How and why digitalization of a company challenges its hierarchy

Gonzalo Martín

16 February 2015

At Good Rebels, the organizations that we regard as ‘Enterprise 2.0’ are those that transform their conditions and work environment to circumstances that introduce networks and digitalization: if the industrial revolution brought about a way to understand work, the means of production based on bits and knowledge has led to a surpassing of these conditions to maximize productivity, as well as the satisfaction of the people.

The post-industrial society accelerated the idea that the commitment and responsibility of workers had a direct impact on their productivity: if at the height of industrialism, it was discovered that workers’ self-esteem improved their outcomes more effectively than the coldness of a stopwatch, and the disregard of the employee’s ability to contribute to directional decisions, the evolution to what is called post-industrial society and the incorporation of Japanese management methods accelerated the consensus (and the social expectation) that work without the people’s commitment and their satisfaction was not good for business.

Professor Manuel Castells in his widely-revered book, ‘The Information Age’, stretched the concept of ‘network society’ and introduced, among other things, the idea that the organizations of the informational society operated within “networked” economies in companies more flexible and higher in operational capacity. Those companies operate, in turn, as ‘networks’ with flat hierarchies i.e. those where what is most important is the interaction between nodes.

Elevated terms such as ‘company or network society’ or ‘flat hierarchies’ certainly require a descent into practice for those who face the digital transformation phenomenon. In short, break down what it comprises of, as well as why it is somehow inevitable, complex to implement, and even more difficult to implement in traditional organizations.

The network architecture affects work relationships

The first question would be this idea of ​​the ‘network.’ The traditional organization already is or was a network. The main thing to understand here is its ‘architecture’ i.e. the power of each of its nodes to control the flow of information. Our traditional organizations would be centralized or at most, decentralized (in other words, everything hangs from above): there are nodes here – management positions – with the capacity to decide where information goes and where it doesn’t, i.e., they have the power to decide what information flows from some points of the organization to others. This is both through access to conduits of information, such as in the ‘censorship’ of what can be said (contributions) and to what cannot be said (when the collaboration of another is relevant or not).

E-mail already introduced a transformation of this system of flow: suddenly, anyone could send an email to another person on his list, and even, to all members of the organization. This power was previously reserved solely for the highest level of management. Quite a few organizations were surprised when they first realized that power, and thus decided to offer the rest of their coworkers a sales promotion to a familiar product.

This new scenario allows us to introduce another network architecture: the distributed network that – unlike the circular system on paper of a traditional organization, and the scarcity and complication of the means to address all people – theoretically, immediately allows anyone to prevent others from publishing (i.e. communicating, cooperating, seeking cooperation or reworking of other people’s content) and reaching any other point in the organization.

The introduction of what we call ‘social tools,’ and the entire foundation of Internet technology (links in all their forms, including tags) accelerate the potential of what can be done with information made public without restricted access (most people cooperate, debate on, and transform the information). So much so that, it is too inefficient to limit the power of what people can do: if management companies discovered in the industrial era that counting on the brains of their members was a good idea for the business, in the digital age or network society, beyond ethical considerations about the relationships between human beings, these capabilities are significantly increased by the technology available.

There are increasingly more conditions that reduce hierarchies

If other ingredients are added to the bias introduced by today’s workplace technologies, (knowledge today is a raw material of the first order, and the educational level of the population makes people much more prepared on average, and with a greater sense of personal autonomy, of merit and equality treatment), we find that the first victim in the digital transformation of an organization – the journey to Enterprise 2.0 – is the hierarchy as we know it.

Hierarchies will always exist: after all, every organization has some responsibilities to a third party, which involve attributing certain powers to people who assume that obligation and risk. Someone must sign the checks; someone must be responsible to authorities and regulators for the decisions of an organization. Ultimately, someone has the ability – and the obligation – to say ‘no’ to the consideration of options in strategy and operations, and to make a final decision. But the range of the ability to say no on the principle of authority is now greatly reduced, and collective processes that are actually really complex have replaced this: it is not easy to change one’s mentality to lead debates and values; to accept the excesses that appear due to the use of this freedom that people have earned; and not to react by trying to recover the old control and, in turn, deliver results.

The question though, is whether there is another way. In Lidertarios, for example, this is the collective vision that we at Good Rebels have for organizations to come; for those already among us; or at the very least, for those that we try to build. Building a ‘network enterprise’ that taps into the potential of the people in an environment, with respect to their individuality and personal interests, is probably inevitable: if the original email was a more or less internal technology, with dependent policies also developed internally, with regards to today’s technology, members of an organization cannot be prevented from building mechanisms of cooperation and communication on their own. This discussion is further highlighted in the last public case we had with the Spanish police.

In short, it is easier and better to accept that the route to becoming a flatter organization lies in the power of distributed networks, than to try to stop it: we must remember that every member of an organization has their own smartphone, and there is no corporate policy which prevents access to your Facebook during working hours, just as there was none for the press paper when read surreptitiously. People are already trained in using a number of technology devices that bring excitement to their private lives, and nothing prevents them from using it to serve their needs at work. To change control by responsibility is difficult, but the challenge is to take advantage of the brains of people who work with us, and so, it seems like an inevitable trend, if we look with perspective at how work has evolved since the beginning of the industrial revolution.