Flat or hierarchical - Organisational structures and governance procedures need to be adapted to suit business goals and the stage the business is in

I used to conveniently ignore how China has leapfrogged in terms of growth as compared to India, giving lame arguments about the benefits and little joys of democracy that we take for granted, till the time I visited Beijing and got a reality check. The spick and span roads with roses blooming on the state highway were a striking contrast to our potholed ones. I was reminded of how I craved cleanliness around me, and how I used to be known for asking strangers to pick up papers that they threw around, back home. Despite being terribly home-sick, I couldn’t but admire the clinical efficiency with which they operate and I so wished that our roads could be as good as theirs, our surroundings as clean, and that is what I wanted to take back from my first ever overseas trip.

How could China achieve an execution efficiency par excellence braving all odds? And why is India still struggling to get even the basics right? Why almost nothing is done well and hardly anything is completed on time in our country?

The one striking difference amidst all similarities between India and China is the governance structure. While the former is a democracy, the latter is an autocracy. Clearly India’s fractious democracy and inept governance doesn’t seem to work. Many of us wistfully dream of dictatorship, for a decade, to set things right. In the Indian context, Guajarat is the only state which has been able to make remarkable progress. To prove our speculations right, the chief administrator of the State, Narendra Modi, is known for his dictatorial characteristics. 

I was reminded of how vehemently I argued my case for flat hierarchies, diffused decision making and empowerment in the context of organizations. Looking at India and China, now I realize that flat is not always beautiful. Organisational structures and governance procedures need to be adapted to the business goals and the stage a business is in.

Consider a factory floor where a supervisor decides to make changes in the way a product moves on the assembly line, or a retail store where the store manager decides to change the music. In all probability it could be beneficial but it is not unlikely either for the results to be disastrous. Organisations such as Inditex, one of the world’s largest fashion distributors, have in place exemplary supply chain systems and store processes defined to an extent that employees at times feel suffocated.

Is there an alternative? In order to achieve high standards of delivery, mammoth organisations need to have defined processes which provide clear direction with decision making in few hands.

Flat structures are undoubtedly more desirable and the idea of empowerment liberating, however the fact that they can effectively work in organisations which are smaller and have a nature of business where creativity and innovation scores higher than discipline and delivery cannot be denied.

A hierarchical structure has the attributes to crush flourishing of vibrant ideas that companies need to keep growing. On the flipside a flat, consensus-driven organisation with lack of policy predictability and directions might make larger organisations go amok and subsequently fail. An ideal scenario would be to arrive at a governance process which enables high standards of delivery without compromising on creativity and innovation. However till the time we are able to achieve the ideal and the most desirable we need to accept that at times strict governance is an imperative not an option.