The First Step Out of Hierarchy
This article is an English translation of 「走出科層制的第一步」, originally published in Chinese on Future Organization Lab 未來組織實驗室 on March 26, 2020.
Shouting about ideals no longer moves anyone — let’s talk concretely about how to do it!
Hierarchy: the only option we have
Today’s world is still dominated by hierarchy. Try typing “organizational structure” into Google and you’ll quickly see that, as far as most people are concerned, organizational structure has only one answer: hierarchy.
Yet the hierarchy that looks so scientific, stable and perfect is now riddled with holes, chaotic and overrun by bureaucracy:
Let’s look at some numbers on how members of organizations now see the organizations they belong to:
Against promotion, against management
• Only 9% of younger employees say they want to be promoted
• 64% of employees say they trust a robot more than their direct manager
• 59% of employees say they think they’re more capable than their leaders
Rigid, boring jobs; organizations that can’t cope with a VUCA world
• 78% of employees say their actual work is more varied and flexible than their job description
• People born after 1995 leave their first job after an average of 7 months (versus 51 months for those born in the 1970s)
• 87% of CEOs believe their current structures and ways of working aren’t well suited to a VUCA environment
Work lacks meaning; companies don’t know how to live their mission
• 54% of employees say they lack motivation because they don’t understand the meaning and purpose of their work
• 95% of employees want their work to help make the world a better place
• Only 28% of employees believe their employer has a strong sense of mission
Engagement is hard to raise, and the “management tax” keeps growing
• Only 22% of employees say they work diligently and conscientiously
• 40% of employees have called in sick just because they didn’t want to go to work
• As organizations grow, the management tax gets heavier and heavier
Hierarchy arrived with the Industrial Revolution and has been with us for more than a hundred years. Peter Drucker said the greatest achievement of management over the past century was increasing the productivity of manual workers dozens of times over. But the frightening thing is that the productivity of knowledge workers has actually fallen over the past 70 years. How to raise knowledge workers’ productivity in this era, and with it the productivity of whole organizations, is what we focus on.
So what can we do? How can we meet these challenges? Let’s look at a few “single sparks” that could start a prairie fire.
This is the organizational chart of Morning Star
• Morning Star is the world’s largest tomato processor, with 40% of the US market
• It has had no managers for more than 20 years
• It has more than 4,000 employees and practices full self-management
• Everyone has an equal voice
• Employees’ responsibilities are negotiated with one another
• Everyone can spend the company’s money
• Each person is responsible for getting the tools they need for their work
• There are no ranks or promotions
• Pay depends on colleagues’ evaluations
• No one has unilateral power to give orders, discipline or fire
The apparent complexity of the neural networks in the human brain somehow results in people moving smoothly. The brain has an effective way of organizing itself. The principles of self-management bring the same effect to organizations.
— Chris Rufer, founder of Morning Star (paraphrased)
This is the organizational chart of Zappos, an Amazon subsidiary
• The largest online apparel and footwear retailer in the US, owned by Amazon, with annual revenue of more than US$3 billion
• 1,600 employees, headquartered in the US, with offices in Asia including China
• Zappos is also, to date, the world’s largest company to fully adopt open self-organization through Holacracy
• In 2013 Zappos officially announced its self-organization transformation
• By the end of 2014, 80% of teams across the organization were running fully on Holacracy
• In 2015 the company’s sales profits grew by 75%
• The CEO’s own email volume fell by 50%
I think the real question is: what happens if a company’s structure stops innovating? This isn’t just about Zappos — it’s about every company.
Almost without exception, companies with traditional structures are doomed. About 88% of the Fortune 500 companies of 1955 are no longer on the list. We chose Holacracy for a better future — it’s that simple.
— Tony Hsieh, CEO of Zappos (paraphrased)
Team of Teams: the empowering organization
• Teams and the organization share a common purpose
• Team members share consciousness
• Authority is highly delegated and decision-making decentralized
• Leaders shift from chess master to gardener
• Radical transparency of information creates shared awareness of the whole
• A liaison program ensures everyone knows someone on another team
None of the organizational forms above are variations of hierarchy such as matrix or inverted-pyramid structures. They break out of hierarchy entirely and grow into new organizational forms.
By changing the relations of production, upgrading ways of working and creating meaning at work, these new organizational forms help organizations greatly increase their productivity.
Behind these organizational innovations lies a series of shifts in underlying operating principles. Here are three key ones:
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Mechanical-system thinking → ecosystem thinking
Predict and control → sense and respond
Centralized authority → distributed autonomy
Mechanical-system thinking → ecosystem thinking
1. Evolution
Hierarchies change their structures often too, with frequent reorganizations. Compared with mechanical-system thinking, ecosystem thinking means expecting small, quiet changes every day — continuous, happening everywhere, and triggered from within.
At the same time, an ecosystem means we expect both flourishing and decline. This is a basic principle of how an ecological community adapts to its environment. No species flourishes forever; in every moment, different species are active, and some may die out.
When organizations need to cope with a VUCA environment, this adaptive capacity becomes crucial. Can the organization dynamically adjust itself to each moment VUCA presents — which roles and teams need to flourish more, and which only need to stay minimally active? Through this kind of loosened structure, the organization’s human resources flow naturally.
2. Diversity and inclusion
Ecosystem thinking also means embracing everything — many species and countless subsystems living together. In hierarchical organizations, military-style management seems to be a fashionable management science. While emphasizing collective interest to the extreme, it also tries to erase people’s individuality.
Many hierarchical companies try to grind people into the same shape, and this is an important goal of leadership development and HR training. By making you and me “look the same,” we show we belong to the same organization — which, of course, also gives people a sense of belonging and security.
When I first started working with a local new-retail company, I saw that their cultural slogan was “Stay weird, stay different.”
At the time, I even arrogantly and shallowly wondered whether they’d used some translation software and gotten it wrong — maybe they meant “unique.” In my understanding, calling someone “weird” was a mild, sarcastic way of saying you didn’t like them. So I asked a colleague in charge of their brand, and she sent me a one-minute video (with Chinese subtitles in gray):
Stay weird, stay different — and when the moment comes, you’ll be the one on that stage. Please pass the message on.
“Ecosystem thinking” means an organization that allows this: allows you and me to look different, to be different — and I can still especially appreciate and like you. Allows us to be as different as can be, while we remain good partners working shoulder to shoulder.
Now I have a new translation for “stay weird, stay different”: be an oddball, stand out from the crowd!
3. Wholeness: bringing both emotion and reason
In Reinventing Organizations, Frederic Laloux describes his bold vision for future organizations, which includes “wholeness.”
As I see it, this is a call to “be yourself.” In most workplaces, we only need to show our rational side: I want to win, I want to be strong.
There’s nothing wrong with that, but working this way for a long time, everyone wraps themselves up tightly. Our emotional side — our vulnerable, soft side — is usually neither welcomed nor permitted in hierarchical organizations. Over time, none of us lives wholly anymore. And how can an incomplete self be full of life?
I still vividly remember a news story: at a large telecom company, a middle manager, worn down by years of overtime and pressure to the point that his marriage was on the brink, finally decided to resign. His manager’s reply: “You could get divorced!”
When we talk about ecosystem thinking, the first thing is to see everyone in the organization as human beings. Organizations need to create a space safe enough for everyone to blossom — where people can express themselves boldly and reveal their weaknesses, and don’t avoid starting a conversation out of embarrassment; where people are sincere with each other and fully present. Only organizations like this can we call organic and alive.
Predict and control → sense and respond
1. Everyone is a sensor
I’m sure you’re familiar with — and may even agree with — the word “execution.” In the hierarchical view, senior leaders look far ahead and have vision and influence; middle managers connect the levels above and below and coordinate; and the front line executes. So the most basic ability we expect from frontline employees is “execution.”
The front line is closest to customers and the market, but when it lacks the ability to sense, it can’t bring the most up-to-date opportunities and problems back into the organization. The result is what we often call a slow, sluggish organization.
New organizational models, by contrast, especially emphasize that everyone is a sensor. They believe each person has a unique perspective and, based on their role and situation, will notice organizational tensions (tension: the gap an individual feels between the current reality and what could be).
Organizations of the future encourage people to keep their senses open at all times and feel the external environment. Such organizations don’t ignore VUCA; they sense change earlier and more keenly, seizing the opportunities and managing the risks of a VUCA environment.
2. One step, felt across the whole network
Frontline employees sense tensions and bring them back to the team. But bureaucracies don’t seem able to digest these tensions well. At the same time, bureaucracies almost always conflate operations and governance, and it all ends up as “rule by individuals.” When the front line reports a tension upward, whether it’s treated as a tension always depends on whether a manager at some level thinks it is one.
Self-organization allows every cell in the organization to pass the signals it receives (risks or opportunities) directly to the whole organization, and has a mechanism for processing tensions — testing which are valid and will be taken seriously and acted on, and which aren’t and can be set aside.
Of course, the radical openness and transparency new organizations advocate is also crucial. Research shows that more than half of self-organizing companies around the world have open salaries. You can imagine that information HR once explicitly required to be kept highly confidential in hierarchies won’t need to be hidden in the future.
3. Emergence and iteration
I wonder if you’ve had an experience like this: you’re leading a new project, and to get management to approve your proposal, you update your slide deck countless times and sit through all sorts of feasibility meetings, big and small.
But by the time the project finally launches, the environment you started with and the resources you have no longer seem to match.
The strategy, budget, headcount and so on that the company spent months on all become waste paper that no one mentions again. These are the rules of the “predict and control” game — and in an increasingly VUCA world, they’re failing more and more.
Emergence and iteration mean leaders allow a degree of losing control — allowing many things to no longer happen as they wish, and being willing to watch, with curiosity and together with the team, how things unfold.
For example, on a road trip you no longer plan exactly how many kilometers to drive each day, which gas stations to stop at and which village to stay in. We still need to agree on our shared destination, the principles for moving forward and who does what — and then we just keep focusing on where to go next.
The MVP (minimum viable product) mindset started as a way of designing IT products, and is now gradually being used by more and more companies in everyday collaboration and management. MVP helps us stop chasing a perfect 100 and helps the whole organization believe in taking small, fast steps.
We help companies adopt a new decision-making mindset: “good enough for now, safe enough to try.” You’ll notice that in meetings and decisions, a voice gradually starts to emerge: let’s try it first and adjust as we go.
Centralized authority → distributed autonomy
1. One shared purpose
An important reason traditional hierarchies are so stable is that power is concentrated, which keeps the structure stable. In decentralized, self-organizing organizations of the future, does letting go of power mean chaos — everyone doing whatever they like?
Of course not. At that point the organization needs another strong thread to pull things together: purpose. You’ll feel that in new organizational forms, purpose is everywhere.
Besides organizational purpose, we also emphasize personal purpose, and personal and organizational purpose resonating together. People put more emphasis on the intention behind what they do. Only when everything grows out of the why and the purpose can we be sure that, as people constantly sense and respond, they’re doing so for a shared pursuit and direction.
In many of the organizations we support, we’ve found employees gradually developing a new communication habit: when they receive a suggestion or a good idea, they always ask, “How will this help us achieve our purpose — or how does the current situation harm it?”
Purpose is no longer a slide HR shows new hires at orientation, or the boss’s opening or closing remarks at the annual party. It lives in every employee’s daily work.
2. Autonomy in collaboration
A few days ago I talked with an executive at a globally renowned HR consulting firm. He said that although they still provide “JD design & review” services to companies — and charge handsomely for them — in his view, the job description is dead. In most hierarchical companies, people’s daily work isn’t guided by their JD; they just follow their boss’s instructions and assignments. Leaders have more information and power to decide what employees need to do and how.
If we want to achieve real autonomy in collaboration, bringing the JD “back to life” is crucial. The method is very simple: make each person’s role purpose, accountabilities and authority clear, open and visible.
Purpose guides goals, accountabilities guide actions, and authority guides decisions. Only when these three are widely and clearly understood within the team can autonomous collaboration happen.
3. Rules first, freedom follows: freedom within a framework
People’s first reaction to autonomy is often: so free there’s no boss, and I can do whatever I want. In my view, that won’t lead an organization to freedom; it will lead to chaos and inefficiency.
What makes hierarchy so-called safe and solid is the ultra-stable “boss + subordinate” structure that supports the system: people obey their boss, and the boss obeys their boss. Self-managing organizations completely break this ultra-stable structure and abolish absolute control through power, so they need “rules” to fill the gap.
Self-managing organizations treat rules as fundamental. They create a series of rules guiding how teams collaborate, how people are managed, how rewards are shared, how conflicts are handled, how risks are avoided and so on. Rules exist to guide what people say and do.
A big pain point of hierarchy is that its rules are rigid and ossified, unable to guide current action and even becoming obstacles. This is where dynamic governance comes in. Through a governance decision-making process, teams help everyone in the organization take responsibility for — and have the ability to drive — the creation of new rules and policies that fit the current work situation.
Many of the companies we support have benefited from dynamic governance. As a food retail chain told me last week: “The pandemic left our whole team with no idea what next week would look like. At first everyone was flustered and inefficient, and team morale was falling.”
“Then we realized our rules and goals were out of date. So in dynamic governance meetings, everyone raised their tensions, and we revised our rules bit by bit and updated our team goals. The process itself was incredibly meaningful. After the meetings, our work had more direction and everyone was in step.”
Afterword:
I believe that as the business world becomes more diverse, people’s ways of working are becoming different too. New organizational forms and hierarchy won’t simply replace one another in any absolute sense; it’s a trend that gives us more diverse choices. What we need to do is see more options — and make our own choices well!
