Boost your digitalization: organization dimension

There are few topics in companies as sensitive as the notion of organization and organizational setup. Many still view their career as climbing the corporate ladder and, having reached a few rungs up the ladder, worry about sliding down again. So, every discussion that might rock the boat is received with great skepticism and people easily get defensive.

The fact of the matter is, though, that in times of rapid change, the traditional, hierarchical setup is probably the worst possible way of organizing large groups of people. Hierarchical structures are good at scaling, controlling many people from a central position, they’re very efficient for repeatable tasks, allow for harmonization of processes and effectively support globalization. If the context in which the company operates is stable and has a low level of complexity, hierarchical setups are perhaps the best answer to the organizational challenge. They’re extremely good at exploiting the learnings of the past and driving continuous efficiency improvements.

Of course, hierarchical organizations also have weaknesses. They tend to suffer from slow decision-making. Power tends to be driven by position and not capability. Because of the career ladder notion, the company tends to be internally focused and things easily gravitate toward politics. Inherent in the structure is the extremely high resistance to changes. Hierarchical organizations are, in many ways, even intended to naturally resist any change to the status quo. If the context in which the company operates is volatile, the future is unpredictable and the industry is undergoing a fundamental transformation, we need a much higher degree of exploration. In a hierarchical organizational culture, however, exploration is very inefficient as it has a very different reward function in that only a small percentage of the things we try out will actually work.