HIERARCHY IN COMPANIES: WHAT IT IS, EVOLUTION, AND HOW TO OPTIMIZE YOUR ORGANIZATIONAL STRUCTURE

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There was a time when every organization had the same organizational structure: a vertical hierarchy, with a small leadership team at the top, many employees at the bottom, and others at various levels in between. But the hierarchy in companies with this pyramid structure, with different levels of autonomy, is not always the most appropriate.

Today, when the creativity and technical skills of some workers give them equal power to management, some managers are trying to reshape corporate hierarchies. The horizontal organizational structure has few or no middle management levels between employees and founders and has been increasingly used in companies.

Evolution of hierarchy in companies

Hierarchies seemed to work before because companies used simple production processes in low-change markets and there were no innovative competitors. When production was simple, managers could realistically micromanage the company and treat workers like robots. But with advanced and highly specialized production, micromanagement is simply not possible.

So the role of management is changing. It shifted from “command and control” to its value-creating role: a production enabler by coordinating, organizing, and supporting the operation of the company as a whole. As a result, the horizontal hierarchy has become predominant in companies, especially startups.

What is the horizontal hierarchy?

The horizontal, or flat, hierarchy is an organizational structure in which everyone has a voice. The horizontal hierarchy does not eliminate the manager’s final decision but opens it up for others to also participate in the decisions, being a way of transforming the organization into a more respectful and mutually helpful environment.

It is important to emphasize that this type of change does not only seek to keep employees happy but also to improve team performance and promote better results.

Thus, it is possible to take full advantage of the potential of each employee, with positive impacts on the productivity of the company as a whole.

How to make a horizontal hierarchy?

Here are three ways entrepreneurs can institute and maintain a productive, horizontal organizational structure:

  • hire good people

By “good” people, I don’t mean those with the best CVs or those who can sell themselves in 15 seconds during an interview. Good collaborators are reliable and self-motivated.

  • Practice management by trust

Encourage trust in your work environment by delegating decision-making to capable individuals or groups and creating room for error. How people recover from setbacks depends on their beliefs about learning and intelligence. Those who perceive intelligence over effort learn from mistakes and emerge stronger than before. When you trust your team to forge their own paths, they become more motivated.

  • be transparent

Show your activities, including your flaws and problems, and let employees know that they are part of the decision-making process by seeking your advice. You will be transparent and earn their trust as well. You don’t have to share everything, but the secrecy and exclusion of all aspects of the company don’t give you the feeling that “we’re all in the same boat”.

The success of your company or team comes down to everyone’s ability to create “moments of truth” in every interaction. To make these moments effective and valuable, you need to employ innovative, empowered, confident, and responsible individuals – not managed robots.

Is the Holacratic model of the hierarchy an option?

In 2013, Zappos CEO Tony Hsieh made the announcement that the hierarchy at his company would shift to a model he calls holakratic. This transition accelerated in 2015 when the management system was finally overhauled.

It replaces today’s top-down prediction and control paradigm with a new way to gain control by distributing power. It is a new “operating system” that instills rapid evolution in an organization’s core processes.”

And he completes his explanation: “In a city, people and companies are self-organized. We are trying to do the same thing by moving from a normal hierarchical structure to a system called Holacracy, which allows employees to act more like entrepreneurs and self-direct their work, rather than reporting to a manager who tells them what to do.”

Zappos identified individual autonomy and entrepreneurship as a priority in its performance and therefore sought to prioritize this method in its business.

Communications and organizational elements can be centralized with the help of technology.  The difficulty is getting this system to work effectively. An open job market, where people can look at available work and gravitate towards the tasks they want to participate in, allows people to focus on the types of tasks they feel most motivated to do. This is part of Zappos’ overall desire to identify each individual’s strengths and make the best use of them.