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February 18, 2005

The Flattening of Almost Everything #1: Organizations

We used to need hierarchies because we had only primitive communication and information processing capability.  Computers, electronic communication, and particularly the Internet have made it possible to flatten almost everything.  Flat organizations, which is what I’m blogging about today, are necessary to deal with accelerating change.

Large organization used to need to be hierarchical in order to accomplish the dissemination of orders and the collection of information.  That meant that, the more people there were at the base of any organization, the more levels of hierarchy were needed.  Even an organization whose only purpose was informational such as a phone chain to pass the word about school closings needed to be hierarchical in order to be effective.  I no longer have kids in school but I assume the phone chain is gone.  Parents can go on the school’s web site or get an RSS feed or a mass email or a mass text message on their cell phones (or the kids’ cell phones) or something like that.  If not this year, then next.

Hierarchy had plenty of drawbacks.  Excessively hierarchical authority usually evolves with hierarchical command flow.  Each layer in the hierarchy distorts directions and information going down and filters information and questions going up.  Each step in the hierarchy takes time.  A missing or defective node near the top can have catastrophic consequences.  Most important, horizontal communication outside of a local group is nearly impossible in an hierarchical organization because that communication needs to flow up and down the chain of command which believes it has better things to do than help lower-level types communicate with each other.

So the good news is that those of us who are technically enabled are not dependent on hierarchies for information anymore.  When I was at Microsoft in the early 1990s, there were 10,000 people in the company but relatively few levels in the chain of command.  At one point I worked for Mike Maples who worked for Bill Gates.  Development managers worked for me, group leaders worked for them, and then there were the programmers, program managers, and marketing people who did the real work of the product group.  In smaller groups there were even less levels. 

But, even more important than the fact that there were few levels, was that information flow did not follow the hierarchy.  We used email (not the Internet yet, but email).  billg could write to anyone or everyone in the company.  Anyone could write to billg – and usually there’d be an answer.  Ideas weren’t truncated by bureaucracy.  Bill’s vision wasn’t muffled by intervening nodes.  Sometimes, as managers, we yearned for the stability of a little more hierarchy and a little less anarchy – but we didn’t get it and probably wouldn’t have like it if we had.

When I came to AT&T in the mid 90s it was still extremely hierarchical – the organization, not surprisingly, ran on phone and phone mail just as Microsoft ran on email.  In the management ranks, there were at least four levels of officer and then five levels of non-officer management below designated by letters A thru E in ascending rank.  Below them were the unionized work force in that parts of the company where there actually were workers.  The names of the ranks reflected their origins – the Es were division managers, the Ds were district managers, the Cs were branch managers – or something like that.  I never could get it straight.  The hierarchy made sense when it was developed.  But, in the information age, it could be stultifying. And information flow did follow the hierarchy and was impeded by it.

As I blogged yesterday, the frequency of disruptive technical change is increasing.  Markets and competition are also changing rapidly – look at what’s happened in India and China recently.

In my experience, flat organizations with non-hierarchical information flow are better able to survive or even thrive on change than those in which information is impeded as it flows through structured nodes.  Direct communication between individuals is both quicker and more accurate than nodal information flow.  Remember the child’s game of telephone where a message passed mouth to ear around a circle is inevitably distorted beyond recognition even in a small group.  Even worse, the nodes in a hierarchy - who are, after all, people - deliberately filter and distort information to protect their positions in the hierarchy.  There is inevitable confusion of purpose between protecting the hierarchy and protecting the organization.  We are primates and we do care about pecking order.

To say that change is a constant is a gross understatement.  Change is a fractal that only the flattest possible organizations with the best information flow can deal with.

One implication of the flattening of organizational hierarchies is the demise of vertical integration and implications for telco mergers.  I have also blogged on the flattening of information hierarchies.

The flattening of bureaucracies is a particularly satisfying special case of hierarchies being flattened.  I blogged about some hopeful signs in India.

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