Hierarchies play a crucial role in facilitating efficient information exchange within organizations. When teams are congruent, organizations can flatten their hierarchies, boost creativity and performance, and maintain genuine diversity.
In a recent article, the New York Times put forward arguments against the effectiveness of flat structures in companies. It appears that the author, with limited background in management and organizational psychology, overlooked key aspects of the discussion. It is crucial to differentiate correlation from causation and recognize that the absence of hierarchies is not the cause of diversity issues but rather a result of congruent teams. Hierarchies play a significant role in facilitating efficient information exchange within organizations. As start-ups grow and introduce forced diversity policies, maintaining congruence becomes increasingly challenging, resulting in reduced performance and productivity. Nonetheless, open-minded organizations can overcome these challenges by selecting and hiring individuals whose values align with the core team, using tools like the Q7 Culture Compass by Collectiver. This approach not only ensures efficiency but also guarantees natural diversity and inclusion.
The Correlation-Causation Fallacy
The author of the New York Times article mistakenly confuses correlation with causation when suggesting that companies rejecting hierarchies lack diversity and face scandals. Flat-structured companies may indeed have limited diversity, but it is not the absence of hierarchies that causes this. These companies can thrive without a hierarchy precisely because they “lack diversity,” i.e. consist of like-minded individuals who share common values and can effectively exchange information. Startups, in particular, often operate with small, close-knit teams of congruent people, which is a key factor in their success.
Likewise, companies “eschewing managers in favor of an autonomous system in which employees can move between projects when they chose,” mentioned in the article are anything but new: basic project organizations. This is the most common organizational structure in the knowledge economy. In fact, it is the only viable structure. This phenomenon aligns with Henry Mintzberg’s insights in his book “Understanding Organizations … Finally!” where he explains that in today’s knowledge economy, many organizations essentially function as projects, regardless of the fancy names given to their structures.
Hierarchies as Information Exchangers
Hierarchies are not solely about control; they provide an efficient means of exchanging the information necessary to run a business effectively. In organizations with congruent teams, information flows naturally and effortlessly, minimizing the need for strict supervision, complex regulations — and excessive hierarchies. Another non-surprise: many start-ups do extremely well without any hierarchy because (a) most start-ups are small, so all communication channels are short and straightforward, and (b) their core is usually a very congruent team, often friends and relatives. Such teams are often referred to as “being on the same wavelength” or “finishing each other’s thoughts.” Why would they need a hierarchy?
In environments where teams share the same values, information flows naturally and effectively, reducing the need for excessive supervision, regulations, and hierarchical structures. However, as organizations grow, maintaining the same level of team congruence becomes challenging. Even worse – or outright impossible – if the diversity, equity, and inclusion (DEI) policies that deliberately bring in disparate individuals are mindlessly enforced. The resulting lack of congruence leads to poor performance and low productivity. Government agencies and public companies, which often face imposed DEI requirements, can be particularly affected, resulting in bloated headcounts and notorious inefficiencies (that are passed on to society at large).
Diversity and Crime
But neither the lack of diversity nor the lack of hierarchy may explain corporate crime. Crime is committed by individuals, not the organization. So, as Elizabeth Holmes candidly admitted, Theranos was “only as good as the worst people on our team.” The example of Theranos, which was originally intended to illustrate the drawbacks of flat organizations without diversity, is intriguing. It’s worth noting that this particular case did not follow the expected pattern, as it was not led by a middle-aged white man. Instead, decisions at the helm of Theranos were made by a young woman who, despite being white, had a rich and diverse ancestral background, including Danish and Hungarian-Jewish heritage. Furthermore, her partner, who played a significant role in the company’s actions, was of Pakistani descent and practiced Hinduism. Given this diverse backdrop, one could argue that it holds no real influence on the structure of Theranos. Regardless of its diversity, this background does not have any bearing on the organizational dynamics of Theranos. Nor does diversity or lack thereof in general.
Selecting for Values and Congruence
An open-minded organization, such as a successful growing start-up, can overcome these challenges by selectively hiring individuals whose values align with those of the organization’s core team. By employing a simple and efficient tool like the Q7 Culture Compass by Collectiver, organizations can ensure that the people they bring on board are selected based on their values. This approach reduces the need for excessive supervision, hierarchies, and regulations, resulting in highly efficient teams that operate cohesively and effectively. Additionally, selecting staff for values not only enhances efficiency but also fosters natural diversity and inclusion within the organization.
Navigating the Challenges of Flat Structures with Rich Diversities
While flat structures can be effective in smaller companies, such as start-ups, where communication needs are minimal, they encounter difficulties as organizations expand. Coordinating larger teams without hierarchical structures becomes increasingly challenging. Attempting to enforce flat structures in a growing organization without considering the potential risks and communication requirements is a recipe for disaster.
Every organization should find structures that suit its specific needs and the involved risks. It makes total sense to have a flat start-up building an innovative consumer product or service, like the examples in the NYT article – a wholesale company and workers’ cooperative, and the video game studio.
On the opposite end of the spectrum, the situation is distinctly different. In the case of a Space Agency or Department of Defense, flat organizational structures are not viable options. The stakes are too high, and any gaps or ambiguities in the chain of command could potentially result in severe consequences, even fatalities. Thus, while the book “Flat Army” gained popularity a few years ago, it becomes evident to both the author and the reader that “Flat Army” can only be understood as a metaphorical concept rather than a practical military organization.
- “Flat” organizations do not lack diversity; nor are they prone to crime
- Hierarchies are not evil: they play a crucial role in facilitating efficient information exchange within organizations
- Team alignment (congruency) makes it possible to flatten the hierarchy, thus improving the information flow – and boosting productivity
- Successful Agile organizations are just project-based organizations with congruent teams
- Only congruent teams can achieve natural diversity and inclusion and operate with reduced hierarchical structures
- Organizations can maintain congruence by selecting employees based on shared values, using the available tools.
You can learn more about the Q7 tool here.