Companies are creating new structures that fit their needs and goals rather than falling back on traditional, hierarchical, bureaucratic, and command-and-control configurations. Like families, once dominated by a traditional, husband and wife and children structure and now outnumbered by non-traditional (one parent, extended, same sex parents, etc.) structures, companies are re-thinking how they do their work. Globalization, technology, competition, and a multi-generational and diverse workforce are causing companies to either build a different structure from the start (e.g., WordPress) or transform themselves (e.g., Zappos) from a traditional structure to something more effective for the new economy.
This trend away from a traditional corporate structure has been happening for some time. In his 2016 book, The Vanishing American Corporation, Gerald Davis says “…the number of publicly traded companies in the United States declined by half between 1997 and 2012.” He makes the case that the public corporation has become obsolete. Much of the work that these companies used to do by being vertically integrated can now be done by outsourcing and using contingent workers. And the advantages of staying privately held are now viewed as being greater than the advantages of going public.
Part of this trend is due to the internet and automation. The number of people needed to do the work of corporations has declined dramatically. WordPress, a billion dollar company, needs only 256 people to run the organization. Other internet companies that are more traditional in structure employ many more people. See the following table from a WordPress marketing document.
Companies are beginning to realize that being agile and innovative is more important than being hierarchical and bureaucratic. They are asking themselves, “Given the dynamic, diverse, and competitive environment, how can we structure ourselves to achieve our goals and be prepared for anything that might come at us?” Leaders are realizing that command-and-control, while easy and comforting and familiar, is not the way to develop an agile and innovative workforce.
So, the question becomes, “How can companies prepare people to work in this new environment?” First, they must change their mindset from “managing hands” to “managing minds.” David Grebow and I have written about this in our new book soon to be published by ATD Press titled, Minds at Work: Managing for Success in the Knowledge Economy. We argue that, fundamentally, companies must shift from a pyramid to a circle in their structure.
The pyramid represents Industrial Economy thinking that dates back at least 150 years, when managing hands was the purpose of companies. Today, in this Knowledge Economy, we must be about developing smart people who can learn continuously and are ready for rapid change. So rather than create an organization that puts the CEO at the top, executives in the next layer, and people with less and less influence in layers beneath, we need to create organizations that facilitate communication, collaboration, and cooperation among everyone. This would be an organization that allows everyone to learn continuously and contribute, to the best of their ability, to the quality of the work environment and the success of the business.