Big Companies End Their Hierarchies to Boost Productivity

Business
The days of board meetings might be numbered as companies turn towards less traditional structural models where collective decision making is preferred. Jonathan Ernst/REUTERS

Traditional pyramid models are outdated and companies should embrace collective decision-making processes to increase productivity, according to business coaches such as Frederic Laloux, author of Reinventing Organisations. His ideas are already catching on in around London's silicon roundabout start-up scene.

He suggests that implementing advice-based decision making – where every employee has the authority to make top-level decisions such as deciding on company expenditure – removes excessive power from a single CEO, and could even irresponsible actions such as those that led to the 2008 financial crash.

Holacracy, a form of company organisation which removes management structures in favour of distributive decision-making, has been implemented by startups including Medium, while the CEO of online retailers Zappos, which employs around 1,500, recently emailed workers asking them to embrace Holocracy's managerless structure or leave the company.

Laloux has been working with the CEO of a 60,000-strong multinational retail firm – who has given a copy of Laloux's book to every employee – and is in negotiations to work with the chief of a global energy firm with 140,000 workers.

One of the companies Laloux studied for his book is Buurtzorg, a Netherlands-based nursing company where the district nursing teams decide who to hire, CEO Jos de Blok's salary is less than double that of an average nurse and he takes strategic decisions by posting ideas in a blog and receiving feedback from nurses.

A 2012 KPMG report found that the company had halved patient care hours by increasing efficiency and giving patients more autonomy, while a 2010 study by Ernst & Young found Buurtzorg cut costs by 40% compared to the Dutch public healthcare system.

However, not everyone in the business community is welcoming the ideas. Lawrence Phillips, emeritus professor in decision science at the London School of Economics, says such models remove crucial accountability from business structures.

"Accountability is about a relationship between a manager and subordinate. People can have all kinds of responsibilities but unless somebody is holding them accountable for their output, then responsibilities are defunct," says Phillips.

"It's Organisation 101 stuff. Trying to get rid of hierarchy is impossible."

Big Companies End Their Hierarchies to Boost Productivity | Business