The Case for Flat Organizations
It’s hard to fathom just how dramatically the pace of change has increased in the last two decades. This infographic gives you an idea.
While it took 50 years for airlines to reach 50 million users, Pokemon Go hit 50 million users in just 19 days.
Keeping up with the accelerated pace of change is an imperative. And those organizations that meet customer needs faster, adopt cutting-edge technologies more quickly, and adjust most rapidly to the changing demographics of their employees succeed. Those that can’t, won’t.
And the key to speed for many companies is to flatten the hierarchy.
- Flatter structures allow companies to respond more rapidly than traditional reporting relationships allow.
- They are better suited to knowledge work that requires people to be able to freely share ideas and expertise.
- And in the war for talent, they give workers more autonomy and control over the work, creating greater purpose and job satisfaction for their employees.
While the pace of change today is new, flat structures aren’t.
Self-managing teams, networks, and Holacratic circles are just the latest in a long line of non-hierarchical social structures, dating back to antiquity.
There’s a good argument that flatter social structures are indeed our future and recent trends have accelerated the move in this direction.
But Should Organizations Replace Hierarchies Altogether?
A better question would be: can they?
Because hierarchical structures reflect a human tendency towards social stratification.
Groups will automatically stratify. In the absence of titles and positions power dynamics migrate to other markers. But even more fundamentally, power is behavior.
People exert dominance and establish ranking systems via their voice, subject matter expertise, social privileges, seniority, access to information, and alliances.
Just as a thought experiment, imagine you are having one of those frustrating, unsatisfactory experiences with a customer service representative.
Are you honestly just as comfortable asking “Can I speak to one of your coworkers?” as you would be asking “Can I speak to your supervisor?”
Hierarchies serve a purpose and there are numerous industries where a hierarchical structure makes good sense.
In a high stakes situation where interdependence and coordination in a time-sensitive matter are necessary, like in an operating room or an airplane cockpit, a hierarchy has its obvious place.
While there are very good reasons to flatten hierarchies, there is also a danger that in the rush to do so, we “throw the baby out with the bathwater.”
We need to first carefully assess and define what we mean by “hierarchy,” because what we identify as dysfunctional may not be the hierarchy per se, but other problems that frequently co-occur with hierarchy.
And this is important because while these problems are more frequently found in hierarchical structures, they could just as easily occur in a flat structure.
It might simply be due to the fact that there are fewer flat organizations; as their number increases, these dynamics can become just as prevalent.
Rather than embrace flat organizations as the solution to everything bad about traditional hierarchies, perhaps we should instead consider how to optimize hierarchy.
What are the main problems we see in hierarchies and how can we upgrade or optimize them to better respond to our fast paced, knowledge economy?
What Needs To Be Upgraded
My work as well as research in the field have identified four main areas of hierarchy that could be upgraded in order to eliminate dysfunction:
- Reducing the Trappings of Power
- Increasing Transparency
- Removing Preferentialism
- Eliminating Silos
By focusing on these four problems, we can improve hierarchical structures, making them more functional and flexible.
1. The Trappings of Power
Over the last 300 years, the trappings and symbols of power have changed from scepter, throne, and crown to corner office, reserved parking spot, and stock options.
The trappings of power are meant to reward and intimidate, and above all, to separate those below from those above. And the trappings of power describe a culture in which there is a greater distance between those at the top and those at the bottom.
Power distance is the extent to which the less powerful members of institutions and organizations expect and accept that power is distributed unequally.
In high power distance cultures, deference by lower ranking individuals to those above is the norm. People won’t speak up unless asked, not only out of fear, but out of the belief that this is the natural way.
High power distance is characterized by a top-down, command and control style of leaders giving orders, having answers, and unfailingly knowing better.
In an organization with high power distance, the idea that you would just “knock on the boss’ door” is absurd. In fact, you could work your whole life in a high power distance organization and never once even see the CEO or Vice Presidents.
While hierarchies tend to have greater power distance, this distance is not inherent.
Lindred Greer, Associate Professor of Management & Organizations at Ross School of Business at the University of Michigan, found in her research on hierarchy that the more power distance there is in an organization, the less functional the hierarchy.
The higher degree of formality, distance between the layers of rank, and top down decision making inhibit communication, exacerbate the bureaucracy, stifle employee engagement, and block innovation.
Power distance is not just structural, but behavioral. When leaders are arrogant, intimidating, and less available, employees are less free to speak up. When perks and privileges for senior leadership are flaunted or overindulged, it is demoralizing and creates apathy and cynicism.
To optimize your hierarchy: lessen the experience of power distance, both structurally and behaviorally.
- Reduce the visible “trappings of power.” Create less physical distance between top leadership and the rank and file. Create greater pay equity and more opportunities for engagement between rank levels.
- Create greater psychological safety. Focus on leading for inclusion and engagement. Train managers to listen, ask questions, and solicit input from those with more expertise.
Another problem often equated with hierarchy, though not inherent in it, is a lack of transparency.
Hierarchies are known for excessive bureaucracy, ladened with regulations, policies, and procedures that seem pointless and arcane.
Even when the regulations and policies are technically transparent, the increased power distance creates the experience of non-transparency.
There are layers of distance between those making the rules, and those meant to follow them. Decisions are made behind closed doors, with little, if any, opportunity for discussion or insight into the decision making process, including those decisions that directly impact employee well-being.
Transparency doesn’t just mean having access to the rules, but also insight into their rationale, into the process for making them, as well as the process for appeal. Companies can be transparent according to the letter of the law, but not to its spirit.
As consumers, we encounter this difference daily: the pre-ticked box buried at the very bottom of the page that auto-renews your subscription, and you don’t notice until you see the charge on your credit.
Lack of transparency is directly connected to perceptions of fairness and bias. If decisions get made or changed (suddenly I’ve been transferred onto another project or assignment and don’t know why, or someone gets promoted when I thought I was next in line), I will immediately think it’s unfair.
When I don’t know how I get assigned projects, how promotions are decided, whom to speak to when I have a problem—even if this is in some procedure or policy handbook—I won’t experience the company as being transparent.
To optimize your hierarchy: create greater transparency.
- Make it clear where decisions get made, along with the rationale, and if possible, opportunities for appeal or discussion.
- Don’t allow people to change decisions or make decisions “on the fly,” or in subgroups or cliques where everyone who needs to be involved isn’t present or informed.
- Simplify regulations and policies whenever possible, and make it easy for people to understand the regulations and policies that affect their daily lives.
Warren Buffet, one of the most successful investors of all time, once admitted that his success was due, in part, to the fact that he only had to compete with half of the population.
He acknowledged that he’s the beneficiary of an inequitable system. To put a fine point to it: He won unfairly.
And to put an even finer point on it: he called into question the belief in meritocracy.
Most people believe in meritocracy. They firmly believe they, and their company, is meritocratic. We got where we are through hard work and effort, and our systems are fair and objective. Or so the story goes …
And yet, statistics don’t lie. Wherever we look, we see a lack of meritocracy—women and minorities are profoundly underrepresented at the top levels of management, the gender and race wage gaps hold steady, and in some cases, even increase.
But unfairness is not only a problem for women and underrepresented minorities. Survey after survey of employees’ experience reveals that unfairness is employee complaint number one.
Most companies truly do strive to be equitable and meritocratic. But when it comes to meritocracy in practice, most companies fail. Not because they deliberately set out to do so, but because of default systems in place— because of bias, because of a lack of objective criteria for promotions and hiring, and because it’s a self-perpetuating feedback loop: people hire and promote those who are like-minded and look like them.
Whether you call it favoritism, bias, preferentialism, or the good old boys’ club, people promoted based on non-meritocratic reasons is a problem that is often equated with hierarchy.
Greer found in her research that hierarchies that are not based on expertise or competency, but instead on personal preference or like-mindedness perform more poorly.
Unfairness is corrosive. It results in a lack of morale, inability to attract and retain diverse talent, and, as Greer points out, the emergence of “shadow hierarchies” that destabilize the organization.
To optimize your hierarchy: make it meritocratic.
- Base levels on expertise that is clearly defined and attainable.
- Create opportunities for people to advance and grow, and achieve promotions.
- Base promotions and hiring on objective and clearly defined criteria. Standardize the process to ensure each interviewer is looking for the same criteria.
Navy SEAL teams have an expression when they debrief their missions: “leave your stripes at the door.” The need to share critical information overrides the reality of rank.
For NAVY Seals and other military operations, the urgent sense of mission requires that people put aside rank and titles and leave their ego at the door. But this is also critical for innovation, decision-making, and problem solving that requires high degrees of collaboration.
Unfortunately, in many hierarchies collaboration and information sharing is limited because of silos.
Hierarchical organizations run on verticals: departments, functions, and business units with long chains of command. This structure, without careful planning, results in silos, in which employees are more loyal to their department or business unit than to the organization. Information hoarding, distrust, and blocked communication has dire consequences for innovation and decision making.
Greer found that hierarchies and more functional and effective when there is greater collaboration—not just across the whole organization, but also across levels of rank.
Hierarchy is often conflated with silos, but it need not be the case.
To optimize your hierarchy: break down silos.
- Make sure everyone in your organization has a holistic understanding of the organization’s work.
- Create cross-functional teams, with different levels of seniority present.
- Create “tours of duty” where employees rotate through different teams, building relationships across the organization.
Putting It All Together
While flattening hierarchies can help organizations keep up with an accelerated pace of change in today’s world of innovation, there is also reason to believe that hierarchies have their place in the contemporary workplace.
And the problems most commonly associated with hierarchical structures cannot be solved by simply doing away with hierarchy altogether.
Organizations should instead focus on optimizing their hierarchy by:
- Reducing Trappings of Power
- Increasing Transparency
- Removing Preferentialism
- Eliminating Silos
Doing so can help create an equitable and thriving organizational culture without eliminating the parts of hierarchy which are helpful, and even essential, to organizational success.