“Zappos says goodbye to bosses” is a recent entry in a long string of articles about decentralized management practices. In the popular press, the implicit message is that decentralization is a nonstandard practice compared to strict hierarchy (if it were standard, why report on it at all?) – and if there is a comment section it is often filled with bitter vitriol about the dumbass management hippies who would rather chant kumbaya than actually do the hard work of telling employees what to do.
Almost 10 years ago, Thomas Malone wrote a book called The Future of Work that summarized twenty years of research on organizational structure, concluding that decentralized management was, well, the future of work. This is no longer a controversial theory, and many different kinds of companies have instituted varying degrees of decentralization with great success. So why are there still so many critics, and why are some of them so bitterly opposed?
One reason is that decentralization isn’t always the right choice. Most employees probably work in enterprises for which a strong degree of hierarchy is a better choice, or at least not an obviously worse choice. This is because the majority of employees in many countries work in SMBs (small-to-medium sized businesses), where there is often little difference in outcome between decentralized and hierarchical management. When you have, say, 5 equally committed people working in the same room together, the information they receive is so similar, and the communication between them so frequent and unmediated, that the employees would probably make the same decisions with or without formal management. In addition, the single largest employer in many countries is the government, where hierarchy is highly beneficial or required due to the nature of the service or because of laws and regulations.
So most people work in SMBs that don’t need decentralization even if they have it, or in large organizations that benefit from a lot of hierarchy. This leads to the common misconception that decentralized management doesn’t scale. “Oh sure, rinky-dink startups and mom-and-pop shops can get by without managers, but when you get to the really big efforts, you gotta have hierarchy to be a great company.”
That is not just wrong, it is perversely wrong. Decentralized management is, for certain kinds of enterprises, actually required in order to scale. The right way to decide whether your company needs decentralized management is to ask yourself these two questions:
How many people are required for my company to achieve our vision?
You have to have a pretty strong idea of your vision to answer this, which is harder than it seems, but let’s assume you know your vision. If you need less than about 150 people (because that’s Dunbar’s number), then decentralized management isn’t required. It might be more fun, more engaging for everyone involved, but it’s not required – unless you’re on the extreme side of the next question …
How well-known and stable is the path to achieving our vision?
If you know exactly how to get to the mountaintop, and that path is set in stone, then you have no need for decentralization. A single leader can just tell everyone what to do. A lot of decentralization could also work, so long as everyone is aware of the well-known and stable path – and this would probably be more fun for everyone involved, but it’s not required. However, if the path is unknown, or even if it’s known but subject to change before the full vision is achieved, then decentralized management is required. Failure is guaranteed under these circumstances due to the Innovator’s Dilemma – in large organizations, strict hierarchy will inevitably serve the needs of the current business model, leaving the company open to disruptive innovators that eat the large company’s future. The only hope to avoid the dilemma is to have decentralized management: employees with enough freedom to ignore the dictates of management might – with the right resources and a lot of luck – find the disruptive innovation within the company before it’s found outside.
So, to summarize in the obligatory 2×2:
I’ve noted the fun factor because it’s an important driver of employee criticism of distributed management. It’s not hard to find people who worked in places with “no bosses” and absolutely hated it, comparing the experience to high school and worse. And the truth is, in a large organization with an unknown and unstable path to a big vision, distributed management is definitely not fun for the employees, because:
- It is intellectually and emotionally draining. If everyone is supposed to make their own decisions, a lot of information and communication is required, and there is no way of getting around the time demands that this imposes, especially compared to the job you would be doing in a hierarchical company. Worse, making so many decisions is very stressful for most people, especially when you believe in the vision and you are close to your colleagues. You don’t want to let down your dreams and your friends, and it is very hard to face the possibility that every day may be the day you screw it all up for everyone.
- It is unrewarded by compensation. People start to think, “Hey waitaminute – I thought managers were supposed to make these decisions. If I’m making them now, why aren’t I being paid like a manager?” Most companies do not adjust their compensation schemes to account for this additional responsibility, because doing so would likely require a complex mechanism for collecting all possible projects, allowing everyone in the company to contribute to decisions on which they are knowledgable, and rewarding both successes and noble failures with monetary compensation commensurate to the effort of the people who implemented the project as well as those who contributed decisionmaking weight to the project. An attempt build this kind of compensation scheme would be regarded as insane, both internally and externally to the company. So most companies don’t try.
- The rewards for this kind of system extend beyond the likely employment period, possibly even beyond the lifetime of the employee. The Innovator’s Dilemma takes a long time to become a real threat. A small company first has to grow to a market leader and have such dominance that it is blinded to the threat of disruptive innovation – that can take years, possibly better measured as generations. So people are doing hard, uncompensated work, for the benefit of preventing a problem that might not happen during the lifetime of anyone that works at the company. That is a tough, tough ask of anyone. Even employees who understand the problem wish that the company could be hierarchical until the problem is apparent, and then switch over to this distributed bullshite. But the problem of course is that at that point, it’s too late.
So … should you like a boss or be a boss? Should you like your boss, and should that even be a question when your boss is you?