The stifling bureaucratic version of hierarchy is crumbling. Individuals in this new age of connectivity have acquired greater power to make a difference. They have access to information and knowledge. They can produce their own content and share it widely across borders, set their own objectives and goals within the overall corporate strategy. They can think and act freely!
Corporate leaders in the 21st century are faced with a real challenge – that of losing control, while remaining responsible for the well-being of their organisations, both in the short term and over the long haul. This counter-intuitive suggestion recognises that power and control are vital elements for any enterprise to function. However, where they reside and to what extent they are shared, is what makes all the difference. It is ultimately fatal for any organisation’s levers of power and control to remain concentrated mostly at the top. Instead, power needs to be distributed appropriately in the organisational structure, in a way that reflects the realities of the market environment of the firm.
Clinging to the past is futile. The old command and control model is failing, particularly in industries where customers value speed of response, and have little patience for outdated processes that frustrates overall efficiency. Thomas L. Friedman has this to say about past practices seducing us: “In societies that have more memories than dreams, too many people are spending too many days looking backward. They see dignity, affirmation and self-worth not by mining the present but by chewing on the past. And even that is usually not a real past but an imagined and adorned past. Indeed, such societies focus all their imagination on making the imagined past even more beautiful than it ever was, and then they cling to it like a rosary or a strand of worry beads, rather than imagining a better future and acting on that.”
Letting go will remain a dream for top leadership, until such time that they decide to act according to the new times they live in. Among the many bad corporate habits, one that visibly lingers even now is the rigid corporate hierarchy which is supported by insecure managers and supervisors. They live in fear, which stems either from extreme reverence of their seniors or the prospect of them getting fired for making mistakes. Fear paralyses thought and kills creativity in people. Bottom-up and lateral communication reduces to a trickle and strategic planning suffers as a consequence. In a climate of fear, managers don’t dare to question directives from above, even when they are aware that a blunder is being committed. They would much rather save their jobs than to risk offending their seniors.
Can we do away with hierarchy altogether? Not really, particularly when you consider that hierarchy is something profoundly natural. It is a general principle of complex structures. Hierarchy emerges almost inevitably through a wide variety of evolutionary processes, for the simple reason that hierarchical structures provide stability. If this is so, then why question its prevalence? Our world is changing. Our business environment is radically different from what it was 20 years ago. Businesses need to adapt to the changing market dynamics.
Size is no longer the basis of uniqueness, strength or endurance. Instead, organisations that are thriving in today’s globalised economy are those that are fast, focused and flexible. Customers have a choice in many industries. They will take their business to organisations where their needs are met swiftly and accurately. A sure way to retain and grow your customer portfolio is to truly empower your people to make decisions at levels where it matters.
Let’s quickly examine the transformative impact of technology in the recent past. The late 19th century had established the transportation and communication infrastructures that made possible economies of scale that paid for engineers and other professional information-workers. Many developments that we now take for granted were largely unimagined. Computer networking hardly existed. In the middle of the last century, the collapse of communism was literally unimaginable, and so was the collapse in cultural respect for hierarchy that accompanied it. In the ‘60s, organisations could still be conceptualised as stable, self-contained organisms whose components did diverse things. Managers served largely as conduits for information, managerial accounting was poorly developed, outsourcing was not practical in most areas, business cycles were severe, and large inventories compensated for poor communications along supply chains.
Phenomena such as de-layering (the cutting-out of excessive layers of hierarchical organisation) and outsourcing (buying from others every product and service that the organisation has not specialised in making) have been attributed in part to the greatly enhanced capacity for relationship-at-a-distance that computer networking affords. Precisely because hierarchy is spatial, it does not fit well with the networked world, which shrinks and shortens distances.
Technology has long been part and parcel of political culture as it shifts power from the few to many. Retreating from the theme of hierarchy, means we entertain the idea of self-organising dynamic systems that technology has made available. In fact, the idealised market model is now culturally associated with dynamic systems. What we are faced with today is the classic conflict between hierarchies and markets.
Cultural fashion swings back and forth between the two sides of the coin historically, both because of changes in the environment (such as the development of the hierarchical capitalist firm) and because of changes in ideology (such as with the fall of Communism). But if we back away from questions of fashion and focus, we can see in historical context the profound complementarities of the two diametrically opposing forces, as well as the genuine complexity that each approach attempts to paper over.
We need both – the hierarchy and the dynamic and empowered systems. These need to work in tandem. Hierarchy providing the needed framework for good corporate governance, while corporate culture characterised by devolution of power and participation ensuring business success. The challenge is to make both work…just like finding a balance between reason and emotion.
ICI Pakistan (now AkzoNobel/ICI) is an example to consider. This company, before Azhar Malik’s appointment as Chief Executive in Jan 2002, was continuing to operate in a classical, top down fashion, while the market place was fast changing. The Late Azhar Malik, in his short tenure of a year and half, injected new energy. He empowered employees, invited their participation by opening formal and informal channels of communication. His brief era has left an indelible mark in the company’s institutional memory. In his time, ICI Pakistan was rejuvenated and became more dynamic and responsive to the demands of the increasingly competitive market. Efforts to develop and empower people continue to this day.
A major rethink is needed in the way companies and organisations in Pakistan are structured, managed and led. Mary Parker Follett expresses the challenge aptly, “Leadership is not defined by the exercise of power but by the capacity to increase the sense of power among those who are led. The most essential work of the leader is to create more leaders.”