Hierarchies and networks in organizations

Inspired by John Kotter’s article Accelerate I am starting to realize that hierarchies and networks need to coexist in a large organization. Organizations that solely run on hierarchies operate from a machine paradigm. They are great at effectively producing copies of the same thing. Everyone knows what to do. Decisions are taken at the top of the hierarchy. Progress and speed is measurable and efforts are spent making this environment more predictable. There are many examples of companies that successfully operate from this paradigm and are doing well. Until the market suddenly shifts, new technology challenges the whole being of that company or new opportunities emerge. Hierarchies cannot handle change and quick changes of direction. Turning this big ship around takes a lot of time and effort, if at all possible.

Networks on the other hand consist of independent parts that work together. Decisions are made at the edges of the organization. It is not always clear who makes the decisions. The networks thrive in an ever changing world, but often lack structure. There is virtually no predictability because change happens all the time, and to many people this environment might seem chaotic. A lot of startups operate in this way.

I am realizing that a big organization that operates on hierarchies alone will die a certain death. It is just a question of when. Having a large organization operate as a network is possible, but really hard to maintain, and not always effective. So I am realizing we need both. It is what Kotter calls The dual operating system. He suggests to create a network in a hierarchical organization. The network should consist of about 10% of the people and be a diverse group with members from different departments and management positions. This network will be able to deal with change and other things that the hierarchy is too slow to manage.

Similarly Dave Gray writes about pace layers in his book The connected company. Dave describes how work is done in pods, acting like small, independent companies. He suggests to introduce layers to deal with different types of problems. Closest to the core, things that seldom change, a hierarchy works well. But out in the borders, the front line, we need networks to deal with a complex, ever changing world.

I believe both networks and hierarchies must coexist in a larger organisation. Conscious design of the organisation is needed to be able to succeed with this, and the awareness that both models will work, side by side. Cooperation between the hierarchy and network is required.

Another idea that feeds into this is Simon Wardley’s model of Pioneers, Settlers and Town planners. The pioneers live in an ever changing world, discovering uncharted territory. They are followed by settlers that can take the concepts pioneers started to build and turn them into something sustainable. They turn the prototype into a product. Settlers are followed by town planners that bring structure, scale and stability. All three are needed to be able to build a town, but we recognize that people are comfortable doing different types of jobs. I love being a pioneer, can sometimes work as a settler but hate doing town planner work. I have colleagues that are comfortable with the direct opposite.

Knowing that both the network and the hierarchy must coexist and work in harmony, we can give people a chance to work in a way where they can be at their best. We have to deal with change and create innovation to be able to survive as a company, but we also need an effective hierarchy that can scale and provide stability.