At the end of 2013, Zappos, the billion-dollar online retailer, announced it would rid itself of managers and internal bureaucracy by adopting “holacracy,” a management philosophy developed by a 35-year-old programmer that emphasizes flat organizational structures. The company spent a year transitioning over to the new holacratic structure and then, in March of last year, its CEO sent a lengthy but clear message to all of its employees: get on board with the new system, or get out. Within a month, 14 percent of its staff had chosen to leave.
For Adam Galinsky, Zappos’s story cuts right to the heart of human psychology and one of the core challenges for businesses today: how much hierarchy is the right amount of hierarchy?
Research on organizational structure in the past few decades has produced mixed results, demonstrating both the superior creativity of flat organizational structures — championed, unsurprisingly, by many in the innovate-or-die world of technology — and their relative failures in execution compared to more stratified organizations. For Galinsky, the reason for these differences might be as simple as the difference between basketball and baseball.
“Think about when LeBron James went to the Miami Heat,” he says. “Right away, it was Wade’s house, LeBron’s kingdom, and Bosh’s pit. Who’s the leader there?” The answer to that question makes a critical difference in basketball, where close coordination is essential and decisions made by individuals impact the entire group. In a team stacked with talented players like the 2010 Miami Heat, status conflicts can impede the sharing of critical resources — like the ball — as each individual competes to be the star.
By contrast, Galinsky says, “baseball doesn’t require a lot of coordination, just a lot of talent.” With batters taking turns and players spaced out across a large field, the need for management in baseball is dramatically reduced. “When people are really independent from each other during their performance, more talent is better; people can work individually, and hierarchy isn’t very important. In the history of baseball there have been maybe four managers who have performed better than the raw talent of their teams would suggest,” Galinsky asserts. “That’s not a lot.”
”The more human the task — the more it requires complex decision making in dynamic environments, and integrating information and perspectives that could come from anywhere and everywhere — the more hierarchy hurts.”
The lesson for managers, however, isn’t simply that they need to figure out whether they’re playing basketball or baseball, but rather when they’re playing each. Galinsky points to IDEO, the California-based design consultancy, as an example. “IDEO has virtually eliminated hierarchy in the early stages of idea development,” he relates. “But when it comes to evaluation and implementation, hierarchy re-enters. In these stages, we need division of labor, and someone has to be in charge.”
For most organizations, then, the solution to the problem of internal organization won’t be selecting the right level of hierarchy for the business, but the right level of hierarchy for each task, and, just as critically, managing their teams through those transitions. “Hierarchy really helps when teams are particularly interdependent, when the choices of one individual affect the outcomes for everyone else,” Galinsky says. “But, the more human the task — the more it requires complex decision making in dynamic environments, and integrating information and perspectives that could come from anywhere and everywhere — the more hierarchy hurts. The challenge for business leaders will be to capture the benefits of both flat and vertical structures.”
About the researcher
Adam Galinsky is the Vikram S. Pandit Professor of Business at the Columbia Business School.
Professor Galinsky has published more than 200 scientific...Read more.