The Endless Allure of Non-Hierarchical Organizations

I recently read Dana Ardi’s The Fall of the Alphas. The most important parts of her argument are:

  1. There are two models of organization:
    1. Top-down ( hierarchical, command and control)
    2. Lateral (networked, empowered)
    3. The lateral model is better
    4. The top-down model is being replaced by the lateral model

What’s striking is that this argument is a recurring theme in management theory.  Jon Husband has written extensively about “Wirearchy” as an alternative to “Hierarchy” (www.wirearchy.com); by chance I picked up Freedom Inc. by Brian Carney and Isaac Getz, they use a series of case studies to convey a similar argument; and if we go back to 1960 we can see a similar sensibility in McGregor’s depiction of Theory X and Theory Y managers. This model is also closely related to what academics call “high-involvement organizations.”

Is this argument true? Why does it recur? What does it really mean?

Two forms of organization?

What is really meant by the two models? Suggesting there are two types could mean:

  1. There is a bi-modal distribution, with most organizations falling in one of the two categories.
  2. These are archetypes; actual organizations fall anywhere along a spectrum.
  3. The model appears at the level of departments or units, it is not necessarily consistent across the whole organization.

Ardi says there is some truth in all three views. They are archetypes, but organizations tend to cluster towards one end of the spectrum.  The form is not necessarily organization-wide, and this is  important because it shows the extent to which use of the lateral form is a reflection of the individual manager’s values. When a whole organization is “Lateral” it probably reflects the value of an individual CEO who has driven this form of organization throughout the company.

Since different people keep observing that there are these two types of  organization, I agree with Ardi that the difference is real, with the usual caveat that it is not as simple as a clean bi-modal distribution.

Is the lateral model better?

Most people are more attracted to the idea of an empowered lateral organization than a top-down hierarchy. Certainly, the argument is always portrayed as the lateral version being dynamic and emotionally rewarding whereas the hierarchical version is a bureaucratic machine that crushes the soul. One could imagine an alternative narrative where the lateral version was portrayed as weak and chaotic whereas the top-down version was an efficient machine where everyone is comfortable knowing exactly what they need to do.

We need to avoid envisioning the extreme versions of either model which are clearly dysfunctional. Hierarchy is very important even in the most democratic forms; and hierarchical forms need not be slow moving and brutal.  If we confine ourselves to reasonably effective organizations we can still see a clear difference between the lateral and hierarchical models. In this case, the academic research clearly shows the high-involvement model is significantly more effective and more engaging for the worker.

Which form is better is bound to be, to some extent,  situational. When we think Silicon Valley we think lateral, when we think Detroit we think hierarchical, however much of the high-involvement research is on traditional manufacturing firms, leading me to believe the lateral form has advantages in many industries.

Is the lateral form replacing the hierarchical form?

If we accept that in general the lateral form of organization is nicer and more effective than the hierarchical form, do we also agree with Ardi’s hypothesis that the hierarchical form, which she calls the ‘alphas’ is being swept away by  the lateral form?

It is easy to see why we hope less nice organizations are being replaced by better ones.  Husband and Ardi both feel the internet is forcing this change. Many people talk about the sensibility of the Millenials and feel they are forcing this change. However, I fear we are being swayed by wishful thinking. People have been aware of the advantages of the lateral form for many decades; maybe it will finally become the norm; yet we have to confront the fact that if destiny favoured lateral over hierarchical it probably would already have happened.

I once asked Dr. Ed Lawler, an expert on the high-involvement form, why it had not become the dominant type of organization. He speculated that it was a fragile form. It needs trust and a strong culture to work. Any crisis can knock a lateral high-involvement firm back into hierarchical mode. Lateral may be better, but if it is inherently unstable we cannot expect it to become the norm.

It is also true that while the lateral form may be better for shareholders and employees it is not necessarily better for the typical manager. The top down form is easier, often more enjoyable (people enjoy exercising power) and perhaps less politically risky. If the hierarchical model is best for managers, than we can expect it to be the dominant form.

Key Take Aways

  • It is useful to know the history of the field so that you can place new management ideas in context . Admittedly history can also be a touch depressing.
  • Be wary of being swept up by the allure of an attractive idea; take the time to break it down as I’ve done in this case.
  • The lateral form (though not in its extreme where hierarchy is seen as a dirty word) is generally better for shareholders and employees, and can be rewarding for managers.
  • There are reasons why the hierarchical forms keep recurring, they are stable and often preferred by individual managers.
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