This is an audio transcript of the Working It podcast episode: ‘Best of Working It: Can you run a company without managers?’

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Isabel Berwick
This is Working It from the Financial Times with me, Isabel Berwick. And today we’re looking at flat hierarchies, which some may call holacracy. And it basically means no job titles, no managers, no boss. It’s the workplace equivalent to taking your three-year-old to a soft play centre. Though you, the parent, ie, the manager, may still be there, the kids are in charge now.

Alexis Gonzales-Black
So I think there is a misconception when we talk about holacracy that it is totally flat and I think a lot of organisations are using that terminology. I don’t think flat organisations are truly flat or even that effective.

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Isabel Berwick
That’s Alexis Gonzales-Black. She’s an expert in organisational design — that’s corporate speak for helping companies find an organisational model that works for them and makes their workforce more happy and efficient. But the question is, does a flat hierarchy make us more happy and efficient at work? Or is it a recipe for chaos and resentment?

Alexis Gonzales-Black
We as humans intuitively form hierarchies. And when folks say, “I’m in a flat organisation,” it usually just means that they haven’t documented the hierarchy that truly exists. What I think that the transformation really is, is a hierarchy of work and a hierarchy of purpose instead of a hierarchy of people. So if you can think about that traditional organisational structure that has a CEO at the top and the C-suite right underneath, the way that that org chart is visualised, that triangle that we all know and love is quite static. When we think about fluid, agile or responsive structures that are about a hierarchy of purpose, what we think about is people showing up and depending on what the work is, their role shifts. So in any effective organisation where people come together, hierarchy will exist. But it’s a matter of making sure that it is a hierarchy of work and purpose and not of static role titles or people.

So when I was at Zappos — this is back in 2012 — the then-CEO had attended a conscious capitalism conference and had come back sort of buzzing with ideas around how the organisation could work in more flexible, fluid ways.

Isabel Berwick
Alexis is talking there about Zappos, a big online shoe and clothing company that’s owned by Amazon, and about its former chief executive, Tony Hsieh, who died in 2020. And that’s a very different sad story and we’ll put a link to articles about it in the show notes. But Tony for many years was a very innovative figure in the tech world and he was really keen to experiment with different ways of working.

Alexis Gonzales-Black
And he brought up the idea of holacracy and the tension that it really seemed to address was: decision-making had really been bottlenecked around him and the leadership team, that all the good ideas had to be run up the flagpole and holacracy to him was the answer at that time. So adopting holacracy and trying on a way of running the company that distributed authority to the teams, the folks who were closest to the work so that they could make critical decisions around what investments to make, what structures to use, how to run their teams, rather than all of those decisions filtering up to the tippy top levels of the organisation. So we adopted holacracy later that year with a pilot in the HR organisation. Eventually holacracy rolled out to the entire organisation and when I left in 2015, they were on the road to evolving from a holacracy but still remained a flat, agile and dynamic organisation.

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Isabel Berwick
So I’m joined by my FT colleague Andrew Hill, who’s written a lot about hierarchies, flat or otherwise, in the past. Andrew, this story from Zappos didn’t really work out, did it?

Andrew Hill
No, I think it wasn’t the great success that it was trumpeted to be by Tony Hsieh. I think one of the issues at the outset, if I remember correctly, was that quite a lot of people left Zappos when it was brought in, that he encouraged them that if they weren’t gonna buy into it, they could leave, may even have paid them to leave. And to me that recognised a little bit that there are some people who quite like working within a slightly more structured hierarchy and may do their best work in those types of situations. So it’s not really a one-size-fits-all, this holacracy approach.

Isabel Berwick
Has anyone made it work that you know of?

Andrew Hill
On holacracy I’m not familiar with companies that have made that work, but the other companies have made a self-organised system work and quite well. Among them WL Gore, which is best known for Gore-Tex, runs something called a lattice organisation where you’re only a leader if you can accumulate followers, which might be because you’ve got a particular expertise.

Isabel Berwick
That sounds like social media.

Andrew Hill
Yeah, I mean, there are similarities between networked organisations and social networks for obvious reasons.

Isabel Berwick
So hang on. So if you’re popular, you can become a leader, is that it?

Andrew Hill
I think you have to go further than popularity. I mean, this is a biggish company manufacturing stuff. So clearly, if you don’t know how to lead a team to manufacture stuff, you’re not gonna be nominated as a leader. That’s one example. There’s another organisation called Buurtzorg, which is a Dutch healthcare network run by nurses in a very patient-centric fashion: small clusters of, I think, 12 nurses who deal with groups of patients. And actually that point about there being small groups is pretty key to making self-organisation work. Soon as you’ve got a too-large group, then you get the chaos that you’ve described.

Isabel Berwick
And are there any other big organisations that have tried it and haven’t worked? I think you’ve written about PA Consulting before.

Andrew Hill
Yeah, well, PA Consulting, I mean, this is not new: trying to do things without managers. I remember interviewing the former chair of PA Consulting when he was brought in as chief executive in the 1990s when things were going a bit horrible with that organisation. They had decided for some reason to manage without any titles. So as a result, he came in from the outside. He didn’t know what anybody really did, let alone whether they were any good at it. And he had to have a whole process of interviewing his new colleagues in order to find out for them who did what and who was worth keeping and who wasn’t.

Isabel Berwick
That’s amazing, because people are generally very precious about their job title. So to think that there was a bunch of consultants with no job titles is kind of amazing.

Andrew Hill
I mean, there’s something radical about it, although actually if you look at consultancies — even quite conventionally structured ones — and a lot of professional services firms have a lot of people called partner — or managing director in the case of banks — and it’s not always totally clear exactly what their responsibility is. So there is a seed there of what your guest described about people being assigned tasks according to whether they can do it rather than whether they have the title that says they should do it.

Isabel Berwick
So is there a sweet spot perhaps where managers can exist, but we all keep those unloved and mundane tasks ticking over? Back to Alexis Gonzales-Black.

Alexis Gonzales-Black
I don’t think the answer is that managers are redundant because the roles that they play are incredibly essential to organisations. I think most of the time they’re asked to take on too much in what becomes an unrealistic role. And what, you know, we strive to do is to parse out what are the critical roles that a manager is playing. Are they the right person to be filling those roles? So maybe somebody is excellent at the subject matter expertise part of a role, but is less excellent at people management. How can we share that work with somebody who is super fit to step into the management and leadership type role?

Isabel Berwick
So it could actually be liberating for managers?

Alexis Gonzales-Black
Oh my gosh. I think that’s the intention. I think a lot of managers balk at first the idea that teams can be self-managing, but really I think most managers would love for their teams to take more accountability and more ownership for the success of their work. And that’s what systems like this are about.

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Isabel Berwick
So Andrew, the experience for managers — is it liberation or is it chaos?

Andrew Hill
I think it depends on the manager. I mean, we’ve written a lot about how managers are being encouraged to become more like coaches. Lindred Greer at Stanford has talked about “hippo managers” who look beneath the water with just their eyes poking out so that they can see when they need to rise and exercise their authority. And for some managers that can be a fun and interesting and productive way to manage a team. But if you’re used to having your hands on the controls, if you’re the classic micromanager, you might find this really quite disconcerting having to devolve more responsibility to people who are lower ranked than you in the hierarchy.

Isabel Berwick
Yeah, I actually can’t get “hippo managers” out of my head now (laughter). That’s brilliant. So these are extremes, obviously. What happened to Zappos and other companies are extremes. What are the things that can work in a mainstream organisation where hierarchies exist and we’ve all got titles?

Andrew Hill
All we’re really talking about is an element of decentralisation and giving more responsibility to the people who are on the frontline. Often those — in the case of some companies — are the ones encountering the customers, which the chief executive and her team might not be doing. So there is a sort of empowerment — don’t like that word much — but an empowerment of frontline workers in conventional companies. There are big companies, Ericsson is an example, a telecoms equipment company, that devolved a lot of responsibility to smaller teams. They divided themselves into smaller teams to do very complex infrastructure jobs. 2,300 software engineers working in a hundred teams of 20 or so. And there are also ways in which big companies can identify what Alexis has described. The people who are good at the tasks, using some of the software, the task management software that we’re familiar with day to day, and identifying people within the network who actually may not have the title but do have the influence and the knowledge in order to be a valuable part of that group.

Isabel Berwick
It’s essentially not what you’re doing, it’s how many people you are doing it with. It’s the nimble, agile, quite small team that seems to be critical in changing the way that we manage. Would you agree with that, Andrew?

Andrew Hill
Yeah, I think small teams, but also knowing who is good at what you’re doing. So the concept of WL Gore having a leader who is somebody who accumulates followers is to do with knowing that that leader is the best-placed person to carry out that task. So identifying who is best placed to do it and then communicating that to the rest of the small groups that you’ve assembled is one key.

Isabel Berwick
It seems like common sense but actually that’s probably something that doesn’t happen (laughter) often in companies.

Andrew Hill
It’s much harder for us to imagine doing it than it would be talking about.

Isabel Berwick
Let’s hear from Alexis a bit more about some real-world effects we can bring into play in management in our own companies.

Alexis Gonzales-Black
Now, just to be very clear, I don’t implement holacracy anymore. I don’t implement it because I think sort of out-of-the-box solutions related to self-management don’t work and they create a lot of cultural antibodies and scar tissue. And I think we saw that play out at Zappos and at several other organisations. So to me the right balance, and just to be really clear, is radical intent. So holding some of that radical belief that organisations should be self-managing, that people should have more power over decision-making. But in the implementation of that, it’s not about signing a constitution and ceding authority into the constitution and this sort of radical change that happens overnight, but a really slow, iterative, everyday practices that help us embody these principles in more effective ways. So I just wanna be clear that I stopped implementing holacracy years ago for that reason, but I still hold on dearly to many of the principles and lessons that I learned from that experience.

Isabel Berwick
So, Andrew, it’s interesting that Alexis no longer advises people to take up holacracy, but it seems like there’s a wider theme here about traditional structures being left behind and she makes a reference there, perhaps to the pandemic and how we can change things now. You write a lot about trends, Andrew. What are the other ways in which companies are changing the way they manage, away from flat hierarchies? Are there other trends?

Andrew Hill
I think in terms of the pandemic, a number of managers and chief executives that I’ve spoken to during the crisis have said it did make them realise that there was somebody they hadn’t noticed who turned out to be more influential in the network when they were working remotely than they had noticed when they were working, perhaps in the office hierarchy, that automatically pertains in most companies. So that’s something that companies ought to be able to take advantage of. And I mean, I think the other aspect that’s emerged very clearly in the crisis is the more human-centric way of managing. That is saying to people, we understand that this is a flexible human organisation and not simply an organisational chart into which everyone has their own place which they will occupy rigidly. And of course that actually makes it more difficult to manage it. So in some senses, those types of organisations run flexibly on a network basis require better managers than ones that have a very clear hierarchy.

Isabel Berwick
I love the way that every time we go down one of these roads, it opens up a whole load of other things we have to think about. It sounds so simple and so flexible and so great to think about people’s skills rather than their job titles or their status. But actually it requires a whole different mindset, I guess. And it was interesting that Alexis talked about radical intent. I’ve heard about radical candour, and you probably know, being ultra-honest at work or in your life. But radical intent — is that another fancy way of saying purpose? What does it mean?

Andrew Hill
I think it is partly to do with being purposeful. I mean, I think you can’t run a self-organising organisation unless you do have some shared mission. And in its most extreme version, people in the cryptocurrency world are now talking about these decentralised autonomous organisations which are essentially run by code. You encode the mission, the people who are involved in it, the tasks that they do and the value that they create and share. That seems to me at the very extreme end. But I do think that there are ways in which some of these radical ideas do percolate down through companies and even come into conventional companies and are picked up as a sort of fashion that eventually reaches the high street. And that’s the analogy I’ve used.

Isabel Berwick
I wondered how long it would be before cryptocurrency made its way into the Working It podcast (laughter). Thank you for bringing that in. I think all roads lead to crypto at the moment. But I was gonna talk a bit more about sometimes these what we might call faddish management ideas are sometimes a cover for quite toxic corporate cultures, and you can sort of paint over the top. But could something like a flat hierarchy actually mask some quite bad playground culture in a place because it allows people much freer rein actually, doesn’t it, if there are less boundaries?

Andrew Hill
Well that’s one aspect. It’s obviously that if you’ve got sort of self-organisation and somebody wants to play the power card and assert themselves over others, in other words, setting up a little toxic hierarchy within this more self-organised, looser structure, that’s probably easier to do. Although I think in the best examples, like WL Gore, they have found that that is sort of self-regulating, the people who need to be on the call. I remember talking to somebody at WL Gore about how they handle the crises. The people who needed to be on the crisis calls were the ones who showed up. So once you’ve established that culture, it does self-regulate. I think the other danger is to think of flat hierarchy as being an undiluted good. I mean, somebody who’s in charge of a company and has four direct reports, each of whom have four reports, might suddenly decide, well, I want all those 16 people to report just to me. Well, that might be flat, but it could also be a power grab by the top person, and that gives them less opportunity to then do the managing that is necessary of the much wider group that they then are in charge of.

Isabel Berwick
I think this is a fascinating topic and we’ve probably only scratched the surface. But I guess for me the key takeaways are that small teams work. You need to have oversight over your people, even if you’re allowing them a lot of latitude in what they do. And also skills, not status. Pick people for what they do and what they’re bringing to the party rather than their place in the traditional hierarchy. Would you say those are two good takeaways for most companies, Andrew?

Andrew Hill
Yes, and clearly if you are a manager — and this is the paradox at the heart of it — in order to devolve power to people at the frontline, you have got to be yourself self-confident enough to give up your power.

Isabel Berwick
No. So we all need a bit more hippo.

Andrew Hill
A bit more hippo.

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Isabel Berwick
Andrew, thank you so much for joining us, and thanks to Alexis Gonzales-Black. If you want to read more about Andrew’s work on flat hierarchies or otherwise, search Andrew Hill on FT.com. And please do get in touch with us. We want to hear from you. We’re at workingit@ft.com or with me directly @IsabelBerwick on Twitter and Instagram.

Working It is produced by Novel for the Financial Times. With thanks to our producer Anna Sinfield, executive producer Jo Wheeler, with research from Pippa Smith and Leigh Mayer and mixing from Alex Portfelix. We have editorial direction from Renée Kaplan and production support from Persis Love. Thank you for listening.

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