Fiona Smith Columnist

Fiona writes on workplace issues, including management, psychology, workplace design, human resources and recruitment. She is a former Work Space editor at The Australian Financial Review and has also covered property, technology, architecture and general news.

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Beware the flattened company as hierarchies live on

Published 21 February 2013 07:18, Updated 10 April 2013 07:40

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Beware the flattened company as hierarchies live on

Men like hierarchies more than women and won’t give up the playing field without a fight. Photo: Mayu Kanamori

When we were in our 20s, my brother worked for a large electronics firm in England.

As Australians, we wondered idly back then where a gangly, scruffy Australian would fit into the country’s famous class system.

As it turned out, class was never a problem in the geeky community in which he worked – but hierarchy was another story.

In his company, every position was plotted onto a status level and the privileges of each level were jealously guarded. Imagine being asked to read large sheets of blueprint on a too-small desk ... because he was not authorised to have a bigger desk.

Yes, his employer would like to have access to his expensive books and manuals, but could not provide him with a secure place to store them. He was not authorised to have a locked cabinet.

Think of his bewilderment and incredulity when he was told some desks had the squares of carpet cut out from beneath them because their occupants had not yet reached the status where they were authorised to rest their feet on carpet.

It was mad.

But when he came back to egalitarian Australia to work in the company’s offices here, the lunacy continued. Short of space, the company allowed one man to work from an office, but he wasn’t authorised to have his own office. So the door was removed.

Hierarchy is one of those things that divides people, literally. Although some people chafe at it, seeing it as an unnecessary and stultifying power structure, others believe it to be essential to motivate and organise people.

Canadian-born psychologist, the late Elliott Jaques argued that managerial hierarchy is “the most efficient, the hardiest, and in fact the most natural structure ever devised for large organisations”.

“Properly structured, hierarchy can release energy and creativity, rationalise productivity, and actually improve morale. Moreover, I think most managers know this intuitively and have only lacked a workable structure and a decent intellectual justification for what they have always known could work and work well,” Jaques wrote in his Harvard BusinessReview article In Praise of Hierarchy.

Jaques spent more than 35 years studying hierarchy, which he said had been abused by inept structures and attitudes.

“What we need is not simply a new, flatter organisation but an understanding of how managerial hierarchy functions – how it relates to the complexity of work and how we can use it to achieve a more effective deployment of talent and energy.

“Hierarchy has not had its day. Hierarchy never did have its day. As an organisational system, managerial hierarchy has never been adequately described and has just as certainly never been adequately used. The problem is not to find an alternative to a system that once worked well, but no longer does; the problem is to make it work efficiently for the first time in its 3000-year history.”

Many would agree that having a hierarchical structure is the most efficient way to organise large numbers of people, allows timely decision-making and that it is in tune with human psychology – the way we are wired.

However, Nigel Nicholson, professor of organisational behaviour at the London Business School, makes the point that hierarchy may suit men, but women are “wired” differently.

Nicholson, the author of Executive Instinct: Managing the Human Animal, says hierarchy satisfies our craving for status and “plays right into the hands of our ancestral primate instincts for contest, dominance, and pecking orders – that is, the traditional obsessions and addictions of men in a patriarchal order”.

Writing in a blog for theHarvard Business Review, Nicholson continues: “Men know the game, love it, and play it relentlessly:.

“Women lack the same presumptions of status – which is good and bad. They are more open to co-operative relationships and ventures; but they tend to handle authority with ambivalence.

“ ... Why do hierarchical models persist? The disturbing answer is that structures and systems are chosen by the people who prefer them and the people who do best in them: Men will sustain the systems in which they have been successful,” he writes.

“Is there hope for change? I think so. Companies that are struggling to keep up with new complexities of work and competition will necessarily have to look more closely at how they’re structured (and then at how they should be structured). In many of these firms, women will, for the first time, have opportunity and advantage.

“But men will not give up their playing fields without a fight.”

Despite our traditions of status-seeking and “pecking orders”,a growing number of organisations are experimenting with flat (or flatter) structures. The idea is that decision making should be devolved to lower levels of the organisation, to people who are closer to customers and the core business of the company.

At the same time, it empowers workers at all levels and makes them feel valued and encourages a greater level of contribution and “ownership” from everyone.

The John Lewis Partnership of department stores in the Britain has been diligent in empowering its workers, as did Brazilian entrepreneur Ricardo Semler in his Semco businesses (before stepping out to let the employees run them without him).

Some organisations allow employees to decide on what colleagues to recruit and what to pay them, some have a flat and transparent pay structure so there is no perception of pay inequality among people who do the same jobs, and others have committees stacked with employees who have a say on board-level decisions.

Reducing hierarchy certainly satisfies our modern desires for equality and individual responsibility, but even the most egalitarian of organisations still need structures to ensure that “taking out the formwork” doesn’t cause a collapse.

Research by associate professor of Business Administration at Harvard Business School, Julie Wulf, shows that flattened organisational structures can sometimes have the exact opposite effect to what was intended.

In her working paper, The Flattened Firm – Not as Advertised, she finds that even as chief executives and business leaders de-layered their companies, they centralised decision making to themselves in their efforts to “get closer to the business”.

Lower-level division managers were also paid less as decision-making was concentrated at the top of the hierarchy.

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