When Unconventional Power Shifts and Flat Firms Become More Than a Trend

Could the end of organizational hierarchies spell the future of work? Changes to work life in the COVID era are well known and intimately felt: the continuing push-pull of in-person, remote, or hybrid models; a renewed focus on employees’ physical and mental well-being; labour shortages and the phenomenon of “quiet quitting” all weigh on the minds of employers and workers alike.

Delve’s Spring 2023 magazine cover story investigates how the workplace zeitgeist has also shifted to questioning the purpose of workplace hierarchies, revealing implications for staff retention, employee loyalty, career trajectories, and company culture.

For management scholars who investigate organizational strategy, these changes spur revelatory research that seeks to answer big-picture questions with real-world resonance: Are traditional hierarchies on their way out? Is the “flat” organizational structure, with middle management reduced or eliminated, the future of work? Or is it just another temporary trend?

Answers that dig beyond the anecdotal and into the data are coming; in the meantime, the flat structure remains a major topic of discussion. Self-managed teams, agile development, even open office plans are all elements of a workplace concept based more on collaboration than chain of command.

The prospect of a post-hierarchical workplace is a double-edged sword.

The prospect of a post-hierarchical workplace is a double-edged sword, explains Desautels Faculty of Management professor Matissa Hollister, whose work focuses on organizational behaviour. “Many people, at least in the North American cultural context, find the idea of a non-hierarchical organization appealing,” she says. “The idea is that hierarchies create problematic bureaucratic structures, and take away autonomy from workers, whereas flat hierarchy creates a more enjoyable work environment.”

Hollister adds a critical caveat: “But then suddenly when people start thinking about their own careers, they want the job titles that signify that they’re moving up. How do we think about raises and recognition in a non-hierarchical organization?”

Alleviate the fallout of going flat

The flat organization is not a new concept—Delaware-based Gore Aeronautics and Defense Products has operated with cells of specialized teams replacing traditional chain of command since 1958—nor is it an idea with a perfect track record.

In the past decade, non-hierarchical workplaces have been as notable for controversy as for success. Seattle-based gaming and software company Valve, which self-identifies as “Boss-free since 1996,” attracted early buzz for its autonomous cells of workers and rotating leadership positions. But it acquired some unwanted attention in 2013, when former employee Jeri Ellsworth described the company in a podcast interview as a “pseudo-flat structure,” stating that “there is actually a hidden layer of powerful management structure in the company and it felt a lot like high school.”

The following year, San Francisco hosting service GitHub added middle management to its open structure following a sexual harassment scandal. Amazon-owned shoe retailer Zappos, meanwhile, rolled out a “holocratic” management structure in 2014, touting a philosophy of “no job titles, no managers, no hierarchy,” but has quietly rolled it back to a less radical, yet still decentralized, system in recent years.

Saku Mantere, professor of Strategy and Organization at Desautels, is not surprised by such cautionary examples. “Sociologist Robert Michels introduced the ‘iron law of oligarchy,’ according to which in any democratic system it is hard to avoid an unofficial power grab by elites,” he explains, adding that “such power tends to be more devious due to a lack of transparency. We often forget that while we may view some rules and procedures as rigid, hierarchical, and ‘bureaucratic,’ at the end of the day they may be sources of fairness, accountability, and transparency.”

How do we think about raises and recognition in a non-hierarchical organization?
Nonetheless, the flat organizational structure is back on the radar of work culture. Hollister attributes the popularity of the idea in part to the rise of individualism: “We want to value our individual contributions, and we want to have the opportunity to make our own decisions. It’s an ideal only because we don’t think about the practicalities. And the practical realities make us realize quickly how challenging that is. We all say we don’t want hierarchy and structure, but when we go to get things done, do we need them?”

Another possible reason for the renewed popularity of the concept is a newfound concern with staff retention, particularly along generational lines. How authority is exercised may be changing, even in companies who still work in a hierarchical structure. Hollister, for her part, acknowledges that “managers are always complaining about millennials quitting,” but explains that according to her research, “young workers have always moved around.”

The demise of management—trend or reality?

Power shifts and even reversals of power are no stranger to the modern organization throughout its relatively brief history, Mantere points out. In 1973, scholar Charles Perrow’s influential “The Short and Glorious History of Organizational Theory” outlined the development of organization theory from its inception in the early days of the 20^th century as a tug of war between what he dubbed “the forces of light” and the “forces of darkness.”

Mantere notes that these forces of light prioritize worker autonomy, a looser form of control, and simpler organizational structures, whereas forces of darkness favour tighter controls and the thicker layers of management that tend to follow. Rather than a progressive movement toward the “light,” Perrow envisions an eternal pendulum that swings between the two. Management trends emerge to fit wherever the pendulum finds itself at the moment.

Of course, part of the reason for non-hierarchical organizations being on the cultural radar is simply the cyclical nature of trends. “Management trends are quite powerful,” notes Simon Altmejd, a PhD student at Desautels who studies self-managed digital platforms designed to decentralize authority. “A lot of organizations adopt trendy management techniques more as a PR strategy, so that they can look good to shareholders, but in reality they may enact this management principle only superficially.”

The flat structure involves a rethink of the long-term career path for workers.

To avoid pitfalls and embrace the flat structure in a genuine and effective way, organizations may rely on clarity in workers’ roles as a way to enable workers a sense of empowerment through accountability within those defined roles.

Hollister cautions that along with the freedom of this approach comes a certain risk. “Some people call it job-crafting; they can craft a job that specifically fits their interests,” she explains. “But if we’re also talking about a world in which your career won’t stick with one organization for the whole time, what are the implications of holding an idiosyncratic job on your ability to then find the next job at the next organization?”

In this sense, the flat structure involves a rethink of the long-term career path for workers. “Traditionally, we’ve thought of career development as opportunities for promotion in hierarchy,” says Hollister. “But it doesn’t necessarily have to be that. In a non-hierarchical situation, it could be personalized to an individual—what kinds of new skills do they want to build, and how can they continue to do interesting work and have opportunities to try something new?”

Do managers still matter?

Where does Perrow’s pendulum find itself at the moment? One prominent example for the forces of light—and the drive for a flatter organization—is the recent book “Deep Purpose: The Heart and Soul of High-Performance Companies.” The book’s author, Harvard professor Ray Gulati, replaces complex structures that control employees with a shared sense of purpose that both motivates and coordinates autonomous executives and workers alike.

This sentiment is critically discussed in another impactful new business book “Why Managers Matter: The Perils of the Bossless Company.” Authors Nicolai Foss and Peter Klein offer a passionate defense of hierarchy as an efficient way to coordinate work. They argue that “bossless” organizing can work—but usually only for small firms with simple processes and employees who are attuned to the “bossless” ideal. Most firms will still need to make use of hierarchy. Managers do—and will continue to—matter, but their roles will change with the times. “What we want,” declare Foss and Klein, “is well-functioning hierarchy.”

Nobel prize winner in economics and MIT professor Bengt Holmström reflects a similar defense of bureaucracy on a recent episode of the Delve podcast in conversation with professor Mantere. “If you go back to the idea that we are seeking to be efficient, you see that bureaucracy…has to serve a very important function,” he explains. “This notion that bureaucracy is an illness? Excess bureaucracy may be an illness, but just as fever is actually a defense mechanism to something, so is bureaucracy. It can be a good idea, a brilliant solution to a very complicated problem of organization.”

Significant changes to hierarchy and bureaucracy clearly have implications for employees, but they also require serious consideration for corporate leaders. If a transition towards a flat or less hierarchical organization is on the table, the people who typically hold powerful positions must be ready to accept that their roles will also change.

Where AI fits in

New technologies also contribute to leadership challenges among a changing workplace structure.

On top of that, new technologies also contribute to leadership challenges among a changing workplace structure. Significantly, the ongoing development of artificial intelligence and machine learning poses both potential and challenges. “We could reduce the number of people involved by having a computer managing them, but I’m not sure that’s what people have in mind in terms of a less hierarchical organization,” says Hollister.

She and Altmejd both cite Uber as a cautionary tale of an environment where management is essentially automated. “Uber can enable independent workers to basically be their own boss, which is the nice part of it,” says Altmejd. “But at the same time, because of the technology and the information that can be extracted, the drivers are often controlled in their behaviour; their efficiency is tracked and they’re nudged into compliance by an algorithm.”

Hollister sees a more positive role for AI in programs that can help employees in directing their career mobility. “People are using AI to create customized career path recommendations,” she says. “There are a number of organizations that have developed skills databases that track and assess the skills of employees and match them with recommendations for training, and recommendations for where they might go next, which fits in with a less structured and more mobile approach to managing employees.”

New philosophies meet new possibilities

Some organizations might feel that rather than a wholesale reinvention of their structure, they might pick and choose elements from non-hierarchical philosophies to fit their company culture. For example, while still retaining a traditional management structure, Montreal-based software company Unito operates by a set of values including distributed responsibilities, transparency about salaries, and adjusting salaries to be more equitable.

“I had experienced the value of transparency and distributed responsibility at previous startups, so we got to bake those into the Unito culture from day one,” says Unito CEO and McGill grad Marc Boscher. “Transparency quickly became one of our most powerful attraction and retention values for staff, so we have kept building up the programs to promote it as we grew.”

In his research on companies attempting to transition to a flat structure, Altmejd has seen that “it’s easier for smaller organizations to come up with control mechanisms to replace the traditional pyramid, but for larger organizations it’s more complicated.” The same is true for companies looking to adjust, rather than replace, their structure.

While a mature organization might be slower to change its hierarchy, introducing specific new values that counter the status quo could help retain employees, attract new talent, and ultimately contribute to the bottom line. In an unprecedented time of change, making these transitions, large or small, is more possible than ever—and very likely a disruption that pays off.

This feature article is part of the Delve Magazine Spring 2023: Reworking Bureaucracy