Debunking the Bossless Company Myth: A Critical Analysis of Managerial Structure
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One of today’s biggest fads (in management) is the ‘bossless company’. According to proponents of this idea, management is passé. The American management guru Gary Hamel declared: ‘First, let’s fire all the managers … Think of the countless hours that team leaders, department heads, etc. devote to supervising the work of others.’ He suggested that all management is waste and, implicitly, that all that managers do is ‘supervise.’
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There are three specific problems with the bossless-company critique. First, it doesn’t offer systematic evidence for delayering and radical decentralisation across firms in general, but rather a few cherry-picked examples. In many cases, these firms already had in place a technology that makes decentralisation easy. One of these examples, Valve relies on heavily modularised software development that can easily be delegated to self-managing teams, and others like Apple (under its late CEO Jobs) and Tesla are run by heavy-handed, even overpowering, top managers. Charismatic figures such as Elon Musk fill the headlines in the business press, though they are often better known for their visionary leadership than their managerial effectiveness. Musk urges his employees at Tesla to interact freely, without regard to divisional boundaries or any sort of chain of command. Communicating through layers of management, he wrote in a company memo a few years ago, ‘is incredibly dumb’. The media fawned and yet, as Tesla continues to struggle to meet its production targets for the Model 3 electric car, the company’s extreme reduction in hierarchy levels and Musk’s continual micromanagement, unwillingness to delegate and insistence on doing things differently, are taking some heat.
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Also, companies that have survived major shocks to their markets or technology have often benefited from having strong leaders with almost authoritarian leadership styles; think of Disney, Xerox and IBM. There is a lesson to be learned: centralising the authority to make decisions is usually a more effective way to adapt to unanticipated change than more collaborative, consensus-driven approaches. This is particularly the case for firms with heavily interdependent resources and activities. A lateral, consensus-driven approach will likely lead to those delays that can harm the survival of the firm. Second, academic research on delayering paints a more complex picture than the cartoon version in the bossless-company literature. One important study observed 300 ‘Fortune 500’ companies for 14 years and found that firms were getting flatter, but were doing so to concentrate authority in the hands of senior managers, not to empower workers.
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Third, while technological miracles such as the internet have induced sweeping changes in all sectors, the laws of economics are still the laws of economics. And human nature hasn’t changed. The basic problem of management and business is still the same. Since the industrial revolution, entrepreneurs have been regularly organising extremely complex activities in firms that are neither completely centralised nor completely flat. Imagine the complexity involved in operating a national railroad or a steel mill. These are all ‘knowledge-based activities’ and are conducted in teams organised in various structures. The bossless-company narrative has been badly oversold by its proponents. Yes, there are conditions under which nearly bossless companies can exist and thrive. However, they are and will remain exceptions. Therefore, the basic message of coordination by designated managers usually works better in all sense than any other known method, including the bottom-up, spontaneous coordination among peers stressed in the bossless company literature.
