Balancing hierarchy with innovation

For nearly a century, hierarchy has been the tool of choice as organizations sought to manage different forms of complexities and scale. However, for the first time in history, we’ve encountered a form of complexity for which hierarchy does not have all the answers. This is the complexity of the accelerated change led by what some call the 4th industrial revolution. Given the pace and continuous nature of change in today’s world, coupled with the sheer diversity of business models, it is safe to say that the old model of top-down hierarchies is changing in many places. It is giving way to boundaryless working, matrix structures, and organizations where everyone, irrespective of the levels, is considered a leader.

Hierarchies have existed as a tool to govern organizations since the origin of organizations. In attempting to define the role of the new “management” layers that were being created by the Industrial revolution, Henri Fayol wrote in 1916: "To manage is to forecast and plan, to organize, to command, to coordinate and to control". 

Over the past few years, at Microsoft, we have been on a journey to answer a similar type of question as Fayol did for his organization. Given the transformation in our industry and in many of the customers we serve, we believe that traditional top-down hierarchies are less relevant today than ever before. This realization started us on a journey to define what the best leaders do in an age where agility, learning, and innovation are the currency of success. 

What we’ve learned is that our best leaders “create clarity”, “generate energy” and “deliver success”. They are not points of centralization of authority, or persons who have all the answers. They are the team coaches, who can leverage the strengths of every player on teams to deliver success or act as someone always looking to build a diverse team where each team member irrespective of their position in the “hierarchy” can contribute their ideas and work. At Microsoft, we’ve realized that humility and not hierarchy brings success to a leader. But perhaps the most significant aspect of our three “Leadership Principles” is the definition of whom they apply to — our belief at Microsoft is that anyone in the organization is a leader, and that everyone, whether team leader, manager or individual contributor, will find relevance and meaning in these “leadership” principles. Each person can create clarity for others, generate energy, and optimism, and deliver success together. So, where in this construct do the formal top-down hierarchies fit?  

Boundarylessness is becoming a differentiator, as is the need for balanced leaders who encourage and nurture collaboration, innovation, and agility

Driven by the need for agility and innovation, and in industries where new business models and completely new customer needs are being met in unique and unprecedented ways, teams are quite literally “going where no wo/man has gone before”. The structure of these teams and entire organizations will need to keep pace with that reality — morphing, reforming, and working collaboratively and quickly in the interest of the customer. In this spirit, the ideators, the doers, the thinkers will be valued for their impact and it will increasingly become irrelevant where (in the traditional model of organization structures) that person sits. Where hierarchy optimizes for governance, it could often underperform as a tool for innovation and creativity in a time of change. Completely doing away with hierarchy is not the answer either. Most organizations will continue to need some form of governance, and hierarchy remains the tool they will use. The key to surviving and thriving therefore is in balancing the essential hierarchy with the ability of the organization to encourage innovation and to be able to pay attention to ideas from all levels.

Breaking down hierarchies in an organization is in some part about symbols. Moving away from closed offices to open plan working, encouraging parity even in simple things like parking spaces, democratizing access to facilities and making them level agnostic — all play a role in how hierarchy is perceived by employees. At Microsoft, we use technology that allows for seamless communication and empowerment. Using Yammer, employees can ask questions to any leader at the company including our CEO. This is just one of the ways we believe that we can use technology to make Microsoft boundaryless.

Some form of hierarchy will likely continue to exist as a management tool, but “boundarylessness” is becoming a differentiator, as is the need for balanced leaders who build a culture that encourages and nurtures collaboration, innovation, and agility. 

Where hierarchy optimizes for governance, it could often underperform as a tool for innovation and creativity in times of change