(Illustration by iStock/siraanamwong)
How can organizations give workers more decision-making power and limit managerial and executive excess without falling back into customary patterns of hierarchy? A new paper delves into one US company to examine what happens when it replaces a traditional corporate management structure with a nonhierarchical structure based on explicit job roles—and what this dramatic change means for employees, former supervisors, and the company as a whole.
The study starts from “the perspective that authority is not something that an organization or its members have but is something that an organization and its members do,” writes the author, Michael Y. Lee, an assistant professor of organizational behavior at France’s INSEAD.
Lee formed the research question behind the paper from his early days as a Coro Fellow in Public Affairs just after he finished his undergraduate degree at Harvard University. Following the democratic philosophy of John Dewey, the program focuses on experiential training for the dozen fellows, including teaching them how to reach consensus, facilitate large-group meetings, and perform tasks without resorting to hierarchy, which Lee described as “an incredibly powerful experience with a lot of creativity.”
When the program ended, Lee worked for several nonprofit and for-profit organizations but felt their hierarchical structures were impeding their group performance. He decided to pursue a doctorate in management at Harvard Business School focusing his dissertation on the question of how individuals can manage performance across an entire organization. To study this issue, he went looking for a company to research.
Few companies have truly decentralized management setups. Zappos, the shoe retailer that Amazon bought, famously used this principle, which it called “holacracy,” but the Las Vegas-based ecommerce company turned down Lee’s request to be featured in a case study. Instead, he found another company, CashCo, which was making a formal change to its organizational structure and adopting holacracy.
The company, a producer of hardware products that manage physical and digital currency that is based in the eastern United States, allowed Lee to spend 18 months doing an ethnographic study of its management practices, beginning six weeks after CashCo made the transition to the new decentralized structure. He spent a week on-site every month for the first six months, then visited every other month for six months, and conducted a final visit. In between trips, he did virtual interviews, observed meetings remotely, and analyzed archival data.
The most surprising finding in his research, Lee says, was how much structure and collective work was required for the decentralization initiative to succeed by making roles explicit and adding guardrails around authority. This work, which included a documented and constantly updated set of rules available on an online platform, helped both former line workers and former managers to know what they’re supposed to do under the new system. Otherwise, workers were often unwilling to make decisions, while those who used to be managers weren’t ready to give up control, he says.
Companies trying to decentralize often leave the rules too ambiguous, encouraging work groups to lead themselves collectively, without clearly stripping former managers of power over their colleagues. This leads to difficulties. “I observe that after this change [to decentralization], people continued to attribute authority to the people who used to be in power, even though they no longer had it,” Lee says.
CashCo dealt with this problem by defining roles more clearly and continuously, which made workplace interactions more equal and less about the individuals involved. The company tried to ensure that it was a worker’s role that conferred decision-making power, not the person’s former hierarchical status within the corporate structure.
In a world where hierarchy is inculcated from the earliest parent-child and teacher-student relationships, it’s important that we keep experimenting with different organizational structures as the workplace evolves, says Julia DiBenigno, a professor of organizational behavior at Yale University, who recently assigned this paper to students in her organizational behavior PhD course.
Although one might expect an organization with no bosses to be more of an ad-hocracy, the study finds that decentralization requires deliberate planning and reinforcement over time, disproving the conventional wisdom, she says.
“Professor Lee shows that working autonomously—without managerial approval on every action and independently negotiating responsibilities with peers—necessitates sustained, intentional collective effort,” she says. “His research illuminates the micro-level behavioral practices essential for success in such a system, including how individuals can effectively ‘work from roles’ rather than ‘work from rank.’”
This study will inform Lee’s next research project, an examination of how a decentralized organization fared when it suddenly had to impose a more hierarchical structure to survive during the COVID-19 pandemic. The change caused some workers to distrust the organization’s commitment to an equal workplace. “Some felt it was a betrayal,” Lee says.
Find the full study: “Enacting Decentralized Authority: The Practices and Limits of Moving Beyond Hierarchy” by Michael Lee, Administrative Science Quarterly, vol. 69, no. 3, 2024.
Read more stories by Chana R. Schoenberger.