The Corona pandemic has turned many traditional ideas about the structure of work upside down. From home-working days, office hours and weekly working hours to new ways of collaborating and making decisions, we have all been challenged to rethink. However, the discussions about which ways of working and which structures are good for a company have remained. At its core, the debate usually comes down to two opposing models: hierarchy versus holocracy. One notable difference between these two attitudes is their understanding of leadership. Leaders should consider the pros and cons of both models when deciding which is best for their organization and its people.
Hierarchies are closed systems in which power lies with a few. A decentralized workforce, it is feared, could lead to decentralized power networks and unproductivity. On the ground, many companies seem to find it easier to consolidate traditional hierarchical structures. Hierarchies give us a sense of order and a clear path of advancement. These are two important drivers of engagement. In certain situations, such as crises or emergencies, clear hierarchical structures can be crucial to making the right decisions quickly. But hierarchies also have disadvantages: they can be ineffective because they prevent effective communication. A command-and-control style often prevents innovation because people tend to say what the manager thinks they want to hear, rather than offering an alternative view.
The holocracy model is seen by many as the answer to corporate malaise. This is because there is no visible leadership. Instead, employees are given what they want: The ability to make their own decisions. It is tempting to imagine a world where there are no hierarchies and employees are happy. But what is the reality?
An impressive example for a flat company was Zappos, the online shoe retailer owned by Amazon, which introduced a radically flat system where there were no job titles, no managers, no hierarchies. Over the years, Zappos has returned to more hierarchical structures, but has remained a company that encourages entrepreneurship and a high degree of empowerment. According to CEO Tony Hsieh, the biggest misunderstanding was that many saw the new management structure as total chaos without structure.
Blinkist, an app developer that packages non-fiction content into short texts, also tried, and failed, because there were too many different interpretations of holocracy. When looking for new business ideas, employees were more concerned with how they would fit into the structure than the actual implementation.
In fact, hierarchies are hard-wired into our brains. Scientific research has proven this. We may complain about being led, but we need leadership to give us clarity about our roles and tasks, a sense of where we belong, and a path for growth. Without hierarchy, work can feel destabilizing. As an organization grows beyond the size of an ‘optimal tribe’, which anthropology puts at 50 to 70 people, it becomes increasingly clear that some formal levels of leadership are needed.
So, what is the right balance between too much hierarchy and too little holocracy? Business success has less to do with the structure of a company than with how you deal with people at an individual level. If you hire people to do one thing, but don’t tell them that they’ll probably have to do other things as well, it leads to dissatisfaction because people feel cheated. Everyone should know their role and accept that mistakes can happen. When everyone shares responsibility, talent tends to flourish in any environment, flat or hierarchical.
So, the question is not whether we need leaders, but how leaders can lead effectively. How they can create a vision, a culture of empowerment and a common purpose that together led to high engagement and high productivity. We should be open to a mix of both organisational models – hierarchy and holocracy – to create the leadership structure that best suits each company’s culture.