IT#9 Tom Sawyer Inc. and Why Hierarchical Management Does Not Work in the Knowledge Economy
#KnowledgeEconomy #DiscoveryEconomy #ITManagement #Management #SocialNetworkEffects
This article talks about why classic 20th Century hierarchical management does not work in the Knowledge Economy, specifically, because of its inability to pass sufficient information without a significant distortion.
Massive hierarchical management is a relatively new thing for humanity. If you think about it, all medieval and even ancient hierarchies were relatively limited in size. Really large hierarchical social systems came into our life in the 19th Century with large armies and large industrial entities, such as factories. In this sense, hierarchical management is a child of the industrial age. And we inherited it from the Industrial Age.
The only problem is that we are not in the Industrial Age anymore. We, or at least a lot of us, are in the Knowledge Economy now. And this is unfortunate.
You see, any management system exists to coordinate efforts of a lot of people. Otherwise, why do we need it? As such, it must pass the information for its subjects. It did that fairly well in the Industrial Age. I know, people who served in an army or worked in large factory probably have a lot of anecdotal evidence to the contrary. Still it was not normally a total disaster.
However in the Knowledge Economy, any management structure must pass much more information for the whole thing to be functional. Much much more. Unfortunately, more than hierarchical systems can handle. It's like passing 10 kilowatt through a power cord of you electric kettle.
The reason is that when two humans communicate, according to generic consensus, it's normal to lose up to 50% of the information. And hierarchical management contains too many human-to-human communications.
And I plan to show it right now.
Have you read “The adventures of Tom Sawyer” by Mark Twain? It's about a Midwestern boy, and one of his adventures was that when his aunt Polly punished him and ordered to whitewash a fence, he tricked other boys to do this work for him.
Now, Tom has grown up and founded a corporation. It's primary business is to whitewash fences. It's a very successful corporation, so it's got several management layers. Let's assume that Tom, following aunt Polly's advice, whats to paint them all white. What color will they be really painted by? You may be surprised.
Let's model it!
I implemented a simple model, which is available on GitHub, so that you can play with it. It has only three parameters.
Number of levels in the organization.
Noise level in the node-to-node (human-to-human) communications.
Top-down or bottom-up model, depending if Tom Sawyer decides the color or a customer, who talks to a bottom level clerk taking orders.
I am using the model to see if one of the nodes orders painting a fence white, what will be the actual color dome by another low level node, since the color is what's communicated in the model. Of course, color is a very simple piece of information, but imagine passing a creative ideas from the bottom level up to a CEO level… convincing enough now?
As a first step let's pick just 5 levels and a very conservative 20% noise in communications. And white color comes from the very top. From Tom Sawyer personally. I know, I talked about 50% noise, but let's play conservative for a moment. Here is the picture:
As you see, after traveling between management desks, white color easily converts to black (and a lot of other colors as well).
You may say that if Tom Sawyer decides on white color, it will be the only available in the inventory. Ok, let the customers decide what color they want. For simplicity, let's assume it's still white, since any other color will suffer in the same measure, and the clerk taking the order is the leftmost one. Here is the picture of the result:
Maybe if we will decrease the number of levels, the things will go better? Ok, let's make it just 3 levels. But since we are getting closer to a real life medium business, I'll put the real noise level of 50%. Here is the result:
As I said above, Java code for this mode is available on GitHub. Please, feel free to play with it.
And the moral of that is— (Duchess, Alice in Wonderland)
As you see, when a lot of information has to be transferred through a management structure, hierarchical management just does not work in the Knowledge Economy. And if it does not pass the information, then why do we need such a management structure?
So, clearly, at some time hierarchical management should be mostly gone. At least in the Knowledge Economy companies. What will come next? I don't know yet, but I have a couple of ideas.
First, at Microsoft there are special people called PMs (Program Managers). They create sort of horizontal network that allows bottom level people of corporate hierarchy, to sort of, bypass the managerial pyramid overhanging them, when they need to solve problems that require cross-team cooperation. In Google the same role is played by TLs (team leads). So the first possible solutions comes from horizontal, network management instead of hierarchical management.
Another option seems in using computers. Of course, I'm not talking about AI Overlords ordering people around, but rather about computers connecting people at the bottom and helping to find other people and resources to solve the problems requiring coordinated collective effort, which is exactly the Achilles' heel of the hierarchical management. May be something like an internal corporate social network with good search capability (“Who is responsible making changes to X?” is not an easy question in any modern large corporation).
In a sense, the second option is also about building horizontal connections and network. So, in a sense, it's just two methods to reach the same result. It's likely that they both will become part of the future.
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