Firms vs. Markets and Flat Hierarchies

For organizations that are tempted to throw out the classic organizational management handbook in favor of a structure with no managers – think again. 

Nicolai J. Foss is a professor of strategy at Copenhagen Business School and the co-author of Why Managers Matter: The Perils of the Bossless Company. The book pushes back on the notion that the key to breakthrough success for organizations is through flat, leaderless structures akin to today’s trendy startups, and makes the case for why companies need hierarchies to function. 

Nicolai and Greg discuss the feasibility and realities of operating without traditional hierarchies, why these models often rely heavily on exceptional founders and are not suited for all business types, and the essential roles managers play in coordination, cooperation, and maintaining effective workflows, especially during times of crisis. 

*unSILOed Podcast is produced by University FM.*

Episode Quotes:

We still need managers

41:33 [Managers] They're doing a lot of good stuff. They are coordinating, and they are cooperating at the most abstract level. I mean, activities need to be coordinated in the sense of, we have to figure out what those activities should be, how they should change in response to outside disturbances. Activities have to be linked. Activities have to be rethought. And once we have figured all that out, which is, of course, an ongoing struggle, then people have to be motivated to cooperate inside those, and actually carry out those activities in the best possible way and in a dynamic reality. This is a never-ending quest.

No human system run itself

11:44: No human system works itself or runs itself. It has to be supported, maintained. There has to be support, scaffolding, or whatever you want to call it. Same goes for firms—and perhaps all different ones.

Organization is about coordinated cooperation

02:40: At the end of the day, organization is about coordinated cooperation, and the right question to ask is, what exactly is the role of managers in bringing about coordinated cooperation?

Boselessness is not for every company

20:43: [Bosslessness] It works for some companies, typically those that have a more modular kind of underlying technology, where there is no high need for mutual adaptation between units or activities or processes. But it works much less well for a traditional industrial company.

Show Links:

Recommended Resources:

• Organizational theory
• Principal–agent problem
• First, Let’s Fire All the Managers by Gary Hamel
• Jensen Huang
• Elon Musk by Walter Isaacson
• Can you run a company as a perfect free market? Inside Disco Corp 
• Morningstar, Inc.
• Humanocracy: Creating Organizations as Amazing as the People Inside Them by Gary Hamel and Michele Zanini
• Valve Corporation
• The Man in the Gray Flannel Suit (film)

Guest Profile:

• Faculty Profile at Copenhagen Business School
• Professional Profile on LinkedIn

Guest Work:

• Why Managers Matter: The Perils of the Bossless Company

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