Are Hierarchies Healthy for Organisations?

You can have high performing teams with deep hierarchies, so long as there is an open model to knowledge access. But when knowledge hiding goes on, hierarchies tend to erode team performance.

An ongoing debate in the practice of management is whether hierarchical differentiation is something that improves or lessens team performance. By hierarchical differentiation, I mean the domains that create a hierarchy in an organisation. Examples of this are status, or the respect and deference of others; and power, or the control an individual or group has over available resources.

Almost without exception, organisations revolve around hierarchies. Either because their size militates against direct engagement with all employees in the organisation when making decisions or because a named individual needs to be legally responsible for decision making. Despite the ubiquity, the quality of organisational hierarchy — functional vs dysfunctional — remains largely unexplored in either day to day conversations or scholarly research.

I suspect part of the reason for this is that some people enjoy being at the top of an organisation, while others hope to be there one day, meaning there is vested interest in the assumption that hierarchies are good. That is, they are good (read necessary) for effective team performance and leading at scale.

Never one to shy away from turning over a stone for fear of what may lurk beneath, I thought it time to challenge hierarchy assumptions in organisations and ask: are organisational hierarchies functional (Anderson and Brown 2010) — and provide enhanced decision-making and improved coordination of action — or are they dysfunctional (Greer et al. 2018) — stoking conflict within teams and undermining organisational cohesion and effectiveness.

When it comes to the effects of hierarchy on organisational performance, it is all about knowledge sharing. That is, you can have an effective high performing team with deep hierarchies, so long as there is an open model to knowledge access. But when knowledge hiding goes on — think when managers take things offline and “that’s above your pay grade” comments abound — hierarchies tend to erode team performance and organisational culture.

Power and Status

Before unpacking some of the practical implications for management, I need to take a brief survey of the academic literature so as to properly situate the terms we are using.

Power in social relations is an incredibly complex and contested concept, with some of the most brilliant people in history — from Edmund Burke to Max Weber and Bertrand Russell — seeing power as too latent a phenomenon in social relationships to be dealt with either neatly or directly. But if I may be permitted a simplification, power is local. That is, it is situated in an individual or group when they can arbitrarily act with regard to a resource — human, financial, etc. Technically this is referred to as asymmetric outcome control.

An example of this is if I have the power over your pay, I can increase, decrease, or stop it altogether and there is nothing you can do about it. If you can influence or stop my actions, for instance appealing to my boss or an external authority such as a tribunal, then I do not have power over your pay. I may have authority, influence, input, but I do not have power.

Status, by contrast, is distributed or outside my locus of control. That is, status arises because you imbue me with respect, esteem, or prestige as an outcome of your judgement of my conduct.

With status being entirely reliant on voluntary processes and power only existing in the absence of voluntary processes, Adam Galinsky and Joe Magee put it well when observing:

power, more than status, therefore, is a property of the actor. Status, more than power, is a property of co-actors and observers.

The upshot of this, as studies show (Blader et al. 2016; Blader and Chen 2012), is that status tends to orientate people seeking status toward the people around them while power can tend to orientate people inward. When people look outside themselves, we often see increased perspective taking — though the quest for high status can also be a driver of neuroticism and narcissism. Those with high power can increasingly turn inward. To the extent that if they have high power but low status they may see exaggerated bellicose tendencies, that is they are more likely to initiate conflict and be disparaging toward others. A notorious example of his is found in the work of Nathanael Fast, Nir Halevy, and Adam Galinsky (Fast et al. 2012) who observed extreme examples in the case of U.S. soldiers physically and sexually abusing prisoners in the Abu Ghraib prison in Iraq.

While some use incidents such as Abu Ghraid, or the notorious Stanford Prison Experiment (Haney et al. 1972) as proof conclusive of Lord Acton’s precept that ‘power tends to corrupt’, Fast, Halevy, and Galinsky analysed the problem more deeply and correctly realised that it was not the latent power that created the corruption. Rather, it was the lack of associated status. A notion of which Acton was also deeply aware, because earlier in his letter to Mandell Creighton he noted: ‘Historic responsibility has to make up for the want of legal responsibility.’ In other words, unless power is harnessed to some notion of responsibility, it will corrupt the holder.

Thus, it is not that either power or status are inherently problematic. Instead, problems arise when there are major imbalances — for example people or teams with either high power and low status, or high status and low power. Under such circumstances there will tend to be an upswing in negative behaviours and an increase in conflict. Either within the team or directed against external adversaries. This latter tendency is often used to maintain team cohesion by creating an external enemy. A tactic political leaders have used over the millennia, the notion of them and us.

A Little Less Competition, a Little More Cooperation

In 1968, Elvis Presley recorded the song A Little Less Conversation which featured the lyrics:

A little less conversation, a little more action please
All this aggravation ain’t satisfactioning me
A little more bite and a little less bark
A little less fight and a little more spark
Close your mouth and open up your heart and baby satisfy me

The song is apt as a take on what is needed in organisations to avoid power and status tending to corrupt. The solution is a little less competition and a little more cooperation between the holders of power and status and their teams. This is because while competition can arise as a result of people seeking after status or power alone, and thus be a highly individualistic endeavour, cooperation by its nature requires an additional dynamic — that of a shared goal. This process of sharing can be a catalyst which determines if the competition is healthy of dysfunctional.

In a team or organisation where status differentiation is already high, the introduction of power can tend to tip the scales of competition in the dysfunctional direction. This is because individuals will often seek to withhold resources rather than sharing them with the wider group in an effort to enhance their own standing or restrict the standing of others. In organisations, where the most generally traded resource is knowledge, knowledge hiding or sharing is often what determines if the competition is healthy or not.

“Knowledge encompasses the information, ideas, and expertise relevant for tasks performed by individuals, teams, work units, and the organization as a whole.” — (Bartol and Strivastava 2002, 65).

It is important to note, that knowledge hiding in this context is different from simply not sharing knowledge. This is because there are many reasons why knowledge is not shared in a team or organisation. It may be that the person with the knowledge didn’t think people were interested, they simply forgot to mention it, or they didn’t have access to the knowledge in the first place. An example of this latter phenomenon may be that there is a departmental manual or wiki, but the person running the induction didn’t know about this cache of available information and thus failed to share a key resource. Knowledge hiding by contrast is deliberate, usually self-interested, and, when exercised in the pursuit of status or power, can also be strategic.

Consequently, team members with higher power but lacking in status are more likely to take a self-interested approach to resource allocation. Even distrusting the intentions of colleagues if they come to fear what they may do with the knowledge once they have gained access to it. Team members with low power and low status may engage in knowledge hiding out of self-preservation — perhaps because they fear punishment or retribution as a result of sharing knowledge that contradicts the narrative of those with power.

Arguably what matters most about the above examples of knowledge hiding is that the cause — high or low power / status — matters far less than the effect. Which is that when there is high differentiation between power and status, the behavioural prediction is heightened levels of knowledge hiding.

Realisations such as this see many people reach for the ban hammer. That is to ban, or to try to ban, power or status in organisations. Apart from this being both impractical and largely impossible, it is also unnecessary as high levels of cooperation are not only possible but probable, so long as the organisational culture is calibrated to achieve a healthy competition outcome. In such circumstances, organisational hierarchy will instead tend toward the functional, yielding several benefits which enhance team performance and that will ensure the organisation outperforms other organisations that are unable to strike the right balance.

The first circumstance is one in which management differentiation based on resource control and decision-making authority is high, but in which there is also an organisational culture which works to ensuring all employees as respected. Senior Leaders play a central role in this process because they enjoy the largest differentiation with respect to status and power, they are in the strongest position to minimise the differentiation experienced by more junior employees.

The second, and key circumstance, is ensuring a degree of parity between power and respect. If individuals are in a position of great disparity, that is they have high power but low status, they are more likely to exhibit knowledge hiding and engage in dysfunctional competition. But if the organisational structure keeps power and status in balance, it will tend to limit the more negative effects that are so often associated with high levels of power.

It will be of no surprise that there are no silver bullets regarding the healthy management of organisational hierarchies. Therefore, it always comes down to the people and how they are managed. So long as senior managers are consistent, assertive, and explicit in according and reinforcing respect among all levels of the organisation regarding the vital role played by each person in achieving team and organisational goals, the balance of probability is that a culture will manifest in which respect goes beyond words and becomes deeds — strengthening organisational loyalty and team bonds. Bonds that will occasion improved knowledge sharing, a process that creates a virtuous circle reinforcing the functional and positive capabilities of power, status, and hierarchy.

Good night, and good luck.

Photo by Edvard Alexander Rølvaag on Unsplash.

Further Reading

Anderson, C, and Brown, CE (2010) The functions and dysfunctions of hierarchy. Research in Organizational Behavior, 30, 55–89.

Anicich, EM, Fast, NJ, Halevy, N, and Galinsky, AD (2016) When the Bases of Social Hierarchy Collide: Power Without Status Drives Interpersonal Conflict. Organization Science (Providence, R.I.), 27(1), 123–140.

Bartol, KM, and Srivastava, A (2002) Encouraging Knowledge Sharing: The Role of Organizational Reward Systems. Journal of Leadership & Organizational Studies, 9(1), 64–76.

Blader, SL, and Chen, Y-R (2012) Differentiating the Effects of Status and Power: A Justice Perspective. Journal of Personality and Social Psychology, 102(5), 994–1014.

Blader, SL, Shirako, A, and Chen, Y-R (2016) Looking Out From the Top: Differential Effects of Status and Power on Perspective Taking. Personality & Social Psychology Bulletin, 42(6), 723–737.

Fast, NJ, Halevy, N, and Galinsky, AD (2012) The destructive nature of power without status. Journal of Experimental Social Psychology, 48(1), 391–394.

Galinsky, AD, Magee, JC, M. Ena Inesi, and Gruenfeld, DH (2006) Power and Perspectives Not Taken. Psychological Science, 17(12), 1068–1074.

Greer, LL, de Jong, BA, Schouten, ME, and Dannals, JE (2018) Why and When Hierarchy Impacts Team Effectiveness: A Meta-Analytic Integration. Journal of Applied Psychology, 103(6), 591–613.

Haney, C, Banks, C, and Zimbardo, P (1972) Interpersonal Dynamics in a Simulated Prison.

Magee JC, Galinsky AD (2008) Social hierarchy: The self-reinforcing nature of power and status. Acad. Management Ann. 2:351–398.

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