Are hierarchies still appropriate nowadays? 

June 14, 2022 | General, Leadership and Organizational Development, Leadership und Organisationsentwicklung

I don’t know about you, but lately I’ve been meeting more and more people who say to me: “Mr. Krause, the concept of hierarchies is out of date – why are they still necessary? Now that we have a modern work environment.” 

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The word hierarchy comes from the ancient Greek ἱεραρχία hierarchia, composed of ἱερός hieros (“sacred”) and ἀρχή archē (“the beginning of something”) and referred to the organizational structures of priests in ancient times. They were ranked with each other towards the end of the 6th century BC.  

Hierarchy governs collaboration, and I would like to begin by illustrating how collaboration ideally takes place. Ideally, two people have the same goal and meet at eye level. The two know what they want from each other and continuously clarify differences in meaning if they misunderstand each other. Finding common solutions and concrete possibilities for action reduce the jointly perceived pressure of suffering when problems arise. The greater the overlap of ideas about goals and directions, the less the need for external rank and guidance. The size of the group – here IDEALLY consisting of only 2 people – makes formally assigning tasks, competencies and responsibilities unnecessary. You guessed it: such concepts are often found in start-ups, i.e. small businesses. Think of the famous “hole-in-the-wall startups” at the dawn of the home computer age.  

However, as organizations grow larger, a dilemma arises: One person can no longer decide what everyone should do, and everyone cannot tell one person what to decide. So you try to solve the problem by first considering: who supplies what to whom? Who decides and is responsible for what? But that alone is not enough. Due to the number of individual topics, it is necessary to group areas together. You remember: one person cannot tell all members of an organization what to do because of their limited time and expertise. But that one person can check with those who are responsible for other areas. The team leaders then discuss it with their employees. The need for a structure – hierarchy – has arisen. Hierarchy thus summarizes areas of responsibility. Sounds logical, doesn’t it?  

Why then does hierarchy have such a bad image? This is due to a misconception. This results from the failure to understand that management and leadership doctrine, especially in large organizations, calls for dealing with contradictions and does not absolutize extremes. What went smoothly in a start-up without coordination and with few levels of rank, because agreements could be reached before an actual structure was created, must now be regulated in large organizations across several levels. How does that work?  

Well, unlike many technical processes where a result can be achieved without compromising the required parameters – the vernacular here would say “much helps a lot” – the management and leadership doctrine combines “good and bad” in such a way that the end result is a system where transaction costs are minimal. This is supported by the individual levels, which combine areas of responsibility. But beware: there is an optimum here, too. If the areas become too large – referring to flat hierarchies – then a manager has to coordinate horizontally with too many employees; if the areas remain too small, vertical coordination losses occur between the levels. So it is not about abolishing hierarchy, but about its optimal structure. In direct cooperation, a decision is then made between self-determination and external determination. It is about autonomy in implementing tasks, but also about the formalization of competencies and responsibilities. How much autonomy is appropriate is then expressed in the management style.  

What is needed, then, is an optimum of all the values, expectations, interests and needs of those who work together. Derived from this, modern executives are called upon to address situations in which they are not “in control,” because otherwise it destroys creativity/innovation, from those in which “command & control” in the hierarchy continues to apply. Thus, leadership behavior oscillates between cooperation and enforcement of rules.

What went smoothly in a start-up without coordination and with few levels of rank, because agreements could be reached before an actual structure was created, must now be regulated in large organizations across several levels.

Frank Krause, Senior Partner, STAUFEN.AG

Therefore, we should not “throw the baby out with the bathwater” and call for the removal of hierarchies, but rather consider what dose of hierarchy makes sense for an organization. Depending on the characteristics of an organization’s individual properties (e.g. size, age, tasks to be completed), a structural optimum can be determined. 

It is important to be particularly attentive in the future when characteristics of small organizations are transferred to larger ones – as much as this may be wanted by individual members of an organization. Managers may confuse their employees and generate costs if – just to follow a trend – they implement an agile/hierarchy-free work environment with the greatest possible autonomy for a Taylorist system in a large company, which is more justified for start-ups. 

What have I been trying to convey to you so far? Management and leadership doctrine describes extremes of structure and behavior – I call them poles – between which we users search for optima in collaboration. Trying to abolish or absolutize a pole is the wrong approach. Discussions on reducing hierarchy are only useful if there is awareness that one has strayed away from the optimum – i.e., a sensible span of leadership and the best compromise between formal rules and individual degree of autonomy – and as a result the organization’s efficiency deteriorates. Then it is time to turn around and either abolish some levels and/or rules or define new ones, otherwise the company will face a crisis. 

Moderation And Author 

Frank Krause Staufen

Frank Krause
Senior Partner

Texts are never created when you’re alone. Your own thoughts are also always the result of external stimulation.

The following authors serve to inspire me and accompany me on my path to insight: Tom DeMarco, Peter Drucker, Ulrike Herrmann, Gerald Hüther, Daniel T. Jones, Stefan Kühl, Rupert Lay, Jeffrey K. Liker, Michael Löhner, Fredmund Malik, Hans A. Pestalozzi, Richard D. Precht, Marshall B. Rosenberg, Mike Rother, Friedemann Schulz von Thun, Reinhard Sprenger, Frederic Vester, Harald Welzer, and James P. Womack.

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