Have you ever wondered why we are using hierarchical structures in organisations and where they are coming from? Are hierarchical structures still the best way to organise hundreds of thousands of people? Is there a more efficient, simple, sustainable, resilient, and human organisational structure?
A brief history of social structures
For tens of thousands of years people lived in small groups. Gradually smaller groups came together to from larger groups, called tribes. Although they had respected elders, they didn’t have any boss or hierarchy, and there was relative independence of the members.
But as population grew over time, some people emerged as leaders, subordinating others through loyalty and fear. Frederic Laloux compares these type of organisations to wolf packs or the mafia. There is a leader, top down authority and a division of labour. When a stronger leader contests the existing one, endless power games erupt, until someone else ends up at the top. This type of organisational structure is highly unstable, and cannot scale up. On the other hand it is highly entrepreneurial.
Around 4000 BC a new organisational structure emerged as people started organising into larger and more complicated collectives, called empires. From the first empire in Mesopotamia to the ancient kingdoms of Egypt, thousands of people came together under Kings, Emperors and Pharaohs, believed to be representatives of Gods on Earth. In this world everyone had a stable role based on their class, with Pharaoh at the top of the pyramid. While at the bottom, there was a great number of slaves, whose slave labour ironically created the Egyptian pyramids.
It is as if Pharaoh wanted to build a physical structure that resembled their social order!
However, it is worth pointing out that this ranked order of people came through a social evolution process and the relevant historical context that shaped it rather than a conscious effort to create a hierarchy. In addition, the world was much simpler, stable, and predictable, which was the ideal environment for hierarchical structures to flourish.
The emergence of hierarchical structures
The word hierarchy comes from Greek. It literally means rule of the holy, sacred order, or ‘rule of a high priest’. The term was coined around 5th century in Athens by the mystical theologian Dionysius the Areopagite. He used it to describe the order of the Angels into ranks. For many centuries since then the term was used to describe a system of ecclesiastical rule.
It is no wonder then that the Christian Church, similarly to ancient Egyptian Kingdoms, was one of the first organisations to adopt a strict hierarchical system. Similarly, the army is another institution that uses strict hierarchical structures with clearly defined ranks. Interestingly enough, even in the army, the reporting lines lead all the way up to the Emperor, King, or President.
Governments also follow a deeply hierarchical structure enabled by a system of bureaucracy. Every decision needs a sign-off from someone at a higher level. In addition, complicated, bureaucratic processes ensure that the hierarchy is always maintained, even at the expense of efficiency.
Hierarchical structures in businesses similarly assume that there are subordinates and superiors. Work is delegated from one level to the next below with the person at the top being the most powerful, while people at the bottom having no subordinates. The flow of information follows a similar top down pattern, where the person at the top holds all the information. The further down the hierarchy someone is the less they know.
Limitations and problems with hierarchical structures
Hierarchical structures have existed since around 4,000 BC and have defined human history for millennia. But how relevant are they today? What are their significant limitations? And why we keep hanging up on them?
The conformist worldview
Hierarchical structures grew out of a need to organise peacefully and stop the endless bloodshed and power games of pre-existing tribal societies.
However, it is no coincidence that this happened at the same time when the first organised religions appeared. For the first time people came together at a larger scale under a founding mythology and behavioural principles. Perhaps the fear of an omnipotent God, who would revenge humans if they wouldn’t follow fundamental ethical principles, was enough to enable wider scale collaboration. Everyone had to conform to the ethical and societal rules, doing what was expected and fitting in. Guilt and shame became the connecting glue that prevented people from deviating from the norms.
Organisations operating with this worldview expect people to wear organisational uniforms, which signify their status, but also create uniformity. This has allowed people to collaborate at a greater scale through stable organisational charts, clear replicable processes and agreed norms.
However, the obvious problem with hierarchical organisations is that in an ever-changing complex world they do not have the ability to change. People’s worldview is rigid and confined within their well-defined roles. There is limited outside information, or opportunity to learn and change. In fact, innovation and emergent change are considered problems that need to be dealt with.
The omnipotent superhuman at the top
In hierarchies the person at the top, being it the CEO, the Pope, the President, the Emperor, always acts as a super decider. Somehow it is assumed that this person is omnipotent and embodies the organisation, while people treat them as superhuman. We think that just because someone is at the top, they make all the calls, although this sounds completely impossible. This is a fundamental attribution error. Whatever happens, good or bad, it is the person at the top. Despite our evolution as species, perhaps we haven’t changed so much after all. We still believe in the myth of the genius expert.
Forecasts to CEOs are what oracles were to ancient tribal chieftains while strategic planning is like a ritual rain danceMatthew Stewart – “The Management Myth”
As Carmichael and Hadzikadic mention there is a tendency to believe that in a complex adaptive system (i.e. a business organisation, a big city) there is always a leader directing all of the activities. This leader is a super-intelligent being, who makes all the calls and has all the answers. But what people fail to realise is that a leader simply does not have the bandwidth to make sense of all the complexity in the field, directing every action, and communicating individually with thousands of people. This is Hierarchy Bias.
Often, when things are complex we assume that there is some kind of hierarchical pyramid structure behind the scenes. But the behaviour of a complex system cannot always be explained through a hierarchy. Although in environments with low complexity, a pyramid structure may seem efficient; when complexity increases this model breaks down.
In reality, decisions made at the top are disastrous when there is no context of what is happening on the ground. As a result, hierarchies turn into bottlenecks.
We need to stop imagining central authorities, committees or demigods who know everything, have all the answers and can predict the future. In fact, this is how things were operating in Soviet Union for almost 70 years. And as we all know it led to great inefficiencies, the Chernobyl nuclear accident and other human catastrophes. Eventually, the central planning committee model of Soviet Union ended up collapsing in 1989, causing major shifts in global dynamics.
Yet, today we still persist on the concept of central planning. We still want stability, repeatable processes, and predictability. We assume that rigid 5-year plans and hierarchical structures will provide the comfort of stability and control.
Unfortunately, the ghost of Soviet Union is still here to haunt us.
As mentioned, organisations are complex adaptive systems. One of their key characteristics is their emergent properties, i.e. trust, leadership, agility, organisational knowledge and innovation, that are the result of the interrelations of its largely autonomous agents.
But, quite often the more complex a system is the more we assume that there is a leader at the top with an elaborate control network that reaches out to thousands of individuals. Our assumption is that a complex and sophisticated structure is required for a complex system to operate. This is complexity bias.
However, if this were true, it would have been a very inefficient, expensive and fragile operational model. In nature though, this doesn’t exist. Instead most natural systems are complex adaptive systems, which operate through the interaction of its parts that follow really simple, local rules.
John Holland, a pioneer in complex adaptive systems research, wrote in his prolific academic article in 1992.
A CAS has no single governing equation , or rule, that controls the system. Each of the parts is governed by its own rules. Each of these rules may participate in influencing an outcome, and each may influence the actions of the other parts.John Holland
A distributed rule-based system can handle perpetual novelty.
Furthermore, Holland gives the example of a car. He says that building a car is complicated. There is a strict hierarchy of mechanical parts, which function in a predictable way. Any emergent behaviour is a bug. On the contrary, driving a car is complex, and any emergent behaviour, such as the driver’s decision to take a new route, is a feature.
Why small is beautiful
When size and complexity increase significantly, things are starting to break down. If we look back into history even the biggest and most successful empires eventually declined and collapse. In fact, what we have been seeing in the past 50 years is the creation of more smaller independent or federated nations rather than massive superstates. There are around 195 countries in the world today with the UN recognising up to 249 countries and territories. I am sure we will see even more independent movements across the globe.
According to Ernst Schumacher, an influential 20th century economic thinker, countries do not need to be big to be successful. In fact, during his time (1970’s) the reverse was true, the biggest countries were largely poor. In his now classic book “Small is Beautiful”, he criticises the ‘economics of scale’ theory that was very popular during the 20th century, along with the obsession of humans to create gigantic hierarchical structures and organisations.
Schumacher suggested that we should transform our monolithic organisations to well-co-ordinated assemblies of semi-autonomous units, each with their own independent drive. He brings the example of General Motors and how this gigantic firm restructure into a federation of more reasonably sized firms. As he mentions in his book, small is more convenient, humane, and easy to understand and manage. Although he didn’t realise it at the time, he suggested to treat big organisations as Complex Adaptive Systems comprising of a big number of independent and loosely-coupled autonomous parts which interact and co-evolve with their environment.
A more human future
The world has changed. Organisations do not exist in a vacuum, but they are part of a wider global, decentralised, economic system that is complex, and unpredictable.
Nevertheless, traditional hierarchical organisations still exist and in some industries still dominate. However, there is a paradox. Although their structure and people by design resist any kind of change, they still plan big transformation programmes to respond to external market pressures. They do and as a result organisations employ fear tactics to push change through, creating a disastrous cycle.
Many technology firms today run efficiently through distributed decision-making and agile ways of working that harness the wisdom of their employees. The main units of organisation are small, long-lived, self-organised teams, which interconnect loosely and create innovative products and services through a web of human activity. These organisations create safe environment for teams to come up with innovative solutions, ideas, products, and strategies that would have otherwise been impossible to plan. People are more capable and know best how to make decisions by sensing and adapting to their context.
Change is part of the everyday life of the organisation, like it is part of every living organism and system in nature. It doesn’t happen with centrally planned, and broadly advertised 5-year transformation programmes. The agile and lean movements of the last 20-30 years have definitely pushed things to the right direction, as more businesses are switching from predict-and-control to sense-and-respond. But we still have a long way to go to overcome the hierarchy bias that is still burdening businesses, and let go of the Soviet ghosts that are so ingrained in our worldview.