Hierarchies cripple Organizations


Our business environment requires more than ever organizational designs which provide a structure supporting the two general complementary problems: (1) how to partition a big task of the whole organization into smaller tasks of the sub-units; and (2) how to coordinate theses smaller sub-units’ tasks so that they fit together to efficiently realize the bigger task or organizational goal. But then our organizations were divided into sections that were too small whereby the people lost their understanding of the entire value chain as they could no longer see their contribution to the business service. We have called these organizations “IT factories” with Taylorism in mind. Our ambition was driven by a standardization prospect as only standardization will provide high quality and low costs.


It’s Time for Organizational Agility


As the markets become more and more dynamic, our IT processes can no longer meet the customer demands related to responsiveness and flexibility. Our VUCA world requires more interaction in order to react fast to unpredictable events. Very often, customers cannot define their requirements in detail at the beginning of the projects. With the traditional classical project methodologies, we end up with an uncontrollable number of change requests. Customers become dissatisfied as well as the employees and their management as well. Constraints of being cost-efficient have limited our innovation. If there are objects that are the main interest, agile methods could lead us on the path to success. The path to success lies in understanding the relevant trends, figuring out how your strengths and resources can capitalize on them and staking out a leadership position.   


Originally linked to software development, there is no doubt that not every business can make its operations agile. Agility is complex and it can take multiple forms. In PRINCE2, the Agilometer is used to identify the possible extent of an agile implementation in different dimensions. Our organizational designs have to combine both: Agile and traditional industrialized process-driven organizations. These hybrid structures will create an organization based on a dual system. However, the increasing market dynamics will promote agility in our business processes as well as agile structures as an organization’s ability has to include nimble and dynamic capabilities. 


More and more, we have realized that IT questions can only be solved effectively with a team approach. The complexity of today’s IT architecture does not allow any other alternative than close collaboration with different experts. The collaboration is not limited to the organizational boundaries. Networks based on social media as well as corporate corporations along the value chain are as important as cross-functional networks including close cooperation with the customer teams. Networks share the quality of connectivity; they link the members of a network together through relationship ties. These ties between the networks motivate the people as motivation never comes from hierarchy (they are just in control of the organizational power). 


The hierarchy is realizing that its position in the power architecture is changing. Not all senior managers support this development as they fear that they will lose control over the business operations. Successful implementation of agility in today’s organizational design is redefining the function of hierarchy. What we need is “an inseparable partnership between the hierarchy and the network, and not just an enhanced hierarchy”. Agility fails when senior management does not show its willingness to redefine their roles in an agile organizational structure. This battle of power does not recognize any winner in the game. Either management is willing to share or it loses its business and will not survive in the long run. 


Purely agile organizations do not need a hierarchy at all. Scrum teams know their roles, but e.g. these development teams do not necessarily know traditional roles anymore such as the roles of project managers. More complex organizations and corporations still need a hierarchical structure and senior positions as they most likely still need to divide their organizational structure into strategic, tactical and operational levels. In agile organizations, we can hardly see any standard scaling in the form of team-unit-organization. Nevertheless, all organizations need to develop the right coordination mechanism and, for this purpose, the right scaling (tactical or strategic) is success-critical. 


It's Time to redesign our Roles


Senior managers will become an important connector between the various agile units. They form the strategic network within the organization. The business operations are implemented on the agile operational teams. These teams will have their own structures and be responsible for the tactical level. More complex units might also have their one tactical connector between the teams to ensure common norms so that the outputs from different teams have the least common denominator.    

Figure: Illustration regarding the integration of agile teams/functions at an IT service provider 


Not all operational teams will exist forever. They are project-oriented and therefore their life cycles will depend on the services they develop. We have to start from the belief that organizational functions and units have an unlimited right to exist. The right to live is determined by the acceptance of the outcome in the market. Senior management has to ensure that the knowledge (and its people) will last longer and will be transferred to other teams. This new way of working means significant changes for people from older generations. For Generation Y and even more so for Generation Z, working on agile teams correlates with their social behavior. These generations are more connected than any generation before. They identify less with the company than with individuals and these people they find on the agile teams. Agility will give them the possibility of realizing their aspiration of contributing to their company’s success. Top talents of tomorrow will look for organizations where they are empowered to realize their values. Agile organizations will presume the empowerment of the people; moreover, their success will be based on team participation from both sides in order to develop the bright talents from the developmental stage to final production. Therefore, we have to develop empowerment to realize team participation. Concepts for team participation are relatively less-developed than relatively new concepts for team empowerment. Team empowerment captures a collective psychological commitment among team members whereas team participation involves a collective behavioral commitment of team members. However, team empowerment and team participation are strongly positively-related. More empowered team members will actively participate in and contribute to team processes. 


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