Hierarchy works

Hierarchy works

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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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