Talent Management

Office Hierarchies – Which One Is Best for Your Business?

March 27, 2013 Charles Coy

It's a tale of two hugely successful companies known for opposite management styles: Apple grew into one of the world's largest companies in part due to the top-down approach of its erstwhile founder Steve Jobs. Google, meanwhile, is famously democratic, allowing employees to cherry-pick what they do and for whom they work.

As the story of these two tech giants shows, company hierarchies can vary widely--even within the same industry. Some, a la Apple, are considered "tall," or "vertical." In these types of companies, there are rigid hierarchies with multiple management layers and explicit lines of responsibility. In "flat," or "horizontal," organizations similar to Google, employees are given more responsibility for a company's success. Job titles are often non-existent. There are very few layers of management. Executives regularly talk to interns working nearby in an open space free of corner offices and closed-off cubicles.

Both management structures are proven winners. But how do you know which one--"tall" vs. "flat"--is right for your business?

The answer, according to Dr. Richard Ronay, a professor at Columbia Business School and author of The Path to Glory Is Paved With Hierarchy, “comes down to an organization’s goals and the characteristics of their leaders." If your company relies heavily on coordination for its success and is thus "interdependent" on each team member doing his or her job, then it may be critical to have a well-established hierarchy with clear lines of responsibility. If your company depends on the sum of each employee's "independent" contributions, then a horizontal model may be the best fit.

Ronay borrows from a Kellogg School of Management study when he likens the difference between "interdependent" and "independent" companies to the difference between a basketball and a baseball team. Winning a basketball game requires players to work together, passing the ball and trusting that everyone is doing his or her share. On a baseball team, however, hierarchies don't matter as much. 

"Basketball teams rely heavily on coordination for success," explains Ronay. A baseball team's success, on the other hand, is "based on the sum of individual contributions"--say, the pitcher throwing the ball, the shortstop fielding the grounder and the first baseman catching the throw for the out.

So are you a basketball or a baseball team (or a cricket team, perhaps)? Here are some critical factors to consider when deciding which management structure works best for your business.

The 'Flat' Structure: Good for Ideas, Bad for Egos

The overriding management philosophy here is: less is more. Flat organizations strive to minimize decision-making by cutting out unnecessary middlemen. “When the company functions from ideas and innovation, a flat organization structure works better because you are tapping into everyone’s creativity,” says Dana Griffin, author of Tall vs. Flat Organizational Model. The big advantage with this model is that it welcomes and encourages different perspectives, which leads to more honest insights about a company and its direction, she says.

On the downside, however, the more decentralized the company is, the more room there can be for conflict as multiple workers jockey for leadership roles. Ronay's research shows that groups populated by dominant personalities in a “flat” hierarchy were more prone to conflict, often speaking over one another or promoting their own ideas relentlessly. But here's the catch: teams with too many passive employees don't work either since no one wants to take ownership of projects. Productivity suffers as a result.

The 'Tall' Structure: Good for Egos, Bad for Communication

In companies dominated by strong personalities and those populated with less-assertive types, an established hierarchy might be more successful, suggests Griffin. Top-down management provides employees with obvious lines of responsibility and clearer career paths. Type-A and other strong personalities that thrive on structure and guidance often do well in tall organizations, she says.

Another factor for companies to consider is the nature of their business: tall management styles work best for companies that require consistent policies and practices because their products or services are potentially life threatening (think hospitals or airlines).

Among the biggest drawbacks to tall structures, however, is slow communication. Companies with multiple layers of management are often bigger and slower to adapt to changes in the marketplace. Even Steve Jobs, as irascible and domineering as he was, recognized that, according to Ronay, by acknowledging that companies need to be "run by ideas, not hierarchies." Leaders of all types of companies and organizational structures need to foster some level of creativity. Workers in companies managed from the top down need to feel comfortable about speaking up, especially if it's to warn about potential harm to the company and its ability to achieve its goals.

Open communication among employees, in any organizational structure, is critical.

What works (and doesn’t) in your organization when it comes to hierarchies?

 

Photo credit: bonkersworld

About Charles Coy

Charles Coy is responsible for getting the word out about Cornerstone as a company, as well as evangelizing Cornerstone’s innovation in talent management technology solutions. Charles continues to be interested in the ways that technology can impact how... more

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