Do you think we have been obsessing over the issues of holacracy® or holarchy versus hierarchy  too much lately? This debate of decentralized trust over command-and-control processes is the talk among business collaboration and management thought leaders, for good reason. Many think the pendulum may have swung too far over towards hierarchic systems; a fact we are now beginning to realize as we see greater freedom in the channels of information, relationships, and power structures. So we are actively seeking new rationale and models of operation for firms. Without reiterating Ronald Coase on the purpose of the firm yet again, let’s take more recent ideas into consideration.

In a recent post by Lee Bryant of PostShift titled The limits of social technology within existing organizational structure and culture, he presents that “social technology is a necessary prerequisite for the reform of overly bureaucratic enterprises, and can enable important new ways of working”. However, as Mr. Bryant points out, “without attention to the underlying organisational structure, it is unlikely to fulfill its potential.” He describes in sufficient detail some of the new models, from Dave Gray’s concept of the Connected Company, to the model of holarchy used in young organizations like online media company, Medium, and now online retailer, Zappos, as well.

[Disclosure: Dave Gray is an advisor to my startup, Alynd.]

Jon Husband, originator of the concept of wirearchies, identified the truism of the nature of work in organizations: “Our agreements are our structures”. What this implies is that structure is an outcome, not a pre-defined order. It is also likely a dynamic one, unless you work over and again with the same set of peers and partners. Therefore structure here is a projection, not a plan.

I think this atomic level concept has a strong basis regardless of the structure, whether centralized or decentralized. First, let’s look at it from a strongly hierarchical view.

The hierarchy defines not only the sequencing of direction and control, but also specialization of skills, knowledge or function. The structure is planned, and is modified on occasion to bring in new skills, move talent around for different needs, or fill a vacuum when one leaves. The structure is therefore planned and while there is some movement, it is fairly static. The benefit is that the nodes in the structure increase in specialization, tacit awareness within their specialty, and perhaps efficiency in executing those tasks. At the basic level, they have agreements in place to do the work as planned.

We debate whether this is the best approach because we see the cracks in the system. Relegation to the same specialty and limited talent mobility; a lack of innovation through variability and new scenarios; a structure that is self-reinforcing for its own interests; a system that directs power, focus and direction up to the very top; executing too literally rather than understanding Commander’s Intent. On the human side, there is boredom, a lack of opportunity, a lack of empathy with increasing distance up the hierarchy, lack of recognition of other skills, and so on.

However, the agreements are in place, by definition, along the structure of command. From this point of view, the debate is more on how well we can, or more accurately, want to deliver on those agreements. It is a ‘want’ not a ‘must’ because many tasks are simply not binary and absolute; rather, they have different variations, possibilities, multiple outcomes and a multivariate context. So, reality reflects ‘want’ as the quality of what we deliver.

The argument therefore is if the command and control system asks the participants to deliver with quality. To enforce this, organizations add context—precise definitions of quality of output, rules for delivery, and other context that are managed through formal motivators or punishments in the system.

On the other hand, consider this from the decentralized approach. The structure may—emphasis on may—emerge out of participation; or it may be transient. In fact, there isn’t on model, but many possibilities precisely because there is no defined sequencing as in the alternative. Why units (people) connect and develop the structure varies significantly but can be because of merit, shared interest, incentives, prior history, serendipity, or pure coincidence. I spent a bit of time explaining in Social Networking for Business explaining the possibilities.

The tradeoff for efficiency through known processes is agility from the organizational view—something we are starting to realize is of serious need due to the increasing pace of business. It creates units that are more responsive to the changes in the market— the large-scale changes and market trends, as well as the dynamic micro-scenarios of individual customers.

Is this an unbearable sacrifice of speed or efficiency? Perhaps, it just takes some getting used to. When asked if decision-making based on consensus in a collaborative environment was slow and long, participants in the 2014 Digital Workplace Trends Survey responded in two ways. The majority of companies surveyed (44%) said it was a serious challenge that held them back, while 48% of early adopters of the collaborative workplace, further along, considered it manageable even if still requiring an effort.

Adding this ability to redraw structures, and to allow self-direction, also improves the participating employees’ outlook on their potential. Passionate employees given the freedom will find new opportunities for personal and career growth. Those who desire stability can also find a reliable place.

This model, overall, still results in agreements between people. These agreements are freer to form, but in trade, they need more context because the high degree of functional specialization of the centralized model is replaced with changing roles and specialties. So, you need a view into the types of skills, expertise, relationship graphs, and other information about other participants to decide upon agreements. Keep in mind that you can change partners you work with at any time, but more than what they can do, what you really need is to have some basis of trust in working with them.

The fractal models as Lee Bryant and Dave Gray describes are really somewhere in the spectrum in between, but closer towards the decentralized model(s). They allow teams to form and reform as needed over time to solve particular problems. They have levels within levels of such dynamic teams—hence the ‘fractal’ phrasing—which overall has some level of order so it becomes possible to scale, to work towards larger or greater goals.

From my view, this common concept of agreements is still at the heart of work. The centralized model trades dynamism and agility in exchange for efficiency through defined context and process in advance, while vice-versa for the alternate model. Call it what you will—manager assignments, commitments, project tasks—they are still agreements and whatever the model you have in place, you will need a system to enable it.  This is the basis for collaboration, whatever your structural model.

Leadership in New Organizational Structures

I tend to be a center-left (if you consider holocracy toward the left), but more so, I believe in leadership as someone who knows how to maintain balance across the opposites, see things both as process as well as agile order. Why is this?

We still live in a world where the traditional centralized model of organizations are by far the most common. We need the new laudable and successful examples of Medium, and others. But realize that most of the world is not there yet. Not all companies can simply swap their organizational models easily. To consider such a change there often needs to be a perfect storm of patterns: a significant crisis felt broadly at the influences of power (the executives, the board, etc.); a market opportunity or possibility for change; a willing and influential leader; an understanding or strategy of how to enact the change; recognition by the employee base of the strategy on a practical, individual level, not some amorphous high-level dictum.

To implement that strategy, you also need to recognize that not everyone will move at the same time at the same speed, no matter how much you want it or explain it to others. Ignoring or hiding that reality is the dearth of many an organizational change initiative. So, a leader needs to be able to balance between the extremes, and everything in between, but also to move it forward.

Have such views been implemented before? Certainly. The Trompenaars-Hamden Turner (THT) model of dilemma theory focuses on a balance between opposites It looks at different aspects of cultures in organizations not as a single “what should it be” view but in terms of where it actually is. There is no good or bad, but reality and contrasts between different instances. For example, does the organization as a whole want to on the achievements and identity of individuals primarily, or does it emphasize group identity and achievement first? Does the organization consider the same rules as universal to all or does it take a more pragmatic approach to specifics of a situation? To evolve, you map your organization honestly and then consider the direction and distance to go for the evolution. More so, as a leader, insight into groups or individuals at different points of the spectrum gives you have a better idea of the distances of each to get to the intended future.

Getting back to centralized versus decentralized models, I see agreements as a common axis of the spectrum to enact such change. What you are changing in essence, moving from centralized to decentralized, is a move along the axis on various factors: who can make agreements with whom, the degree of context needed, and the basis of trust. The job of the transformation leader is to try to move people towards the new point on such an axis for the organization. The job of the overall executive is to drive continued or performance while moving towards that goal.

To get to the new possibilities of Medium, Semco, W.L. Gore, Morning Star and others, we need a basis for managing agreements that works under both the old and new models. The mechanisms can remain the same. The real change then becomes around the culture of how you make agreements and what that means to the people involved. And that needs a more pragmatic look, don’t you agree?