Boss-less business is no workers’ paradise

Hierarchies are everywhere, from family-run businesses to multinationals, and under the spotlight as never before. On the plus side, command chains enable control and co-ordination. They also have many drawbacks, as the British academic John Child highlights in his recently published book, Hierarchy.

Hierarchies, he writes, concentrate rewards at the top, foster secrecy and are, arguably, “a failing organisational principle” for an era in which innovation depends increasingly on ideas created by young tech workers.

They may even be bad for health. Studies of the British civil service known as the Whitehall cohort studies found that, grade by grade, these officials, the embodiment of hierarchy, had worse health and shorter life expectancy than officials ranked above them. After controlling for standard factors, the researchers attributed the unexplained gap to lack of autonomy, a known metabolic stressor. But, if hierarchy is flawed, are there any alternatives?

Blinkist, a Berlin-based business that distils non-fiction into podcasts and bite-size reads, experimented with radical self-management. When its founders quit corporate careers they planned to build a company of equals — but a pecking order emerged. Though they hired smart people, the founders made the decisions and as the business grew they quarrelled over budgets. “We were one-and-a-half years in and, ‘Oh man’, the corporate hierarchy that we’d rejected, we’d recreated,” says co-founder Niklas Jansen.

Out of frustration, they turned to Holacracy, a self-management system best known for its adoption by Zappos, the online shoe and fashion retailer. Based on teams — known as circles — in which employees guided by explicit rules design work roles to solve business problems, Holacracy tackles the conundrum of how to avoid chaos without traditional managers. When a pilot project produced a new audio product in record time, Blinkist’s workforce agreed to go all-in with Holacracy.

Two years later, the bold experiment that had promised freedom had turned into a straitjacket. “Instead of solving problems, we were spending all our time asking how do we solve them Holacratically?” Mr Jansen says. Blinkist concluded that being ruled by the book was as onerous as being ruled by a boss. “One thing we really underestimated was the step-by-step explaining required to familiarise new people with a completely different way of working. It’s so many words that you need to learn to get the whole system.”

At the other extreme are companies that claim to dispense with both rules and hierarchy and rely solely on their corporate culture. Yet, as the feminist writer Jo Freeman, author of The Tyranny of Structurelessness (1970), and the Stanford professor Jeffrey Pfeffer (2013) have respectively argued, declaring an end to hierarchy does not erase status differences. It may amplify them by serving as a smokescreen that masks how power is exercised.

Thomas Hoyland, lecturer in organisational behaviour at the University of Hull, worked for a start-up that professed to be hierarchy-free. “The founder talked of employees as owners, [staff were able to buy in], and told everyone to bring their ideas and opinions,” he says. Yet instead of putting everyone on the same footing, the lack of formal channels fostered power cliques who dominated over employees with technical expertise. “There were [influential] in-groups, and out-groups who were sidelined.”

Lindred Greer, associate professor of management and organisations at the University of Michigan, believes that hierarchy is a necessary tool, though best used sparingly. To maintain management control without causing people to bow before power she recommends “flexing” between authority and autonomy, as US Navy Seals do. In the field, the Seals obey rank, but for the debrief everyone removes their stripes. In business, that might translate to holding certain meetings off-site and playing down status. A leader might, for example, say: “I hired you because you’re brighter than me, I really need you to let me know your thoughts,” she suggests.

Flexible policies, flatter structures and job autonomy are popular with tech companies. Futurice, a Helsinki-based innovation consultancy, goes further, combining low hierarchy with a reliance on trust. Employees are taught decision-making techniques, trusted to decide their hours subject to operational requirements, and given a credit card to buy work tools of their choosing. David Mitchell, UK managing director, says that people appreciate freedom, and so “tend not to abuse it”.

Allowing employees greater autonomy does not necessarily reduce top down power imbalances, however. Nor does it limit the ability of higher-ups to abuse power — as revelations that leading tech companies imposed arbitration on victims of alleged sexual misconduct and discrimination illustrate.

An expansion of industrial democracy might improve matters, thinks Professor Child. Dividing organisations into smaller units helps foster “a sense of identity, between the top and bottom,” he writes. Likewise, co-opting employees into ownership and profit-sharing gives workers a stake in success and, if accompanied by board representation (a demand in the Google staff walkouts), makes executives answerable to workers as well as shareholders.

Not all experiments succeed. St Luke’s, a London advertising agency, operated as a co-operative from 1995 to 2010 in which employees owned equal shares and voted on issues affecting the agency’s direction. When it hit financial difficulties in the early 2000s, tensions between the leadership’s right to run the business and the ownership rights of employees erupted into a row over management-proposed redundancies.

To the relief of staff who feared deadlock might sink the agency, the leadership ultimately bypassed the voting system, but many employees saw this as a betrayal of all St Luke’s stood for. “The belief was that everyone was involved in decision-making. Now, we [the management] were saying, we’re deciding this and you’re not invited to take part,” says Neil Henderson, St Luke’s chief executive. The agency is now management owned, though employees share in the profits.

Mr Jansen says that aspects of Holacracy, such as pushing decision-making downwards, still influence Blinkist. But now he focuses more on behaviour — starting with his own — than process and structure. “Moving team A to department B on a whiteboard takes five minutes. What matters is not what’s written, it’s how people behave.”

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