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Do Hierarchies Have a Future?

Many of the emerging trends shaping the future of HR, and the world of work, point to the need for different organisational structures. The behaviours and values driving the evolution in approaches to leadership development, engagement, employer brand, talent management and acquisition, include transparency, feedback, inclusion, authenticity and collaboration. Some of these are difficult to encourage in a traditional hierarchy.

Influence, trust and self-determination are becoming increasingly important. Future leaders are no longer identified by job title but by performance and influence. Likewise the performance management process has begun to recognise an individual’s impact and contributions to the success of others. Employees take responsibility for their own development with many now opting for more lateral progression, gaining a broader range of skills and more varied experiences. Almost every business is now, in some way, a digital business and employees need a digital mind-set.

Many of these changes stem from the recognition that the commercial world is now faster and more volatile, uncertain and complex. Disruption to companies, or whole industries, can come from anywhere and in a globalised trading environment economic shifts elsewhere in the world can impact countries far away. Organisations need to be responsive, agile, robust and focused yet open to change and innovation. As author Peter Hinssen says, “The new normal isn’t technology, it’s speed. If things move fast then hierarchies are dangerous“. Surveys regularly show employees feeling disengaged from the businesses they work for, usually identifying politics, bureaucracy and cost-driven restructuring as the main problems. Too many feel unable to influence the decision-making processes where they work.

Many of the newer, fast growth digital businesses rely on a spirit of innovation and creativity with everyone’s input encouraged. Much of the creative energy comes from collaboration, with ideas formed through the ebb and flow of chance, chemistry and interaction. Ideas that have to filter upwards through a management structure can be lost or watered down. Information and knowledge need to be open and shared, driven by internal networks and not top down communication flows. Traditional structures can act like barriers whereas many digital businesses are moving towards a more fluid structure, enabling employees to take responsibility.

Can all this be achieved through traditional hierarchies? Is it time for organisations to evolve?

One of the main issues often raised about traditional structures is around the information flow (usually from top to bottom) that can make the organisation slow to adapt and respond to changing needs, and creates a bureaucracy around decision-making. This helps newer, more agile competitors to take a market share quite quickly.

Another concern is over how layers of management can often create a bottle neck for talent looking to progress quickly, and there is a general tendency to attend less to the employment experience, resulting in lower levels of engagement and a less than compulsive employer brand.

Much of the current thinking around these areas stems from two sources – firstly the book ‘Reinventing Organisations‘ by Belgian consultant Frederic Laloux, which suggests that organisations evolve over time, and we are on the cusp of another evolution, and secondly from the way that evolving digital businesses seemingly discard the traditional approach to organisational structure and appear to evolve organically.

Four different types of organisational approaches are regularly talked about:

Teal

The structure written about by Laloux is one built on the principles of self-management, wholeness and evolutionary purpose. The drivers with this type of organisation are peer relationships, autonomy, self-expression and self-accountability. Each employee brings their ‘whole self’ to work as opposed to just a ‘professional’ version. Power and control is shared collectively, not remaining with a particular job role or level, whilst the business focus is on agile responses to changing market preferences, creating customer value.

Holacracy

Possibly the most widely talked about structure, this replaces authority and decision-making through a traditional vertical hierarchy of teams, with one based on a network of self-organising circles. These are aligned around project or operational needs, with the individual having roles as opposed to job descriptions. The individual also has authority and responsibility to best determine how to achieve their goals.

Flatarchy

There are many organisations trying out flatter, less hierarchical structures, and this one combines the best of both worlds with a strong focus on innovation. This is a more ‘dynamic’ and flexible approach, rapidly adapting to evolving needs, so that either ad-hoc project teams operate within a more traditional structure or a more structured team can work within a much looser organisation. This flexibility is particularly important when rapidly developing a new product or service, particularly in industries facing some form of disruption.

Wirearchy

This structure is more network-based, and informed by information and knowledge flows which, as mentioned earlier, are less likely to occur within a vertical hierarchy. Our previous blog mentioned the concept of ‘networked intelligence’ and this is one way to incorporate that. The answer to problems may not be within the organisation but has to be accessed through wider personal and professional networks.

In future, organisations are likely to be embracing some practices from all of these approaches. The increasing use of flexible, freelance collaborators is a potential extension of wirearchy, whilst the preferences of a younger generation of workers for more project and experience based work will almost certainly drive interest in flatter and more agile approaches.

The most powerful evidence for change will come from case studies of organisations that have adopted different structures and then share the greater value that they have been able to derive. And also from the learnings of those who have been less than successful. One of the best-known recent examples has been that of online retailer Zappos who moved their structure to a Holacratic model in early 2014. Yet bringing in a system of self management, with roles instead of defined jobs, to a business with over 1,500 employees hasn’t been so straightforward, and when an open offer was made to all staff earlier in 2015 that they could leave with several months severance pay if they didn’t like the system, around 14% of the workforce took the offer. This in a company whose attrition rate previously was around 1%.

The case for organisational structures to embrace the challenges and expectations from 21st century business by evolving from their rigid, traditional hierarchies, is strong. But it needs to be a journey that everyone in the business takes. Which is why most successes at this stage are likely to come from newer, creative organisations in which the culture and structure evolves around the people, and isn’t imposed on them. For more established businesses it might be that individual teams, or circles, start the change from within.

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