Staying relevant

Ever wonder how most large organizations, which claim to have no hierarchy or a flat hierarchy, tend to have power concentrated at the top even more so than conventional firms with a defined hierarchy. By eliminating hierarchy and consequently chopping off a majority of the middle-management roles, they end up creating a steeper power gradient between the management team and the rest of the employees.

In my opinion, it is largely irrelevant if a company has a rigid hierarchy or a more loosely defined and flexible structure. What matters more is to institutionalize a culture that promotes company building even at the junior levels. The bigger the organization, the more important it is to have a more democratized approach to solving problems or building new businesses.

Most companies that have evolved to large organizations employing tens of thousands of people have followed a similar path to success. After starting out as an innovative and nimble startup in the initial months and growing to a successful, emerging company, they tend to end up as an enterprise fighting to stay relevant. The battle of the middle-management bulge is a reality in almost all of the top enterprises and technology companies are not immune. Most technology companies employ a philosophy of hiring ahead of the curve, which is essentially increasing the pace of hiring without regard to the actual requirement for talent. The usual side effects of this philosophy include the emergence of a bureaucracy, under-utilized individuals and teams and subsequently less productivity per employee.

Companies once at the bleeding edge of technology fail to ideate, innovate, and execute faster than new players who look to disrupt the market. Even with their financial muscle and vast resources, many large companies just fail to compete in this age of hyper-innovation. This is partly due to the prevalence of a complacent culture that is all pervasive. The middle-management layer is often incompetent to spot a bright idea and bring it to market. This ensures that promising ideas are often nipped in the bud. This leads to disillusionment at the lower rungs and eventually the organization suffers. Many large companies fail to see the merit in fostering a hundred million dollar ideas in the quest for a single, potentially $100M bet. The small bets are often left to wither and die, as they do not account for more than a rounding error in the company’s balance sheet in terms of revenue potential. Often, the pressure of quarterly earnings adds to the problem with the company focus shifting from long-term growth to a short-term gain. Left to remedy too late and the organization runs the risk of turning into a vestige of the past.

As a startup, it is prudent to institutionalize processes to ensure that the pace of innovation is maintained as and when it enters the next phases of growth and avoid some of the problems that large companies so often end up in. It is far easier in the earlier stages of evolution of a company. It helps to have the right set of measures to encourage new ideas internally, help discover them, and productize the ones with promise. It is perhaps essential to eliminate the possibility of a decision maker to pull rank over rationale and veto an idea. Chain of command might work well in the military and government but could prove detrimental in a technology firm. It is more pertinent to have the right people in the right places to enable decision-making. It will go a long way in helping the company stay relevant for a long time.

Perhaps it is an idealistic argument but it is definitely worth a try.

What’s your opinion?

It is also worth having a look at what these companies have done – Fog Creek Software, IDEO.

[Guest article contributed by Shashank P S. The author can be reached on twitter: @shashank_ps]

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