Even a well-meaning company hierarchy can quickly become bloated, rigid, and inflexible.
Find out which techniques the best management thinkers use to keep a hierarchical organization from taking over.
Lester Tenney was a Japanese prisoner of war (POW) during World War II. He was held at a POW camp in mainland Japan.
Tenney explained to Clifford G. Holderness and Jeffrey Pontiff, two Boston College management scientists, the importance of trading in POW camps. “I was willing to gamble my life to trade for food,” said Tenney.
Nausea and sickness often interfered with a POW’s ability to stomach his food. That meant spoiling rations, a disastrous outcome for already physically deteriorating soldiers. Trading gave sick POWs the ability to exchange current rations for future ones once they got better.
The Japanese captors expressly forbade trading among and with the POWs. Punishment was severe.
The hierarchical organization of the soldier-prisoners could have adapted to facilitate, endorse, and hide trading from their captors. They didn’t. Instead, bizarrely enough, the military officers in the camps often interfered with trades, with some going so far as to enforce the Japanese prohibition on trading.
Keep in mind, these were American and British officers enforcing the rules of their sworn enemy.
Here’s Robert I. Sutton and Huggy Rao explaining the consequences of an inflexible hierarchy organization in their 2014 business book, Scaling Up Excellence (emphasis mine):
The results were striking: prisoners in the most hierarchical camps suffered a death rate about 20 percent higher than their counterparts in the least hierarchical camps. Traditional hierarchies are effective given the need for quick and coordinated action on the battlefield. But they are too rigid given the flexibility and individual judgment required in prison camps. Captured senior officers who automatically replicated and clung to the traditional military mindset created inferior organizational structures compared to those officers who realized that a different model was required (and then acted on such beliefs).
Lester Tenney was caught trading. His Japanese captors sentenced him to death by beheading. He only talked his way out of it by wittily confessing to the camp commander.
Others weren’t so lucky. And stiff, inflexible American and British military hierarchies in POW camps didn’t help.
What is it about hierarchies that can make otherwise intelligent, resourceful, and nimble-minded individuals act so rigid and dumb?
Big Dumb Company Hierarchy
Here’s Sutton and Rao again from Scaling Up Excellence:
As organizations and programs expand and age, they often propogate ever more convoluted procedures and processes. Ballooning brigades of administrators must justify their existence. So they busy themselves by writing more rules and requiring colleagues to jump through more hoops—stealing bandwidth, effort, and willpower from more essential work. In the worst cases, the result is “BDC” or “Big Dumb Company” disease, as venture capitalist John Greathouse calls it.
Big Dumb Company disease infects and leeches precious brainpower from your organization. It’s the bane of business hierarchy—a self-perpetuating bureaucratic system that is only concerned with its own sacred processes.
This won’t stand. This can’t stand. Not for long.
If we’re serious about improving our organizations and our companies, then it’s not okay to sit around and let Big Dumb Company disease take over.
Everyone from the lowest level front-line employee to the C-suite executive has a hand in preventing and treating Big Dumb Company disease.
BDC stifles innovation, robs talented employees of their opportunities for autonomy, mastery, and purpose, and can often lead to a fatal misalignment of an organization’s mission and its actual practice.
We can’t claim to want to work for better employers on the one hand and then tolerate, aid, and abet abusive, bloated, and inefficient administration on the other.
The Hierarchical Organization’s Biggest Problem: Big Dumb Companies Don’t Innovate
Because I’m a venture capitalist, people often ask me why big companies have trouble innovating while individuals and small companies don’t. The answer is pretty simple. Innovation always starts out looking like a bad idea. Big companies have plenty of great ideas, but they don’t innovate because they need a whole hierarchy of people to agree that a new idea is good in order to pursue it. If one person figures out something that’s wrong with an idea—often to show off or to consolidate power—that’s usually enough to kill it.
— Ben Horowitz, author of The Hard Thing about Hard Things, in remarks at Columbia University on March 4, 2014
The Ellsberg Paradox says we prefer known probabilities over unknown risk/reward ratios. For a Big Dumb Company, the current product, the current service, the current business model is known and therefore safe—to get big in the first place, BDC had to be good at making and selling this one main thing.
But as it gets bigger, as the layers of bureaucracy set in and calcify, it gets harder and harder to move forward into the unknown. Every “new” idea looks like a tired spin on an old one.
Seth Godin thinks one of the problems is trying to please a person who’s not in the room (emphasis mine):
One reason organizations slow and stumble is that teams of well-meaning people form committees and go to meetings, determined to please the boss.
What they do, instead, is assume that the boss is far more conservative than she actually is. They buff off the edges, dilute the goodness and quench their curiosity. They churn out another version of what’s already there, because they’re imagining the most risk-averse version of their boss is in the room with them.
Godin’s solution: Have leaders who continually asks, “is this the most daring version of your work?”
But how many of our business leaders actually have that kind of courage?
Big vs. Small Company Hierarchy Executives
In The Hard Thing About Hard Things, entrepreneur and venture capitalist Ben Horowitz explains what it was like to be an executive at a big company (emphasis mine):
As a result, I spent most of my time optimizing and tuning the existing business. Most of the work that I did was “incoming.” In fact, most skilled big company executives will tell you that if you have more than three new initiatives in a quarter, you are trying to do too much. As a result, big company executives tend to be interrupt-driven.
In contrast, when you are a startup executive, nothing happens unless you make it happen. In the early days of a company, you have to take eight to ten new initiatives a day or the company will stand still. There is no inertia that’s putting the company in motion. Without massive input from you, the company will stay at rest.
A corporate hierarchy of organization is useful when it clarifies relationships. It’s helpful to know who you’re ultimately accountable to in an organization.
However, corporate hierarchy becomes a detriment when layers of permissions and processes allow executives to abdicate responsibility for having a vision and executing.
No one succeeds in an organization without a mission or a purpose.
Even agile, self-organizing teams need leaders. Leaders remove roadblocks and provide vision. A corporate hierarchy that encourages interruptions and countless coordination meetings doesn’t make for a good environment for leaders to emerge.
So what is the opposite of a rigid, hierarchical organization?
Meet the decentralized organization.
Reject Corporate Hierarchy of Organization Altogether? The Decentralized Organization
Coordination theorist and MIT professor Thomas W. Malone is a big believer in the power of decentralized organizations. In The Future of Work, he posits that many of the buzzwords used to describe the organizations that will succeed in this new world of work (like self-organizing and emergent) are all getting at one central concept: decentralization.
Let’s define decentralization as the participation of people in making the decisions that matter to them. In this sense, decentralization means roughly the same thing as freedom.
This isn’t merely kicking operational decisions down the corporate ladder (the fancy word for this is “delegating”). The power in a truly decentralized organization emanates from the bottom up, not the top down.
If all the member of an organization were in control, how would things look?
Would workers fire their own managers? Executives? Suffice it to say, I don’t think they’d be paying failed C-level executives $58 million dollars to go away.
How do you guide the fate and direction of a company without lapsing into rigid, nonsensical corporate hierarchy?
How the Guardrail Strategy Can Disrupt the Traditional Organizational Hierarchy (Without Descending Into Chaos)
Back to Scaling Up Excellence: Sutton and Rao introduce the idea of the Guardrail Strategy to alleviate the problem of scaling up any kind of organization.
Their point? Organizations can (and should) use a Guardrail Strategy when replicating their processes and systems—without stifling local innovations and creativity (emphasis mine):
The key to using the guardrail strategy is specifying as few constraints as you possibly can—picking those precious few that matter most and pack the biggest wallop, and then leaving people to steer between and around them as they see fit. Keeping the list of constraints short also reduces the burden on leaders and teams that are charged with scaling, and on frontline employees who are asked to live the new behaviors and beliefs.
The POWs in the Japanese prison camps of World War II would have been better off with leaders who understood and used the Guardrail Strategy.
Instead of hopelessly enforcing rules and procedures that were detrimental to their own men, American and British officers could have set up Guardrails—don’t turn on each other, don’t collaborate with the enemy, help each other survive—and allowed their soldiers to implement the strategy and exercise their own judgment as they saw fit.
To be clear here, I’m not blaming military officers who were facing impossible-to-imagine hardship and conditions. What’s apparent from the research is that more POWs might have made it home if the rigid, inflexible organization hierarchy of the military adapted to the chaotic, uncertain, and ambiguous circumstances present in the prison camps.
The harsh reality is our businesses act and react in situations more like the POW camp than the swift, coordinated, and thoughtfully planned world of military organizations.
What can you do right now to challenge your company hierarchy?
The top drawing depicts an American POW giving water to a fellow soldier at a WWII prison camp run by the Japanese. The artist is Benjamin Charles Steele, himself a former prisoner of war.