Decentralized organization is a hot trend within the business and management world. Companies like Google and game-development studio Valve have famously sought to run their businesses with “no bosses.”
But a growing fascination with self-management and greater autonomy in the workplace shouldn’t be reason enough to renounce the traditional ways of administering a company.
What are the perks?
Well, for one, experts largely agree that when compared to its centralized counterpart, a decentralized organization generally fosters an environment in which employees experience a greater sense of responsibility and loyalty to the company. That’s a big deal. But the limitations of a decentralized company also mean that certain conditions must be met in order for this to work.
So how do you keep employees without managers motivated, and a business without hierarchy from falling off the rails? We spoke with an expert to find out.
Eric M. Anicich is an assistant professor in the Management and Organization Department at the University of Southern California’s Marshall School of Business. Anicich’s research focuses on social hierarchy within groups and in the workplace, in particular. Here are a few tips to keep your decentralized company humming along without a hitch:
Flat organizational structures work best for small businesses. “There is no tipping point per se beyond which an organization can no longer sustain a decentralized structure,” says Anicich. “However, as an organization grows, its internal complexity increases rapidly making decentralization unsustainable and potentially chaotic.”
This isn’t to say that you shouldn’t aim to scale your decentralized company, or that large companies like Google can’t try to reduce managerial layers and flatten their organizations. But it won’t be easy. For example, Anicich says Google and Zappos are two large companies that have “notoriously struggled” to decentralize.
“Part of the challenge with organizational change initiatives that seek to flatten the hierarchy is that simple procedures that were once taken for granted, such as how to process an expense report, may become unnecessarily time consuming and frustrating as employees struggle to identify the appropriate point of contact to process their request.”
The fact is that as your business grows, formal organizational structures will become “more valuable,” says Anicich, and therefore, more attractive and efficient. Tradeoffs might need to be made.
Culture is king.
Clear, strong, and well-articulated values are important for a company regardless of its organizational structure. A company’s culture “can be thought of as an invisible hand that guides employee behavior,” Anicich says. But because decentralized companies lack the formal structures that otherwise coordinate that behavior, it becomes much more important for that guiding hand to be visible and obvious.
“Embracing cultural artifacts and rituals that clearly broadcast the organization’s values, paired with selection and socialization processes that focus on bringing in employees who will contribute to this culture, are crucial” for a decentralized company, says the professor.
There are myriad ways to do this, but the more interactive and inclusive for employees, the better. The key is for everyone to understand what is valued within the organization and what isn’t, and the best ways to get that across don’t involve enumerated lists in an employee handbook that nobody ever reads. Get creative. And do it often.
Keep the lines of communication open.
Another tip that applies to all organizations, flat or not, is to ensure everyone within the company feels comfortable voicing their opinions and is confident they will be heard. Decentralized organizations, by design, have baked-in features that typically enable more honest communication within the company.
“Hierarchical organizational structures can have the undesirable effect of suppressing employee voice due to the real or perceived threat of punishment that lower-ranking employees experience at the hands of higher-ranking employees,” says Anicich.
However, decentralized companies cannot take for granted that their structures alone will mitigate this phenomenon. A decentralized company must also place emphasis on “psychological safety,” Anicich says, to create “a team climate characterized by the shared belief that the team members can take interpersonal risks without fear of punishment or embarrassment.”
This is the key for effective communication within a company, says the professor, adding that Google’s Project Aristotle demonstrated that psychological safety “was the single greatest predictor or team performance within the company.”
Have an efficient dispute-resolution procedure in place.
The idea of having “no boss” at your workplace might sound great to most people—until there’s a problem that needs resolving, and there’s nowhere to turn.
Whether your employees work remotely or share office space, people are people—and, every now and then, tempers may flare. In a decentralized company, however, intra-organizational disputes between employees can’t be resolved using traditional means. And, as Anicich notes, “a purely democratic method of dispute resolution would be highly inefficient, especially for larger organizations.” So what can we do?
Anicich says adopting a mediation model is one way to do it. This would involve using a neutral third party, such as another employee, to “work individually and jointly with the disputants to identify a satisfactory and sustainable solution.” Selecting the right people for the role of mediator would, therefore, become extremely important, but could be accomplished democratically within a decentralized company “on the basis of relevant expertise and the likelihood of establishing interpersonal rapport with the disputants,” Anicich says.
More complicated disputes involving more people will require a greater team effort, which means a process that relies on the “principles of restorative justice” could be the way to go. This involves bringing all stakeholders in the dispute together to “cooperatively address and repair harm caused by a conflict,” says the management expert.
Allow employees to define their own roles.
In traditional hierarchical companies, the rat race to climb the corporate ladder is well understood. But what happens when there is no ladder to climb? No middle management, corner office in which employees can picture themselves? You incentive your staff to look inwards. Very zen.
“When promotion opportunities and other extrinsic sources of motivation are largely absent, organizations need to devote more effort to fostering intrinsic motivation among employees,” says Anicich. Fortunately for those entrepreneurs with an aversion to pyramidal work environments, Anicich says the research is very clear on how best to do this.
“For example, employees who have more versus less autonomy to choose how, when, and on what they work will, on average, experience more intrinsic motivation than employees who do not,” he says. “Other factors such as experiencing one’s work as meaningful, receiving performance feedback, and having a clear understanding of how one’s work contributes to the broader organizational goals can also help in this regard.
And, for those who want to get even more imaginative, one of the best ways to keep employees motivated is to provide them with the freedom to define their own roles. Job crafting exercises are great for this, says Anicich, because they allow employees to “create a more ideal version of their job by aligning aspects of their work with their interests, strengths, and values.”
If you decide that a decentralized organizational structure is right for your business, it’s best to heed the professor’s advice. Or, you know, just do your own thing. We’re not the boss of you.