01 Jul 2015 20:01 IST

IT and the collapse of hierarchies

Organisational structures, systems and processes must be redesigned to reflect changing realities

The emergence of a digital world coupled with the arrival of Gen Y and Gen Z on the scene have necessitated the re-evaluation of long held ideas and theories of organisational behaviour and structure.

Harvard business historian Alfred Chandler famously said: “Structure follows Strategy.” A global corporation organises itself differently in comparison to a local one. A firm that follows the cost leadership strategy is structured differently compared to a differentiator from the same industry. When strategy and the business landscape undergo tectonic shifts, as we saw in the earlier discussion on Strategy, the impact would naturally be felt across the board in terms of how organisations are structured and the kind of systems necessary to cope with it and carry out the intended strategy.

What is happening to organisational structure?

A VUCA (volatile, uncertain, complex and ambiguous) world demands that an organisation be highly flexible and nimble. It means being acutely alert, alive and responsive to real-time changes. It means to have the dexterity of a small company while being a big one, it calls for being entrepreneurial and having the ability to respond quickly to the environment. And this means going back to the drawing board.

Information technology has redefined the task of management, particularly that of the so called ‘Middle Management’ which traditionally formed the bulk of the managerial pyramid. A Harvard Business Review (HBR) article a few years ago questioned the classical pyramid in terms of ROI (return on investment), and argued that it was result of vested interests of decision-makers who are the managerial class themselves and take decisions that would promote and not challenge their place and power.

The main task of middle management is that of coordination, information collection/ collation/ dissemination, communication, and generally be the link between the top floor and the shop floor. Information technology has taken over many of these tasks and does it better in terms of timeliness, speed, accuracy and objectivity. Starting with IT industry and across a cross-section of industry, the traditional middle management jobs are vanishing and the pace of this will only increase.

Every job, be it in the service industry or manufacturing, is becoming more ‘knowledge’ intensive. Other jobs either get eliminated or routinised and automated. Robotics, artificial intelligence, machine learning and IOT (Internet of Things) are the signs of things to come. The work-place, even within a decade, will be a very, very different one.

All these will mean that hierarchies will collapse. The class system of strategisers (top management) coordinators (middle management) and executers (the grunts) will increasingly converge and, with middle layers becoming irrelevant, the organisation will expect people to be both ‘thinkers’ and ‘doers’ simultaneously. In a slower world, one had the luxury of time between strategising and execution. Not any more.

Even in tasks such as manufacturing, where you still have a greater need for hierarchy, command and control, and coordination to produce a physical product, things are changing. For instance, look at 3D manufacturing.

Organisations are increasingly realising that in order to remain relevant, and profitable on a sustainable basis, they need to excel in doing the following two tasks:

-Employee engagement

-Customer engagement

As much as you can’t leave employee engagement to just HR, customer centricity demands that it be an organisation-wide priority and not just that of the marketing function. The silo-ed structure is vanishing as it comes in the way of creation, distribution and appropriation of value in the most optimum fashion.

Virtual organisations are changing the way employee engagement and contracts are done. People with unique capabilities and skills are increasingly refusing to be ‘monopolised’ by organisations under ‘full-time’ job contracts. They would rather be available on contract with defined outcomes and work at their convenience and flexibility in terms of time and place and are willing to be compensated on the basis of results.

All this simply means that organisational design, processes and systems have to be overhauled and redefined to reflect the massive shifts/changes that are happening. This is not an option anymore but an organisational imperative.

To read more from the Simply Strategy section, click here .

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