The Semco Style 5 Principles to transform the way we work
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Minimizing Hierarchy

An organization that’s neither flat or hierarchical

We’re in favor of a hierarchy of self-interest and talent and opposed to the symbols of power and control that come with it. – Ricardo Semler


In a Nutshell

The latest fad to hit the business world seems to be self-management. Every company wants to join the bandwagon and call themselves a “fully self-managed organization”, a “team of teams” or a “flat organization with no bosses”. While it’s not hogwash, neither is it the entire truth. Today, a fully self-managed organization is still more myth than reality.

Of course, there are certain companies within specific contexts that have been able to function as truly self-managed organizations. But implicit hierarchies continue to exist even within such organizations. On the other hand, an organization with a minimum level of hierarchy, that is mature about how flat it can stretch itself, is closer to reality.

Such organizations are neither completely flat nor conventionally hierarchical; their minimal hierarchies work like subsets in a Venn diagram, intersecting when necessary while existing and  functioning independently.

They have the best of both worlds, where dramatically reduced power distances and responsibility for results co-exist. And although they have a minimal hierarchical skeleton, the organization is nimble enough to respond rapidly to fluid market environments; it innovates strategically; and holds itself together with a central purpose.


 What

Minimize the hierarchy in your organization but don’t get rid of it entirely either.


Why

An organization that is almost flat is a tougher act to balance: They need to offer autonomy and dignity to their people, while retaining a minimum semblance of organizational structure that holds it all together. It can work only when there’s alignment between all stakeholders and their expectations from each other; when there’s no doubt about the roles and responsibilities of people; and when it’s safe to fail and feedback is constantly available.


How

 

Condense your organogram into a circlegram: If you want to do away with the traditional organogram chart, that flows from top to bottom, then condense your hierarchies into a simple redondograma or a circlegram. But restrict the number of levels to about three – the top management, the managers and the associates. Remember that even such a minimal amount of hierarchy can create trouble if it’s highly formalized and treated in conventional ways. So, keep the relationship between the different levels on your circlegram as informal as possible.

Seek alignment and flexibility at every level: Put in a lot of effort towards ensuring everyone in the organization understands their roles and responsibilities. Help both employees and departments remain flexible by creating no clear boundaries between them. The lack of restrictive boundaries is bound to stimulate proactivity and push people to stretch their limits and areas of expertise. It also creates the perfect conditions for situational leaders to emerge and take the lead over projects they’re most qualified to direct. Finally, it’s extremely important that there’s an alignment of expectations that makes it clear what each individual, manager or peer expects from the other person.

Create a feedback loop that runs constantly: In the absence of traditional hierarchies, it’s extremely important that there be no gaps in communication and feedback. So offer continuous feedback and establish a number of formal and informal spaces for communication. Such open, safe spaces, where people can interact and share their feelings and opinions transparently, are crucial to maintain the flow of communication and reduce power distances.   

Expect strong resistance to the reorganization: When you set out to reduce the hierarchy in your organization, it’s natural to see resistance emerging from the management side, which would be the most affected by the reorganization. Particularly, mid-level managers find it harder to let go of the power they’d just acquired. In some cases, the resistance may be strong enough to make people quit their jobs.

Make it safe for people to air out their fears: It’s natural that a number of your managers, especially the mid-level managers, feel threatened by the reorganization. But instead of blaming them for not wanting to let go of their recently-acquired powers, consider involving them in an open conversation where you listen to their real needs and fears. Only then will there be clarity on developing the best approach to handling them. When you don’t involve them and you’re not open about what the future holds for them, they’re bound to be suspicious and resistant.

Don’t dismiss, but redirect people toward their strengths: One of the major fears that emerge within people during any reorganization is the loss of their job. For instance, a technical expert, who was the go-to person when it comes to a certain competence, might have been recently promoted into a mid-level managerial role. However, they might have not shined in their new role because of a lack of experience or learning around management. It’s quite natural for this person to feel anxious when you propose a reorganization. You could allay their fears by announcing that there will be no dismissals or salary reductions and that they’d continue to value people’s expertise. So the mid-level manager in the example could be renamed a technical specialist – a move that acknowledges their strengths and doesn’t come across as a demotion either since there’s no reduction in salary. When you handle managerial resistance in this way, there’s very less room for speculation and opposition to change. Ignoring people’s fears and concerns will surely backfire.

It can be challenging to work with fewer filters: When you minimize the range of your hierarchy, you’re also removing the various levels of organizational filters that kept sensitive information from affecting day-to-day operations. For example, the intensity of mounting pressure on the business from shareholders, would have earlier been toned down through multiple managers before it reached the employees. And it was easier for the organization to maintain a semblance of normalcy even in the face of extreme external pressure. However, when there’s hardly any filters between the top management and the employees, the business pressure affects everyone immediately – positively or negatively. It can work the other way around too, with the top management having very few filters between them and useless ideas that sometimes originate from the bottom-up.


Level to implement

  Hard


DO’S

Reorganize into a minimal hierarchy that’s informal and flexible

Ensure there’s extreme stakeholder alignment on roles, responsibilities and expectations

Make it safe to communicate openly and frequently

Offer constructive feedback at every opportunity

Explain to people who resist the change that they won’t lose their jobs or face salary cuts

Assure people that the reorganization will acknowledge and value their areas of expertise

DON’TS

Accelerate the change process unnecessarily

Make changes to the old organizational model in a drastic way right from day one because it will only create more barriers to the transformation

Neglect or slight individual fears and insecurities

Make changes in increments that your organization can handle

Pros

Minimize conventional, bureaucratic ways of functioning

Reduce power distance

Improve communication and feedback

Boost creativity, innovation and agility

Improves employee morale and sense of ownership

Cons

Might evoke strong resistance that leads to people quitting the company

Breaks hierarchical filters and exposes everyone to all kinds of information

Might lead to a temporary loss in productivity until people get the hang of the new order


CASE

 

The decision to flatten the organizational structure at Semco wasn’t an easy one. In fact, it was met with a lot of resistance from the management because until then Semco was a highly hierarchical and traditionally-run organization. Back then, every building at Semco housed several departments and every department broke down into multiple segments. The company’s intense period of expansion brought about several mergers and acquisitions and every new company that joined the Semco Group brought with them their own organizational complexities. So, it was a real nightmare when it came to titles and structuring – so much so that there were eight levels of hierarchy at Semco.

As is normal in any hierarchical and traditional setup, the leaders at Semco were also prone to playing corporate games guided by inflated egos. All that took a huge hit when Ricardo Semler announced his decision to flatten the organizational structure. When he made the announcement at a convention meant for all employees, people reacted with shock and utter confusion. Nobody could fathom a workplace without clearly defined titles and they began talking amongst themselves wondering who would be the manager or the boss.

And for the managers, it was a really difficult decision to swallow because they were no longer sure about their future in the company. In fact, many people chose to leave the company because it wasn’t aligned with their career plans or their aspirations to climb the corporate ladder and eventually land plum top management positions. With Ricardo announcing that there will only be three levels of hierarchy at Semco, they felt like there was no room for their career plans or vision.

But, in reality, the restructuring didn’t mean that people could no longer grow or develop themselves. They could grow, but just not vertically. Instead, they could now grow horizontally, absorbing new functions and responsibilities, moving between departments and always getting the respective increases in salary. The salary ranges, which were earlier associated with titles and positions on the hierarchy, were also revamped to reflect an individual’s contributions and their impact on the company’s progress. So people, within the new structure, may belong to the same hierarchical level but they earned what they deserved.

After Ricardo’s announcement, the first steps to implement the decision were quite physical: They broke down the walls that separated people into cubicles and offices. They created an open concept office, with floating desks and flexible working arrangements. These actions organically removed the need for corporate bureaucracies and silly procedures to seek information because people could now directly access the person who had the answers. For instance, a person might have emailed the sales director’s assistant, copying his own manager on the email, if he needed some information from the sales director. In the new setup, there was no need to do that because the sales director probably sat just a few desks away from the person seeking information.

The physical changes to the work environment naturally busted bureaucracy and enhanced transparency among different departments. It also got rid of unnecessary fears of subordinates bypassing middle managers to seek out information from top management. Overall, it was a great catalyst that quickened the reduction of hierarchies at Semco.

Of course, the open floor setup caused some initial chaos and drop in productivity. For instance, the CEO may have been consulted on matters that really didn’t need his input just because he was much more accessible now. So it might not have been the best use of his time. However, the chaos settled down overtime when people started to self-regulate in terms of relevance. With a little kindness, leaders were able to redirect people to others better suited to answer their questions. And it prompted them to think twice before disrupting someone’s workflow – a learning process that Semco employees quickly mastered.


Changemaker

Expert avatar

Borges, Ian

Co-founder at LeadWise | Partner at Semco Style Institute | Entrepreneur | Lifestyle Strategist | Digital Nomad

Rio de Janeiro, Brazil

Portuguese, English, French, Spanish

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