Shifting the Meaning of Hierarchy to Community

Over the last year or so, a fascinating bow wave of interest has been converging on a growing cadre of companies who appear to be doing something quite novel and seemingly new. Specifically, these organizations have apparently thrown off many of the traditional structures and processes of corporate management. Interestingly, all of these organizations are focusing on change through people first, technology second, if at all.

Though sometimes employing the language of social business, these innovative organizations aren’t just centering their efforts at rethinking their business around digital/social. Instead, they are focused primarily on fundamentally changing their thinking and behavior around work itself. This is something Hugh MacLeod noted last week that is likely to literally become one of the next big industries, albeit in a virtual sense, as we seek en masse to adapt our organizations to much faster rates of change and innovation.

Ironically, as the changes being made aren’t primarily technological but cultural, it’s the organizations which don’t have a strong or healthy culture that are finding that technology revolutions like social media are greatly amplifying their shortcomings in this regard.

Some of the notable exemplars that have been held up as poster children for this trend include Southwest Airlines, W.L. Gore, Valve, Zappos, and Morning Star. All of these firms have realized in some form a contemporary new and self-organizing way of working that pushes action, responsibility, and change directly to the edge of the organization, where workers are essentially free from unnecessary bureaucratic and political constraints to take initiative, make decisions, and act on their insight.

It’s not fully clear yet if we’re seeing the emergence of a broader trend or if these are isolated examples, but the overall success of these organizations is well-established, as most of them are leaders in their industry. Side note: By isolated examples, I mean in the traditional enterprise space. There are countless successful examples in the digital space.

So, as we try to understand these examples, I’ve wondered what is really happening in this new wave of how we manage and structure the traditional organization. Fortunately, I do believe we’ve started to get a good sense of this and it helps us understand how these ideas could possibly work. An important discussion recently of these changes by Steve Denning makes a rather convincing case that hierarchy is not exactly what’s being eliminated in these new models. Instead, hierarchies themselves are shifting from org charts, fixed responsibilities, and formal titles to a more fluid and competency-based model:

Thus I often hear it said, and see it written, that firms […] have done exactly that, i.e. “gotten rid of managers” and “abolished hierarchy.”

This is a misunderstanding. This is not what these organizations are doing or what the ongoing paradigm shift in management is about at all.

In networked organizations, where work is self-managed, there are still managers. The managers have become enablers of self-managing teams and networks rather than controllers of individuals. In those organizations, someone has to sign checks. Someone has to sign legal documents on behalf of the organization. Someone is legally responsible for what is done by the organization. That someone is a manager. A manager after all is simply someone who is responsible for getting things done. If anything is to get done, an organization has to have managers.

There are still hierarchies in a network, but the hierarchies tend to be competence-based hierarchies, relying more on peer accountability than on authority-based accountability, that is, accountability to someone who knows something rather than to someone simply because they occupy a position, regardless of competence. It is a change in the role of the manager, not an abolition of the function.

Based on my work, I think Steve’s analysis is very close, yet not the entire picture. The part that is missing is that indeed there is a broader move in many organizations towards a networked structure, one based on earned, peer recognized competency and manifesting itself in loosely-coupled, dynamically formed, and freely participative teams (pods in Dave Gray’s language.)

It’s a Community, It’s a Networked Hierarchy

However, it’s also becoming increasingly clear to me that the part of this story that is left out here is the very notion of the enterprise itself. Our increasingly antiquated view of companies as self-contained entities with leaders and workers working within rigid and slow-to-change functional silos that are also supposed to provide all the ideas and all the motive force is no longer effective or accurate. In fact, the single most disruptive force shifting hierarchy is the same force that is also expanding the meaning of hierarchy beyond the boundaries of the organization.

This force is community, and by that I generally mean online communities, although their incarnation in the digital is not always required, as we clearly see from the examples above. I’ve long believed that communities are moving to the very center of our organizations — this means operations, structure, and yes, even business model — and it’s really the community model that is being replicated in today’s new corporate hierarchies.

What does this shift mean to businesses, specifically? Functioning organizations will soon rely on, as they already do to hundreds of organizations today, communities that will deliver essential capabilities to the enterprise that used to be intrinsic to self-contained organizations: Marketing, advocacy, pre-sales support, product development, customer care, operations, and other functions. There are excellent examples of community-centric versions of all of these functions happening at scale in traditional enterprises.

So while I do find it quite interesting when we look at new models for recasting the classical notion of the workforce — and look at the classical workforce only — it’s essential that we don’t merely regard the subject through the myopic lens of the old org chart. Instead, we must use the deeper understanding that networked organizations are hybrids that fully merge traditional workforce and online community. Again, the more transformative examples seem to focus on the people more than the technology, though the latter — especially social technologies — does seem vital, as long as it’s not put first.

Implications of Networked Work Hierarchies

The move to networked models of work therefore appears to imply the following:

• A network of self-interested people organizing dynamically around what needs to be done is more efficient and effective. Forcing work down only through traditional hierarchies produces poorer and much more costly outcomes. This assumes of course, that there are tools, education, and organizational structures to enable the former. Again the evidence is clear that peer production is a richer — if sometimes less predictable — and far more scalable and agile way of working. Therefore:
• Greater business value is created with least overhead or friction by self-interested and engaged communities. Organizations that try to “do it all” with their own workforce simply cannot compete.
• The individual/organizational bond is steadily becoming the individual/community/organizational bond. Community is a new emerging construct between our institutions and individuals. Like most major changes to the world, this is neither a complete nor total shift, but a gradual change in the center of gravity. Thanks to Harold Jarche, for a summary of his ideas that helped crystallize this particular insight for me.

Consequently, the enterprises that don’t fully appreciate they are now part of a much larger and richer system-of-systems of people — and redesign themselves around this new reality — will increasingly be at risk. To survive, our organizations must pro-actively seek to efficiently ramp up participation in the richer, shared outcomes that only the productive entanglement with communities — internal and external — can produce.

Finally, if you’re not sure this is a big part of our business future, we have only to look at the mass dislocation that the collaborative economy is producing in so many industries, where communities are at the very center of the business model, to see that this is actually happening today and widely.

Related: Rethinking How We Transform Our Organizations for the Future