Monday, February 24, 2014

What Is Wrong With The Hierarchy?



In a world where things changed less frequently and when there was plenty of time to react on new information that emerged, where markets did not emerge by themselves and change shape by themselves, it was possible to centralize planning and make long-term detailed plans and execute the plans over a period of several years. Organizational hierarchies and command-and-control style management were the solutions implemented to get the information from the top to the bottom of the pyramid and ensure that execution plans were followed. Things are different today, as organizations have to be prepared for the unexpected, and readily adapt to new conditions. They might still have an overall strategy and plan, but they need to be prepared to change it at any point in time. They need to accept that the only feasible strategy they can have is to respond to change fast enough and good enough, and that it requires them to level out information asymmetry and distribute the power of decision-making to everyone who might ever need to make a decision.

A Major Problem With The Hierarchy

In a hierarchical organization, most of the information that answers key questions about the management and operation of the enterprise (what, why, how and when) is typically produced and aggregated at the top and then distributed downwards throughout the different levels and branches of the hierarchy. The information must often pass each level of management on its way down until it reaches the intended receivers. Each such level is an "information tollgates" that have the responsibility and mandate to communicate the relevant information to appropriate receivers further down in the structure. In doing so, they can often select which persons they think should receive the information, how they should receive it, when they should receive it, and what they should receive. A major drawback of this way of distributing information is that the probability is quite high that information needed by an individual further down in the pyramid does not reach her. There can be many different reasons behind such a consequence. Management might be unaware of the need of the individual co-worker, which means that she does not receive the information she needs at all. They might have misunderstood her need, which means that she receives the wrong (insufficient, incomplete, inaccurate...) information. Or perhaps for some reason they might not want her to receive the information she needs, which means that important information is filtered out, or that information gets distorted along the way.

It is also quite obvious that this is not the shortest or most efficient way for information to travel and that even if the coworker receives the information she needs, it is likely that it is not received in time. All these things can be avoided if there is a more direct communication and interaction between the sender and the receiver. But the hierarchic organization allows management to maintain control of the information and how it flows. The information asymmetry gives each level in the hierarchy power to influence and manipulate the decisions and actions of others, much like. It wouldn’t pose a problem if everybody always has the greater good of the organization before their eyes, putting all personal interest aside. But anyone who knows human nature also knows this is nothing but a fallacy.

The Power of Networks Is Being Distributed

Since the dawn of time, primates have relied on social networks to help the whole group with their environments. This of course applies to organizations as well. First of all, information disseminates easier and faster through networks than through hierarchies. This makes it possible for us to gain access to and act upon new information faster. We have the ability to be more responsive. Second, the lack of bureaucracy and hierarchy encourages communication and interaction. This makes it easier for us to share more information continuously. If we put these two things together, networks can help both individuals and groups of individuals make better decisions faster — decisions that benefit the whole group.

Informal networks have always been important, if not to say critical, for accessing information, making decisions, and ensuring commitment to implement the decisions in organizations. They are different to the formal structures that perform these functions in organizations as they lack structure, arise spontaneously, and develop and change organically as people interact with new people and build bonds of trust between each other. Informal networks are often seen as problematic as they by-pass the formal structures for communication and decision-making, in a hidden way that cannot be controlled by management. Still, without those informal networks most organizations would not function.

Until recently the power to build and maintain strong personal networks and become part of informal networks has been possessed by the people within an organization who held formal positions in the hierarchy, such as managers, or people who had as their jobs to meet a lot of people, such as sales people. Their positions allowed them to allocate the time and resources to build their personal networks and be part of informal networks within their organizations, influence the decision-making. Enterprise social networking platforms now offer anyone in the workforce to build stronger personal networks inside the organizations they work for. The power of networking is available to anyone who finds it in their interest to build and maintain their personal networks by providing open spaces for starting and joining conversations across any barrier such as organizations, locations and positions. This power that was previously only available to the "business elite" consisting of sales people, managers and experts, can now be utilized by the anonymous and disconnected worker.

A Threat To Middle Management

What we are seeing now is a shift from hierarchy to the network as the primary organization system for an enterprise. In the light of this, it is easy to see that middle management is becoming irrelevant and displaced, and that it is there we will find the greatest resistance to change, trying to maintain status quo. To understand this, one needs to understand the force they are resisting; social networks. To start with, social networks are flat. Everyone in an enterprise social network solution is typically presented as being on the same level, even though there is often a reference to an individual’s position in a hierarchical organization. But these titles are less important in a social network than in real life. What is more important in a social network is the person behind the title and whom that person is connected to. This, together with the fact that people often are more comfortable with contacting people they do not know virtually than in real life, makes the barriers to contacting someone higher up in the hierarchy of an organization much lower. It enables important information to be communicated from grass-root level to top management and vice versa in a fast, undistorted, frequent and in a timely manner. This is also the "threat" of social networks to hierarchical organizations, and middle management in particular. It is not a threat to the business itself, rather an opportunity, but it is threat to those in the middle of the management pyramid who build their positions on their formal right to make decisions and distribute information from the top and down, and vice versa. This is pretty much the primary function of a lot of people in the middle of the pyramid. As this function is becoming less important and sometimes obsolete, it poses a threat to those managers who are not really good coaches, mentors, visionaries, sales people, networkers and so on.

An Big Opportunity For Top Management And The Organization

Top management, on the other hand, can benefit from social networks in many ways. By bypassing the cumbersome hierarchical communication structure and communicating directly with individual coworkers, they can practice a much more agile and proactive leadership. They can get access to vast amounts of uncensored information from any corner of the enterprise and interact directly with coworkers from which you need additional information. The information that is made available to them is unfiltered and undistorted, and with the help of information technology they can access and filter out important information that is flowing through the social networks to spot trends, capture important signals, and increase their awareness about the health of the business. In a sense, the emergence of social networks, and the means to distribute and aggregate information within those networks can be seen as "social business intelligence". Social networks put content in context of other content, but what is even more important is that they put content in context of people. And it happens in real-time, allowing top management to take the temperature of the organization. They can act on problems or issues before they escalate and grow worse, and spot and take action on opportunities they otherwise never would have known existed.

There are definitely great opportunities for organizations to capitalize on social networks. But an organization has to find out a way to deal with those individuals in the middle of the pyramid that do not like being flattened out.