remarked:

It’s strange to think that Zappos, with its communal-family culture, is a wholly owned subsidiary of a ruthlessly efficient machine. Amazon’s treatment of its employees recently caused Business Insider–a Jeff Bezos investee–to warn: “Brutal Conditions In Amazon’s Warehouses Threaten To Ruin The Company’s Image.”

It seems to me that Amazon and Zappos are microcosms of two potential futures of work. On the one hand, you have breathtaking inequality, “peak jobs,” and the bifurcation of the population into a diminishing elite of skilled/tech/finance workers, and a growing mass of low-quality and/or part-time jobs increasingly threatened by technology and international competition.

And then there’s the Zappos future. Its take-home pay still isn’t spectacular; but it’s a future where companies genuinely try to create a social fabric–and safety net–woven from excellent benefits, a thriving culture, a strong community, and the encouragement of entrepeneurs, on the theory that these rewards will eventually redound to companies and their executives. It says a lot about today’s America that this sounds almost impossibly idealistic and starry-eyed. But Tony Hsieh is betting $350 million of his own money on it, and he’s been right once or twice before.

Andrew Hill at the FT was less optimistic:

Zappos is owned outright by Amazon, which Jeff Bezos runs with old-fashioned micromanaging ruthlessness. He allows the shoe retailer a long leash, but what will happen when Holacracy clashes with Bezocracy?

Look a bit more closely, though, and the ‘death of hierarchy’ claims are overblown. Here’s Steve Denning at Forbes:

The first nonsense in this discussion is the notion that holacracy is non-hierachical. Holacracy, a management practice developed by the entrepreneur, Brian Robertson, in his firm Ternary Software and introduced to the world in a 2007 article, puts a lot of emphasis on consensual, democratic decision-making and getting everyone’s opinion. At the same time, holacracy is explicitly and strongly hierarchical. If you read the introductory article or the Holacracy Constitution 4.0 (2013), you will see that holacracy is hierarchy on steroids: the hierarchy is spelled out in more detail than in any conventional organization you have ever seen.

Basically, in holacracy, there is a hierarchy of circles, which are to be run according to detailed democratic procedures. At the same time, each circle operates within the hierarchy. Each higher circle tells its lower circle (or circles), what its purpose is and what is expected of it. It can do anything to the lower circle—change it, re-staff it, abolish it—if it doesn’t perform according to the higher circle’s expectations.

The second misunderstanding in the media is the notion that in holacracy there are no managers. In a holacracy, there may be no one with the title of “manager”, but there are “roles” that are, in every respect except the title, “managers”.

The fact that this “project manager role” isn’t called a Project Manager doesn’t mean that there are no managers. Nor does the fact that the accountabilities of the role can be changed in accordance of the governing rules of the circle make him or her any less of a manager in the normal sense of that word.

This was the killer line, though:

In holacracy, each circle must meet the purpose as defined by its higher circle.

Sounds a bit scary doesn’t it? Surely I can’t be the only one thinking ‘Nine Circles of Hell‘!

Joking aside, though, none of this should really surprise us. When there are owners to be satisfied, be they shareholders of private equity firms, there must be bosses and a chain of command. Likewise, if public services are democratically accountable, someone has to report back to the elected representatives and they have to have a way of transmitting their wished to the organisation. If you remove all aspects of control, you eventually reach the point where you don’t have an organisation at all.

Years ago, in an online discussion, I said that I had a libertarian heart but an authoritarian head. I was only half joking. I have a natural aversion to hierarchy, stays, bureaucracy, procedures and the like. But I also know them to be necessary.

I think Bob Sutton may have a similar view of the world. His recent research on hierarchy has led him to some conclusions he doesn’t like.

I have always despised hierarchies in my heart, but this research taught me that they are good and necessary – of course some are good and others are bad, but spreading and sustaining excellence depends on having an effective pecking order.

I still feel a bit ambivalent about it, but the evidence is overwhelming.

Poor Bob. He hates hierarchy so he really doesn’t want to believe this stuff but he can’t ignore his own research findings. He continues:

Hierarchy is inevitable. As our Stanford colleagues Deb Gruenfeld and Lara Tiedens show in their detailed review of research on hierarchy, although the forms it takes vary wildly, it is impossible to find groups or organizations where all members have roughly equal status and power. Whether researchers study people, dogs, or baboons, hierarchies are evident after just minutes of observation. And when strangers meet for the first time, a hierarchy of leaders and followers begins to emerge immediately. This rapid development of pecking orders is seen, for example, in groups of college students who meet in psychology experiments and when strangers start chatting on the street corner – leaders, followers, and other signs of status differences nearly always emerge (along with more subtle roles such as “joker,” “hero,” and even “scapegoat”).

Gruenfeld and Tiedens conclude: “When scholars attempt to find an organization that is not characterized by hierarchy, they cannot.”

Organizations and people need hierarchy. While there is no doubt that some hierarchies are better designed than others, an interesting test is what happens when there is little or no consensus about who has more — and less — power. Gruenfeld and Tiedens describe a series of studies showing that when such agreement is absent (so the nature of the formal or informal pecking order is not clear), members become less committed to their groups, less productive and effective, dysfunctional competition for status emerge, and coordination and cooperation suffer.

This second point is interesting. Removing hierarchy can lead to competition between competing groups. People jostle to create a new hierarchy with themselves at the top. I have worked in organisations during interregnums. They are strange places. The barons do as they please, as they did in medieval Europe when kings were weak. The hierarchies they create are often more dysfunctional than the top down ones they replaced.

For this reason, I liked the comments Bob Sutton quotes from Twitter’s Chris Fry:

His core argument, however, is that a well-managed hierarchy is among the most effective weapons for getting rid of the friction, incompetence, and politics that plague bad organisations.

A strong hierarchy will rein in the barons and stop them beating up the peasants.

All organisations, even the smallest, have a certain amount of hierarchy. When the organisation  grows, it needs to formalise that hierarchy. Some organisations choose to give employees a lot of autonomy within that hierarchy, others don’t. Whatever they do, though, they all have bosses, reporting lines, rules and procedures. You can’t run an organisation without them.

All that boring old management stuff is what makes organisations work. The World Management Survey, probably the biggest and longest study of organisations in the world, found a high correlation between productivity and routine management practices like setting targets, monitoring performance and providing incentives. This HBR paper Does Management Really Work? summarises some of its findings.

That may be OK for run-of-the-mill organisations but what about more innovative companies? The same, I’m afraid. It’s those middle managers, the ‘suits’, who turn the ideas into reality. As Wharton’s Ethan Mollick found, in the beautifully titled study People and Process, Suits and Innovators

[V]ariation among middle managers has a particularly large impact on firm performance, much larger than that of those individuals who are assigned innovative roles.

[I]t is the individuals who fill the role of middle managers – the “suits” – rather than the creative innovators that best explain variation in firm performance.

The results also show that middle managers are necessary to facilitate firm performance in creative, innovative, and knowledge-intensive industries.

Even in creative organisations you need hierarchy and boring old middle managers.

It is the ability to organise effectively on a large scale, says Ha Joon Chang, that differentiates the rich from the poor economies. It is organisation that makes us prosperous.

What makes the poor countries poor is not the lack of raw individual entrepreneurial energy, which they in fact have in abundance. The point is that what really makes rich countries rich is the ability to channel the individual entrepreneurial energy into collective entrepreneurship.

If effective entrepreneurship ever was a purely individual thing, it has stopped being so at least for the last century. The collective ability to build and manage effective organisations and institutions is now far more important than the drives or even the talents of a nation’s individual members in determining its prosperity.

And to organise, you need some form of hierarchy.

Perhaps the last word should go to one of the commenters on Bob Sutton’s piece. I know next to nothing about gaming but I understand exactly what’s going on here:

I learned about leadership and hierarchy from gaming. In order to kill the biggest boss monster in the quickest way, you had to go as a group. However if no one researched the boss monster’s weakness, planned a strategy, recruited the optimal group, set the schedule, and then explained it 30 times to each person that doesn’t listen, the boss monster would be happy to kill every single person in 2 bites.

Some sort of hierarchy and organisation is essential to get things done. Without them, ‘the boss monster’, in his various forms, will get you. The idea of a hierarchy free, boss free organisation is nonsense. Fashionable, zeitgeisty nonsense but still nonsense.

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16 Responses to Hierarchy works

  1. Rick

    This is excellent and a nice balance between the over use of hierarchy and the need ensure accountability.

    I tire of the cultish and overly simplistic, “it’s dead”, angle.

    Different and evolving certainly. Dead, certainly not.

    I have ordered my team to read this on pain of death.

    Anthony

  2. perrytimms says:

    Thanks as ever Rick for a brilliant post. I agree with huge swathes of this and like you I am head pro / heart anti hierarchies.

    You are also so right that the hype genie is out of the bottle and people are now all jumping on the latest bandwagon that is holocratic set ups with “no” managers.

    Before we kill the idea of something different stone cold dead let’s look at some of the stifling, lumbering practices that appear to come out of hierarchical structures. Slow decisons; petty power games and diminished responsibilities to solve problems are often the reasons many dislike hierarchies. That is without the ego and megalomania fuelled acts of people who lead in those hierarchical fiefdoms.

    There is a lot wrong with hierarchies and yet like you though, the answers are not some version of workplace anarchy and self organised teams as a total U turn on workplace structures.

    Something needs to be done to move to a more conducive hierarchy where order and efficiency ensue whilst individual abilities and belonging make that efficiency even more impactful.

    People can hide in hierarchies. People can be malevolent in hierarchies and people may perform to only a percentage of their ability due to a limited delivery “jobsworth” mentality. A holocracy is not the answer everywhere but a little more workplace democracy, open dialogue and involvement will help. Most hierarchies do not naturally appear to help this.

    I wonder whether the answers lie in some form of reconstruction/reconstitution of the hierarchy. Maybe we do this by “patching new lines of code” to upgrade the operating system – or we uninstall completely and start again?

    Love this post. Well researched as ever and something that has really got me thinking. I suspect this one will go on, polarised views, people not getting it etc. So let’s sort the drivel and guff from what really matters.

    Hi (erarchy) Ho silver lining!

  3. Mil says:

    Reblogged this on http://error451.me and commented:
    I’m one of the Zeitgeisty nonsense guys: http://blinkingti.me/2014/01/01/we-cant-afford-this-government-we-must-afford-holacracy/ – but Rick provides an excellent corrective to the latter’s excesses. (Even mine!!!)

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  5. Peter Mendham says:

    Even after your excellent article, I’m not totally convinced about the need for hierarchical structures to dominate organisations. I’m also not sure about the use of the term. A hierarchy is a useful structure for categorising and organising information, and so it is very easy to see hierarchies everywhere. In my experience it is possible to organise a group of people, working together, using “coordinators”. Effectively, for a particular purpose or task, the “coordinator” is the “boss” (and there is a transient hiearchy) but there is no power relationship, other than for a particular task. I know nothing about organisational theory, so I’m sure this is old hat. My point is that, unless we are specifically discussing an organisation dominated by a single hiearchical organisational structure, I don’t think an analysis of the way people interact that identifies hiearchies tells us anything at all.

    Just because there aren’t any (really? none?) examples of efficient organisations without single dominant hierarchy does not mean that it’s impossible. There are plenty of examples in nature of optimal self-organisation without hierarchy (e.g. emergent behaviour in ants, wasps; flocking, schoaling etc.) which operate through consistent and distributed rules. I think there is plenty of scope for these kinds of mechanisms to be applied to organistions, but it would be quite a scary thing to try out.

    How can you get through an article on the breakdown of hierachies without mentioning Valve? Both the workload balancing and remuneration mechanisms at Valve are also a pretty good examples of self-organisation applied to a corporate environment. At Valve there is still hiearchy, there is one (albeit quite flat) organisational hiearchy, plus lots of transient hiearchies. But, importantly to me at least, the way these hiearchies are used and applied is different. The key thing is that by changing the relationship between an organisation and hiearchies, you can change how much a member of that organisation engages and feels valued. Surely that leads to a more efficient, and more enjoyable, work environment?

  6. Yet another FCR post that provokes thought…how do you find the time?
    On the substance, I have no additional sources to quote; simply the evidence – such as it is – from my own experience of large public sector delivery agencies ( Jobcentreplus and its predecessor, the Employment Service ) over a 30 year career.
    My feeling is that it’s not an either/or world ( as in your head/heart ..) but rather a continuing balancing act between hierarchies on the one hand; and personal creativity and discretion or judgement on the other. In Govt I observe that most Ministers of both political persuasions express loathing of the “bureaucracy” whilst through their actions requiring its existence.
    For what it’s worth here are three points that have struck me over the years:
    – the demand for personalised public services delivered by front line staff encouraged to use their judgement is strong and growing which undermines the need for management and supervisory structures;
    – the standards expected of public services in their behaviours and accountability are remorselessly high which reinforces the need for those very same management structures to maintain quality through consistency;
    – effective organisations need to respond to calls for changes in remit ( general elections; mergers and acquisitions etc ) and to emergencies, which requires both enabled delivery staff and a resourceful hierarchy.

    It is I believe one of the abiding responsibilities of senior leaders in organisations to be aware of these tensions and contradictions, and to manage them in contaxt both for the present and the future.

  7. Joe Booth says:

    Have you come across ‘Requisite Organisation’ by Elliott Jaques’? He is proscriptive about hierarchy but offers better analysis and insights into why it is necessary and how it best works than any other author I have read. He went on to develop a theory that human capability is expressed at different levels which match the hierarchical levels he posits. Fascinating ideas which appear to be valid in experience.

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  9. Hi, I work with Holacracy everyday and I’ve witnessed how many misconceptions there has been around what Holacracy is and how it works—and this blog post includes several… Holacracy is a specific system with specific rules, not just a category of “flat organizations”. And it’s certainly not anti-hierarchy. More in this blog post: “Holacracy Is Not What You Think” https://medium.com/about-holacracy/67144c3adf8

  10. Hi Rick –

    While I very much agree about the shortcomings of Holacracy, and the ways in which its claims about being non-hierarchical are vastly exaggerated, I don’t think the conclusions you draw are fair ones… here’s why:

    There’s a particular lens that tends to equate hierarchy with leadership… I would argue that the latter (while closely related to hierarchy in a hierarchically structured organisations) isn’t necessarily problematic, but the former is.

    This lens, can see a group of neighbours discussing a planning permission application, and see that one of them is talking a lot more about the details of the application process, while the others listen, and decides: ‘a hierarchy has emerged.’ Maybe it has, maybe it hasn’t though.

    It may be that the the person talking a lot has spent time in local govt, and thus understands a particular level of detail of the planning application process, but when it comes to community mobilisation around a new Tesco, or about the logistics of knocking on doors, others step up and fill take the lead.

    (It may also be soft hierarchy/ego playing out, but knowing that often takes considerable time).

    The difference in these situations is considerable. If I’m a part of a group, I want to know that when something I know I’m good at, care about, and have experience with pops-up, that I’ll be able to ‘take the reins,’ or at least be an active part of the conversation. If an issue arises in the same process where I am relatively inexperienced, I will be quite happy to pass my autonomy along to others who I have (hopefully) spent time building relationships with and trust the perspectives and intentions of. I would argue that what I’m describing is a form of emergent leadership, but not of hierarchy, because, even if I’m the person who steps up on a particular area I know and understand, this does not give me the right to tell others what to do.

    This is where relationship building is so important, and is far more complex when it happens in a hierarchical organisation, for the simple reason that it is a lot harder to really trust and open up to someone who has the power to fire or discipline you, but not you, them.

    If you start from a strong attempt at equality (this tends to require a) an absence of formal hierarchy, b) a challenging of soft hierarchy, and c) an understanding and collective addressing of power and privilege), it makes people more comfortable to both step into moments of leadership, and to trust that others are better suited to lead than they are in other moments.

    The framing of the ‘hierarchy works’ lens is also looking at group organising through a particular measure: that equally capitalist and communist emphasis on ‘efficiency.’ Particularly in the short-term. More democratic processes take more time, and thus are written off as inefficient in most companies and many other orgs. But this is the short-termism of both markets and politics that ignores the long-term costs of institutions where people don’t feel they have any autonomy to find their own best ways of doing things; low morale to active sabotage being some obvious ones.

    Management theory that assumes group dynamics are controlled by those at the top of a pyramid though, are only putting their heads in the sand to the messier and far more complex nature of organisational culture, emergent change, and the theory-practice gap that becomes strongest when people aren’t a part of the decisions that affect them (even if that does mean deferring to a trusted other much of the time).

    Underpinning a belief in hierarchy is a deeply paternalistic view of staff… and with it, most people; they need to be told what to do and how to do it. This view is usually hidden from the public view of most management theory that came after Taylorism (at least he was honest about it), but remains in the subtext.

    A relationship-focused approach to group dynamics is definitely harder than hierarchy, in that it requires all of us to act like adults (the very opposite of what traditional management encourages… and thus produces). But if we assume that is a permanent barrier, rather than an obstacle to be collectively overcome, the best we can hope for is, as Margaret Wheatley put it in 1992: “a treadmill of frantic efforts that end up destroying our individual and collective vitality.”

    I believe we can do better.

    Cheers,

    Liam
    @hackofalltrades

  11. No matter what manifestos, constitutions, by-laws or fairy tales are written by whomever deems them appropriate, there is one fact that remains…every organization will have a vertical component, no matter how flat. If nothing more than for responsibility allocation.

    A front line employee isn’t expected (or often skilled) to develop vision and strategy for the organization. In the same way, the CEO wouldn’t be making quality use of his/her time answer customer calls when the organization needs direction.

    This pendulum swing in business seems to only be magnified by the internet/social media. Something works at a company and so everyone takes the explanation from those involved as face-value gospel. It may have been their intention, but there are natural functional roles that are required to make business work. How those roles are expressed have a ton of latitude, but their existence remains the same no matter how it’s positioned.

    Much of this is semantics creating a false distinctions. Little substance. Business is evolving and there are some definite shifts taking place. A move to be more human-centric is gaining speed and it is a necessary renaissance. It doesn’t change the fundamentals of business, however.

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  15. I think this comment says it all – Its called The Holacracy ! And what’s with all the misunderstandings about “No hierarchies”, some people need to go back and actually read Holacracy properly !!!! i get tied of talking to people that say this over and over again without a real understanding of how it works…..sighhhhhhhh! If its not a classic control dominator hierarchy it must be flat……. no no no. refer to Olivier’s comments and links http://www.holacracy.org/ and actually read this time. 🙂

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