People Follow Structure: How Less Hierarchy Changes the Workforce

Managers today are attuned to current thinking that how companies are organized matters to their performance, so they frequently adjust the corporate structure in the interest of improving outcomes. But the effect those changes may have on the workforce itself is less well understood.

While research has shown that employees are a heterogeneous group and that attracting and retaining talent involves a mix of incentives, we know less about how various types of organizational structures appeal to different workers, and whether those structures bind them to their employer or make them want to leave.

The more radical the changes that senior leadership intends to implement, the more critical this question becomes. Among the most dramatic transformations observed in the corporate landscape these days are moves from traditional, hierarchical organizing to working with flatter structures featuring fewer layers of command. These structures offer more autonomy but also impose burdens of self-organization on employees.

Structure Follows Strategy’ Is Too Simplistic – this approach is out of step with today’s corporate reality, where objectives other than strategy execution have gained importance. Some leaders may seek to experiment with different structures in order to foster the learning and adaptation needed to identify new opportunities.  In any case, according to the authors they have seen that organizations pursuing similar objectives may differ dramatically when it comes to structuring work. A plethora of contemporary management approaches — such as (scaled) agility, scrum of scrums, or Haier’s RenDanHeYi — rely on organizing with fewer layers of managerial authority while giving more autonomy to the workforce. These different structures appear to work for very different people, irrespective of the strategy the companies pursue.

The finding that individuals respond differently to different corporate structures is unsurprising: People differ from one another, and employees appreciate and expect different things from their workplaces.  The authors’ findings are clear. First, controlling for company-specific effects that stay constant over time, as well as controlling for company size and particular year effects (macroeconomic events), we can show that workforces do in fact change as a result of structural de-layering. Second, we can demonstrate that, on average, employees become more conscientious, agreeable, and open; that is, they rank higher on three of the Big Five personality traits that many HR professionals use to assess their employees.  These findings are relevant in absolute terms: Many organizations compete to hire talent with these traits, and that has a direct impact on performance. But they also indicate that de-layering leads to worker self-sorting across different types of structures, which should help increase productivity.