Organizational Structures

By Trinh Son

Successful leadership requires vision and a set plan. It is important to include the topic of organizational structures when discussing leadership of Technology Companies. I believe that the structural makings of an organization can ultimately decide whether or not a company will be successful. It is the job of leadership to select the organizational structure that will best fit the needs of their employees and overall goal. Although successful Technology Companies have similar goals, there is a diverse array of organizational structures currently being implemented in that sector. This article will analyze Amazon, Zappos, and Facebook through the lens of their respective organizational structures which include: hierarchy, network centric, and holacracy.

Traditional Hierarchy

The first organizational structure we will discuss is Amazon’s hierarchy system. The hierarchical structure is the most traditional construct we will examine in this article. In a hierarchy, communication flows from top to bottom which creates a large bureaucracy. This system is a secure structure with clearly defined roles and goals, however problems can arise. There have been many reports in previous years stating that Amazon workers are generally unhappy, which I believe is attributed to the company’s organizational structure. According to an article published by Fortune.com , “ The ideal Amazon employee to a soldier, someone who thrives on the adrenaline rush of high stress and demanding work”(Rao, 2015). They work long hours, and are expected to produce their best. Like a soldier, Amazon employees must be completely focused at the task at hand. Unfortunately, because of this structure, Amazon employees lack resources to support their emotional needs. Communication in hierarchies are usually one way, which mean that the leadership heading the Amazon cooperation are unaware of the issues facing their employees.

But, despite the one-way communication method, hierarchies are very resilient as most corporations resemble this structure in some form. According to a 2014 articles in the journal of Organization Science, “ Hierarchy coexists with divisions in firms with complex but non-decomposable task systems.” (Yao, 2013, p. 350). This means that hierarchy are used when organizations have permanently complex tasks. Amazon must partnered with many other retailers to meet the demands of its’ customers. In order to accomplish their goal, they have chosen to use a complex technological system to keep track of all of their orders. Amazon’s goal is not an easy task to accomplish and requires a strict organizational structure. The hierarchy structure has helped the company maintain that complex system. Amazon has grown to be one of the most successful companies in the world because of its’ full commitment to its’ customers through the hierarchy. Amazon’s hierarchy system is not perfect, however it works because it fits the need of the company.

Network Centric

The second organizational structure we will discuss is Facebook’s network centric structure. Interestingly, Facebook’s organizational structure is a reflection of user’s relationships to one another which is in the form of nodes and links. This system is called the Network centric Structure and was created to, “ accommodate the fast pace of technological change, global competition, and the emergence of a knowledge-based economy”( Diefenbach, 2011). Facebook has become the premier online social media service in the world, with over 1.8 billion users (Fiegerman, 2017). Its primary mission is to give people the power to share and make the world more open and connected through their friends and family.

Facebook, like many other firms, is moving away from the rigid organizational designs which are geared for repetitive transactions and routine activities. Facebook still has clear leadership roles however, the organizational structure is completely different from Amazons’. Facebook's organization was designed to accommodate novelty, innovation, and change. According to an interview between the Harvard Business Review and Kate Aronowitz, Facebook’s Director of Design, “top executives including CEO Mark Zuckerberg and Vice President of Product Christopher Cox, are [involved] in the conception and design of all products...There [is no] review board that designers and engineers go to present with PowerPoint slides”(Jana, 2013). The interaction between top level leadership and employees are more organic because of the networked structure.

Although Mark Zuckerberg is the CEO of facebook, he is not entirely at the top of the organization. He interacts with other employees in this network system. According to another HBR article, “The most efficient networks are small-world networks, which have the almost magical combination of high clustering and short path lengths” (Satell, 2015) . Interestingly, this is also the type of networks that Facebook implements in its organization. The employee collaborations are done in small and agile self directed teams. The agile development methodology develops products iteratively instead of all at once. Through the usage of small teams or networks, employees are encouraged to focus on specific aspects of a project which is more manageable. Although these agile teams are self directed, it is important to note that networks centric organizations do not lack formal leadership, which is an attribute of the next organization structure we will look at.

Holacracy

In 2013 Tony Hsieh, Zappos’s CEO, started promoting a new management structure called holacracy which encourages collaboration by eliminating workplace hierarchy. This essentially means that the employees of Zappos no longer have workplace titles. Managers and employee relationships shifted to a peer-to-peer system. According to Forbes, “The basic goal with this structure is to allow for distributed decision making while giving everyone the opportunity to work on what they do best” ( Morgan, 2015). The structure and hierarchy is based on circles which decentralizes decision making. This system increases transparency, accountability, and operational agility. However, the problem with holacracy is that is only viable for small size organizations.

After the implementation of the holacracy system, Zappos began to lose their employees. Before the official implementation of the holacracy, Hsieh offered a hefty severance package to his employees who were not on board with the transition. A total of 18% of the 1,500 employees at the time took the deal and left the company (Feloni, 2016). I believe that this reaction to the news was expected because holacracy takes away clear goals and responsibilities of the traditional hierarchy.

Employees need both reliability and adaptability. According to an article by the Harvard Business Review, “to be effective on the job, people must have stable working environment[s]”(Bernstein, Bunch, Canner & Lee, 2016). The people who left the organization cited that the holacracy seemed too vague and ambiguous. Without the traditional hierarchy, teams at Zappos now design and govern themselves. While, this sounds great on paper , it leaves people behind. If employees are unable to find their niche in this holacracy, they are brushed aside because of the lack of identifiable roles.

Conclusion

We live in a web 2.0 world where communication methods continue to be challenged, and therefore it is important to discuss the leadership styles of technology companies today. Successful leadership depends on strategic organizational structures to relay communication. In this article, we examined the traditional hierarchy characterized by top- down communication. We then moved on to the network centric view which depends on nodes and links, but is still somewhat hierarchical. Finally, we discussed holacracy which resembles “circles” for group decision making. The leadership heading these corporations made conscious decision to implement these structures knowing their strengths and weakness. One should ask a series of questions revolving around their own company or group if faced with the job of selecting an organizational structure. One should consider the size of their organization, complexity of tasks, and product development speed. Each structure we discussed today was created in response to different organizational needs. Ultimately, there is no perfect method to organize a company.

Reference List

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