As a business consultant with experience in large companies as well as startups, I often hear about dysfunctional management hierarchies, as well as the value provided by exceptional ones. We have all heard about the successes of flattened management organizations in the last decade at Facebook, Valve, Zappos, and others. Individual team members all dream of being unleashed.
I can see the positives on both sides of this hierarchy argument. Good managers improve focus and productivity through effective communication and coordinating disparate activities. Bad ones build fiefdoms and assign work autocratically, with little consideration for individual motivations and fit. Overall, I’m still convinced that businesses larger than twenty people needs a hierarchy.
For an in-depth study of the pros and cons of a bossless environment, I found a new book, “Why Managers Matter,” by management scholars Nicolai Foss and Peter Klein. These authors provide inside details of recent management experiments, as well as historical data from both successful and failed traditional companies. They also look ahead to forecast what you should expect.
Here are a few of their key points, with my own insights added:
- Workers today are more educated and aware of options. In this age of millennials and social media, individual workers are more driven by the greater good, work-life balance, and peer culture, than by organizational pressures. They are more sensitive to customer needs and see peer collaboration as the most effective decision process.Most experts agree that the key to worker productivity, decision making, and satisfaction, is raising their level of engagement from the currently low thirty percent range. Giving them a feeling of self-empowered decisions with fewer managers is key to this move.
- Office jobs and communication technology have evolved. Modern Internet communication and video meeting software have given new scope and immediacy to communal work efforts and customer feedback. Traditional management tasks of updating and coordination are reduced, and even focus and direction may be obvious.Examples of the new tools include online meetings through Zoom or GoToMeeting. These and other collaborative communication platforms, such as Slack, have absorbed many former manager responsibilities, including scheduling, summarizing, and follow-up.
- Leadership and hierarchy perform strategic functions. In today’s knowledge-based and highly competitive environment, strategic leadership and company direction can still most quickly be decided and executed in a hierarchical organization. Innovations, both inside and outside the company, are driven more by great thinkers than organizations.In addition, strategic functions involve working ON your business, whereas tactical work, done by most employees, is working IN your business. In my own experience, I find that highly flattened organizations struggle with strategic focus and execution pivots.
- Rewards for results versus work requires monitoring. More and better performance management and the greater use of rewards hardly implies bosslessness. Certainly managers need to be better trained, more sensitive to worker needs, and focused on hiring and training the right people for the right job, rather than treating all as soldiers.I have found that creating and administering creative rewards programs for results produced is an important role of every manager, and not one that can be done by peers. The proper use of rewards can make or break any business and employee relationship.
- Outsourcing and working from home needs coordination. The recent pandemic, global outsourcing, and new remote collaborative tools have increased the need for company-centered team management, rather than reduced it. Outside contracts and freelancing rapidly dilute everyone’s focus on the higher company mission and purpose.In the early days of outsourcing, I was led to believe that it would reduce the need for local managers. After some bad experiences, I realized that, in fact, just the opposite was true, since outside contractors had little view of my company values, priorities, or goals.
- Market evolution is not the same as company success. Some people argue that markets evolve quickly and are optimized without managers, so why not let this happen within a business through spontaneous decision making? Businesses have specific objectives, producing particular products, and providing financial returns to shareholders.
In summary, I am supportive of the trend toward delayering, reducing the number of managerial layers, and managerial training for those interested in that role. It’s always positive to foster self-management for all employees, and to delegate operational decisions to the lowest levels. Your challenge is to make this all work for you, and qualify yourself to be at the top of the hierarchy.