Why Management still matters – even in organizations with flat hierarchies

Managers are characters that are pretty loathed. The term manager has an image that can be described as uninformed, ignorant and power driven. A Manager is not doing anything, except ruling and playing nice with superiors. Yet, here are the facts (#1):

  • The number of managers in the total workforce in the US has increased from 12,3% in 1998 to 15,4% in 2015
  • Between 1980 and 2012 more and more jobs became “Management-like”: The demand for routine skills decreased, and the demand for social skills (e.g. negotiation, coordination, persuasion and social perceptiveness) grew
  • Even in Silicon Valley’s most successful Companies, Middle Managers are still the norm and shape the “transmission belt of information” between the top and the working level

In fact, there is a huge case to be made for middle managers, even in the digital age:

  1. In an ever changing VUCA environment good middle managers help to make this complexity manageable for the top management: They “encapsulate” complexity (not unlike API’s do in modern IT architectures)
  2. Persuasion is what is needed to get results from all this data. Without getting your points across, no one will follow. Persuasive people attract followers and are – by definition – managers/leaders
  3. Collaboration needs encouragement. While people may collaborate naturally with one another, a manager gives the act of collaboration a particular purpose and keeps it on the target of an organization

Modern management systems are not blind to these advantages. Here is how those systems let Middle Managers (or people charged with management tasks) do their work more effectively.

(This is part 4 of a series on a comparison of the three Management Systems Liberated Companies, Holacracy and Management 3.0)

Management Actions

No matter if Managers are still called Managers or not, there are still a hell of a lot of management tasks to be done.


Let’s start with decision making. In classical hierarchies, the superior is supposed to decide everything of importance, except those decisions explicitly delegated to coworkers. Delegation has been recognized as the critical to tool to keep an organization running smoothly and develop your coworkers at the same time. Good delegation is 80% of what good management is about.

In ever changing VUCA environments there is just one problem with it: You can only delegate those decisions that you expected. In a climate of constant exploration, experimentation, and adaptation the traditional form of delegation is to slow. As long as the “residual rights of control” (to borrow a term from the theory of Incomplete Contracts as described by 2016 Nobel prize winners Oliver D. Hart and Bengt Holström)  for every unexpected decision lies with a manager, decisions will automatically slow down, as a manager needs to find time to acquaint herself with the situation.

Therefore Liberated Companies and Holacracy takes a bold step: The “residual rights of control” for every decision shifts to the work level, as a default. Only if a worker does feel sufficiently informed to decide, she is able to escalate it to a superior. That superior can be a manager or a group (a “Circle” in Holacracy).

Management3.0 does not go so far of shifting the “residual rights of control” to work level. But it does change the nature of delegation, by using Mission type tactics in the delegation, as explained in the next chapter.

Here are my Orders!

“As long as everyone follows my orders, nothing can go wrong.”

Who hasn’t heard this sentence? I even heard that from the CEO of a Billion Euro Company. He claimed that if every business unit just performed according to the revenue and budget numbers he came up with all by himself, everything will be okay: “Everyone! Just focus on these orders!”

Attractively straightforward and easy to understand, this order. But an utterly flawed attempt by one mind to compress all the complexity of a business and the environment to a set of numbers. For sure, people acted on these figures. After all, the CEO provides them with a living. But as sure as hell people will play with these numbers. They will game the system, e.g. use creative accounting, shift burdens to the future, other business organizations or anything that is not measurable as for example quality and risk. This “fantastic” plan just got everyone to focus their energies on gaming the system instead of making the customer happy.

Still, there is nothing more efficient than giving good orders. It relieves people with all tedious work of getting to a decision themselves. It eliminates uncertainty and indecisiveness. It gets people to work on the spot. It is very efficient.

But it is rarely very effective: Given a complex and changing environment, where a superior can not possibly know all relevant details, the more detailed or exact an order is, the more it is likely to fail to bring about the intended consequences.

In a complex and changing environment a detailed Order is inferior to an Order expressed as a Mission. 

This style of command is known as “Mission Command.” Orders are expressed as Missions, i.e.

  • The intent of the Commander is stated clearly: “Why?”
  • The objective is described in the broadest possible terms: the expected actions to be taken, the “What,” the “Where” and the “When.”
  • The authority over resources that may be employed for the mission is specified

While this is still an order, this type of order delegates maximum authority to the subordinate. Not only the authority to vary means, but also the authority to alter ends – as long as the commanders intent, the receiver of the order has the leeway to do whatever is in her power to bring the situation nearer to the status intended


Management 3.0 wants orders to be given in a Mission command style. It shares that preference for Mission Command with the Lean Movement. There is one precaution in this: Mission Command must be complemented by the competence level of the receiver of the order. It is no use making orders so broad and vague that people are just overwhelmed by all the decisions they need to make. In this case, it is better to make the order less general and more specific – and therefore more executable.

Within Holacracy or Liberated companies, there are no orders – on the surface. While there is no individual who has the authority to order anything, there are informal social groups (Liberated Companies) or  Circles (Teams in Holacracy) expecting individuals to do things. This hasn’t the hard look and feel of an order, but disobedience is full of consequences, too. In fact, decisions of informal social groups or organized circles that oblige individuals to do things are orders in all but name. These orders are just not given by individuals but by groups.

Holacracy’s “integrative decision-making process” is built on consensus and is a safeguard against the tyranny of the majority. However, this protection comes with a hefty price tag: Consensus.

Information: From Need to know to Right to know

The flat organizational structures of Liberated Companies, Holacracy and Management 3.0 need to be based on ubiquitous information that is available to every member of the organization. It is a sine qua non for everyone working in such organizations to be as transparent as possible.

There is a “right to know” that is in stark contrasts to the classic “Need to know” mantra, which is the norm in most organizations. Why should a worker know more than he needs to do his job? Well, there is no reason, if the job is precisely defined so that the “right” amount of information can be specified and the environment is stable.

In knowledge based organisations and in inherently unstable environments “Right to know” is therefore superior to “Need to know”.

But I have to insert a qualifier here: The amount of information and the usefulness of the information is essential. Information overload and echo chambers will undermine the success of any management model – and it will all but devastate modern, less hierarchical management systems. Any current management system has to rely on Social Network Theory (see Social Physics: The Revival of Science in Management) to engineer an effective information flow, e.g. a structure that will reign in echo-chambers.

Specialization: Go forth and specialize

Specialization – the separation of tasks within a system – is tremendously powerful. Everyone human being is being specialized during education and in work life –  so that this specialization becomes an important part of oneself. The specialization is internalized not only in the skills that we have, but in the values, we tend to have, and finally in the people we are. Accountants, lawyers, construction workers, salespeople, etc. – we all attribute certain values to these professional specializations.

For Adam Smith specialization (“the division of labor”) was one of the three cornerstones of an industrial society, along with the ability to act according to self-interest and free trade. Up to this day, people are not hired primarily for character traits, they are hired for their specialization. A job profile is defined predominantly by the tasks and skills that a person is supposed to bring into the new position. A suitable candidate for the job is selected and the position, the cog inside a machine, is in place and ready to work in the manner planned by the manager in charge.

The total opposite position is taken by liberated companies. Here persons are hired because primarily because of their character traits. The skills that a person has are not unimportant, but they are secondary. If a person has got the right “growth mindset” (read: expected capability for learning) is curious and has grit, the hire will be made. The predominance of character traits over current skill is something that is actively supported by Google (see Hiring like a Pro: Lessons from Google).

Once a person is hired, she is rotated from job to job to find her calling. The path is not pre-planned as in classical organizations, i.e. “you were recruited to fill this position – now do your job.” Instead, it is left to the personal interest of the new recruit to find her calling.

The mechanistic staffing of a person into a predefined slot in the organization is replaced by a series of explorations that enable the new recruit as well as the organization to find the place of long term maximum impact and value

Let’s face it: Nobody knows a new hire at the start. What is known is a CV. Interviews reveal next to nothing – just check the article on Google’s hiring experiments above. If people are the most valuable asset a company has, conducting a phase of controlled experiments by rotating to different positions is a wise and even – as Google has proven empirically – a scientifically sound strategy.

Holacracy approach to specialization is all about roles. Here the circle is defining the roles needed and is deciding on the question who should hold which roles at what point of time. Basically, the Circle’s need determines the degree of specialization.

Management 3.0 works with roles instead of job descriptions, too. Here the roles are defined (or sanctioned) by a superior manager instead of a circle.

What’s all this obsession with Roles instead of Job Descriptions?

  • A Job Descriptions implies some binding legal definition of all that an employee should do: The more detailed it is, the more difficult it is to change – which is wrong in the digital age
  • A Job Description is tied to a position which is held by a person in a 1:1 relationship.  This risks creating a single mindedness of the individual over time, due to a lack of other perspectives: With the locking in of a person in a position, world views get locked in to. This is very bad, as growth and innovation need impulses from the outside
  • Roles are not legally binding, they can be flexible invented and discarded
  • Roles are temporary: They are held only for a time, giving the employee a chance to grow with every change of perspective
  • Multiple Roles can be held by anyone at a particular point in time

The recommendation is: Keep Job Descriptions as general as legally feasible. Use roles instead and maintain those vigorously. Especially Holacracy is very adamant to formalize roles in written form.


Now let’s talk about Specializations twin sister: Coordination.

The need for coordination increases with the number of employees and the degree of specialization. I would say the need increases exponentially, foremost because it’s trendy to be exponential. Linear is so 1980ish…isn’t it?

There are two game changers in the realm of coordination these days:

  1. Technology is there to connect everyone to everyone, across hierarchies and levels, instantly, e.g. Slack, Trello, Jira, Google Hangouts, etc. There technology crowds-out traditional coordination mechanisms like Meetings, Broadcasts (“Letter from the Manager”), or One on Ones. These traditional coordination mechanisms do not disappear, though
  2. Change is here to stay. The ever expanding rate of change requires a company to redirect resources time and again. Coordination is already required in stable environments to keep things running smoothly, but in unstable environments, it is much more necessary

All three modern Management Systems rely on a shared purpose, a clearly communicated “Raison de être” of the organization. This shapes the values and behaviors of everyone in the organizations giving it a “true north” as a base for any decision. An extreme, very successful example of this is Amazons “Day one Message“.

But a “true north” is not enough. It needs to be supplemented on the tactical level with free flowing real time information about hard facts (numbers) and soft facts (social relations and emotions). Not communicating openly, not in real time, and painfully long drawn out decision processes mean – as Jeff Bezos said in the clip above- Stasis followed by excruciating pain and death.

Liberated companies rely mostly on a shared mission and free info. This system does not give any other recommendation, but people are free to try anything else and check what works. In stark contrast to this is Holacracy. Its whole Operating System is basically about coordination. There are accurate and detailed descriptions how to achieve coordination in a nonpersonal, nonviolent, systematic process.

Management3.0 is openly embracing the concept of coordinating by shared purpose and free information flow.  But it does reserve a place for traditional coordination methods by managers. By expecting managers to regard their trade as a craft, which one should seek perfection in, it offers concrete, simple practices to do so. These practices are not just about coordination, but coordination is always involved as soon as more than one person is participating.

A couple of Management 3.0 practices center on supplementing the hierarchy with networks, e.g. forming of ever more self-governing communities of interests called “Huddles, Tribes or Guilds”.


Rules, Policies, and Processes

Rules are one of the arrows in the quiver of coordination.  They are usually made to regulate behavior.

This is obviously something that Liberated Companies are allergic to. Besides Kant’s categoric imperative in its second formulation (simply said “Nobody should act to do another one harm”), it actively discourages the use of any rules:

Rules are made to regulate the behaviours of the 3% of employees who may be misbehaving and are punishing the 97% with limitation and distrust.


Rules can never be perfect, especially not in ever changing complex environments. It follows that rules bred rules. The Proliferation of rules will kill companies, they will create, “stasis, followed by excruciating pain, followed by death” – to cite Jeff Bezos.

Please note that processes share a considerable overlap with rules, if they are very strict, formal, static and not applied in a reflected manner.

Holacracy shares this aversion of rules – with one ironic exception: The rules of Holacracy must be strictly adhered to. Do not temper with the Operating System! The Operating system is fixed, go innovate somewhere else, on top of the operating system.

Management 3.0 is averse to rules, too.  But it prefers a gradual reduction of the use of rules, as competence and trusts grow. I think there is an inherent conflict here: Rules proliferate over time. Yet, they should be reduced over time, which sets a high bar for the skill level of the manager in charge. Getting rid of established rules is empirically very hard. What is first: Granting trust to build competence or gaining trust by sticking to the rules? I do think the first.

Summary: The evolution of the craft of Management


Decision making, Getting people to do things, Communicating, Specializing, and Coordination remain critical activities of managers or people doing management tasks in any System of Management.

All these management activities require new tools, as the challenge of managing a knowledge based organization in a rapidly changing digital age has changed. Get a new tool-set you people doing management!

This is not the end of middle management but an evolution.

A final word about the presentation of the Management Systems:

Practical advice is very warmly presented on the Management 3.0 Site. Looks a bit like a children’s birthday party, though. In contrast to this, look at the core of Holacracy, the Constitution. This looks like “legalese” small print terms and conditions.

  • Holacracy wants to treat people as adults – who it obviously expects to be all lawyers.  

  • Management 3.0 wants people to “manage for happiness” – so we all got to be children again? 

  • Liberated Companies offers narratives but little guidance.

I think there is a space to be filled here.

We are not done with this series on Management Systems yet: 4 done, 2 more to go. The next weeks, I will be heading for the coasts of France. So posts will be shorter and smeared with a mixture of sun-cream and sand.

Enjoy Summer, ladies, and guys!

Here is the updated summary table:




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