Rethinking Hierarchy

We need to reconceive managerial authority for today’s business environment not eliminate it.

- Nicolai J. Foss and Peter G. Klein

FOR ALL THE HYPE AND PROMISE SWIRLING AROUND the idea of eliminating management to create agile, flat organizations, bosses and corporate hierarchies have remained extremely resilient. As we argued in the pages of MIT Sloan Management Review in 2014, under the right conditions, having such hierarchies in place is the best way to handle the coordination and cooperation problems that beset human interactions.’ They allow human intelligence and creativity to flourish on a larger scale. They provide a larger structure, with predictability and accountability, for specialists to do their work.

But that doesn’t mean traditional, command-and-control organizations are right for today’s environment. We see a confluence of business and social trends influencing the development of new kinds of hierarchies. Rapid technological progress, instant communication, value creation based on knowledge rather than physical resources, globalization, and a more educated workforce require us to rethink how we wield managerial authority. Meanwhile, individual views on politics, religion, and culture also inform our attitudes toward hierarchies such as whether we value autonomy or admire authoritarian figures. All of these factors point to a new, different role for hierarchy to play in meeting the challenges of the 21st century.

The key challenge for designing and operating hierarchies today and tomorrow is to balance two opposing forces. The first is the desire, common to us all, for empowerment and autonomy, which helps companies mobilize employees’ creativity and exploit their unique knowledge and capabilities. The other is the need particularly in environments characterized by rapid change and interdependent activities across the enterprise to exercise managerial authority on a large scale.