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Fuelled by fierce competition for talent, there is a growing trend towards horizontal management in the workplace. What are the benefits? And how should executive leaders go about creating a flat, open culture that works well for their business?
The streaming service Netflix does not track how many hours employees work each day, nor how many holidays they take. “We leave it up to people’s own good judgment,” explains Netflix’s Allison Satterlee. The company is a well-known example of the ‘flat’ organisations that have become so popular in the last decade.
For Netflix, the magic formula was a simple and compelling message: the only rule is that there are no rules. What’s your expense allowance for a business trip? You decide. Who will sign off your project? Nobody – it is up to you and your colleagues to determine whether it meets quality standards or not.
It is a message that ties in perfectly with how younger members of the workforce view their ideal workplace. According to a 2015 survey of millennials (those who reached adulthood around the turn of the century), a towering 83% prefer a flat, transparent and flexible way of working.
Horizontal management is by no means a new phenomenon. After all, even seventeenth century pirates democratically elected their captain and wrote their ‘constitutions’ collectively!
Coming up to date, technology companies were among the first to pioneer a horizontal approach to leadership, as a selling point for future hires. One of the reasons for the pivotal shift in management economics was the looming deficit in digital talent. With the rise of digital, it is no coincidence that horizontal leadership and similar ideas are firmly on the agenda.
Since fewer management roles are needed with a flatter structure, organisations enjoy greater agility and can more easily empower their employees.
Recent data by PageGroup show how companies are struggling to attract and retain tech candidates, with a clear shortage of Java developers in all major European Markets. For example, in October 2017 in France there were twice as many job adverts for these roles as there were candidates.
“The ratio shows there is a clear need for businesses to create the right environment for employees, instead of focusing on the right environment for managers,” says Matt Mowlam, Global Digital Director of PageGroup.
Tech companies embracing a more horizontal structure are using digital tools to support this new way of managing. Google has introduced Google Moderator, a tool that allows anyone to ask a question during a worldwide online meeting and enables all employees to vote for which questions they would like answered. Twitter, Facebook and Nextdoor have similar online Q&A sessions with their employees.
However, for every success story, there is a corresponding example of a business that has hit a roadblock and returned to a more hierarchical structure. Why then do companies continue to invest in flattening their organisation when there are no guarantees of a smooth transition?
The reason is simple: there are huge gains to be made in innovation and agility. The big tech players know that their future depends on employees who can help develop new products and services to meet competitive demand.
Matt Mowlam adds, “A flatter structure empowers employees, but it doesn’t stop there. Since fewer management roles are needed, the model is highly cost-effective and has the added impact of making the organisation leaner and more agile.”
These are compelling arguments, and for organisations committed to a flatter internal structure it becomes a question of not if but how.
It’s worth noting that, as always, one size does not fit all. In ‘The Future of Work’, Jacob Morgen describes four types of horizontal structures, of which the so-called ‘flatter structure’ is the most scalable for the majority of the companies.
A flatter structure does not completely abandon the traditional hierarchy, but opens up lines of communication and removes layers from within the organisation. Cisco, Whirlpool, and Pandora are just some of the corporate giants who are actively implementing this approach.
A flatter structure does not completely abandon the traditional hierarchy, but seeks to open up lines of communication and remove layers from within the organisation.
One big difference between the larger tech companies and most other organisations is their demographic. The average age of employees at Facebook, Apple and Google is 28, 30 and 31 respectively. The vast majority of their employees are millennials who are generally comfortable with flat structures and digital tools. For companies in other sectors, this is still not the case.
Leaders need to find a balance between the multiple generations in the workplace, each with its preferred way of working. According to a Boston College Center study, baby boomers feel much more enabled in a hierarchical structure and are less open to the use of digital tools. With a wide range of needs at stake, how can generational gaps best be bridged?
An additional challenge faced by multinationals concerns how a perception of authority has a strong connection to the prevailing culture. Dutch sociologist Geert Hofstede coined the term ‘power distance’, which he defined as “the extent to which the less powerful members of organisations accept and expect that power is distributed unequally”. When Swedish managers were asked if they should have the answers to all the questions of their team, only 4% claimed that was important, in contrast to 47% of Japanese respondents.
Increasingly, horizontal companies are appointing a chief culture officer (CCO), a role first introduced by Google in 2006. PageGroup’s Matt Mowlam contends, “The rise of the CCO marks a shift in the way companies think about HR. Rather than having a traditional HR remit, CCOs are focusing on how to market the business in order to attract the right people.”
In the early Noughties, few companies grasped the added value the CCO can bring. However, a CCO or equivalent profile is becoming a key figure in companies committed to building a collaborative and inclusive workforce. There is a sense that a harmonised company culture is a route to commercial success and minimises the risk of collateral damage caused by either a high turnover rate or disengaged employees.
A harmonised company culture minimises the risk of collateral damage caused by either a high turnover rate or disengaged employees.
For maximum impact, a chief culture officer requires the full support of senior management, but just as importantly should remain in close contact with employees. Cultures grow and develop from the bottom up. The challenge for CCOs and their senior colleagues is to influence that organic evolution.
We hope you enjoyed reading this article, which is part of our ‘Executive Trends’ series where we explore the biggest challenges facing senior business leaders and executives today. The series is already in its 3rd edition, and you can access all previous articles by clicking here.
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