“In the midst of chaos, there is also opportunity”. When have we heard that before and when will we hear it again? In 2020 this is more relevant than ever, with the COVID-19 pandemic acting as a catalyst of digital transformation and iconic companies like Twitter allowing some of its workforce to continue working from home “forever”.

Just as Sun Tzu recognized when he wrote the “Art of War” in the 5th Century BC, opportunities arise in the most challenging of times. These trends aren’t new though. even before the pandemic, companies had already started to become decentralized, more digital and less hierarchical, with agile methodologies quickly becoming the new normal. Having worked at IBM for 5 years, I have had the opportunity to be exposed to a large-scale agile transformation and its associated challenges from a first-row seat.

What would an organization with the highest possible degree of digitalization and decentralization and the least hierarchy look like?

Given that COVID-19 is accelerating wide scale business transformation, we might wonder where this is leading us to. What would an organization with the highest possible degree of digitalization, decentralization and horizontality look like? In my opinion, it would pretty much look like a distributed flat hierarchy.

What is a flat hierarchy? A flat organization (also known as horizontal organization) has an organizational structure with few or no levels of middle management between staff and executives. This is not a new concept, as illustrated by the fact that the previous description dates from an article in Personnel Psychology from 1972. 

It isn’t an untested concept either. Iconic companies like GitHub Inc. use open allocation. Other organizations are looking for insights to help their leaders manage “networks” of staff in networked environments. However, in response to criticism or due to the associated challenges of operating an increasingly larger organization with a missing structure, companies typically end up introducing one or several layers of middle management.

So if this approach has met with limited success in the past, why would it become the future? Here is where AI-powered organizational network analysis (ONA) could play a critical role moving forward. ONA is a People Analytics method that allows the visualization and analysis of both formal and informal employees interactions, either through an online survey or through the analysis of employees’ digital footprint in collaborative tools like email or Slack.

Figure 1: Visualization of an informal network through ONA. Source: Cognitive Talent Solutions

ONA works best when combined with AI capabilities like email nudging to increase its actionability. Nudges, typically provided via email, propose positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals. This approach could potentially mitigate the vacuum that is created in flat hierarchies by the lack of supervision from formal leadership roles. Moreover, it could also enable them towork with fully distributed teams in a more effective and efficient mannerby 1) monitoring productivity of employees working remotely, 2) accelerating adoption of new strategies, policies and procedures by leveraging informal leaders as early adopters, 3) monitoring and mitigating employee burnout, 4) enhancing remote employee onboarding and 5) preventing employee isolation during remote working.

This might look like a too futuristic prediction, but the numbers might say otherwise. Mercer’s 2020 Global Talent Trends Study showed 44% of companies say they use organizational network analysis and 38% apply intelligent “nudging” technology to help employees make better choices. When it comes to remote working, in 2020 (before the arrival of COVID-19) there were already 7 million people working remotely in the U.S., or 3.4 percent of the population. Over the last five years, the number of people working remotely has grown by 44 percent.

One of the challenges that flat hierarchies always faced was the lack of an alternative system that could ensure a fair performance assessment. ONA could potentially solve this problem by establishing a performance assessment system based on social capital metrics. This performance assessment system would be based on employee interactions like sharing information, providing technical or personal support or inspiring other employees, which are common to all employees and do not need to be assessed by a formal leadership role. A next promising step in this direction would be the integration of social capital metrics to complement existing performance assessment systems, eventually been able to replace them.

ONA can also address some of the key challenges associated with operating a fully remote and decentralized organization. Social capital metrics allow for ongoing monitoring of productivity, including advanced use cases like burnout risk monitoring. This is achieved through the analysis of indicators in the employee’s digital footprint such as the percentage of emails sent outside of working hours, attended meetings and unread emails, providing multiple opportunities for actionable nudging.

Why would companies embrace such a system? For once, it would significantly streamline processes, driving efficiencies and productivity in an unprecedented way. Moreover, the startup world has been showing for decades the power of organic collaboration. How is it possible that a few colleagues working from a garage can innovate faster and better than large multinationals with almost unlimited resources at their disposal? The answer might lie in the fact that those colleagues voluntarily decide to work together. Unfortunately, startups steadily lose that magic as they scale up and their size increases. The reason is that they can’t replicate in a scalable way the organic collaboration they have in their early stage, and eventually have no choice but to rely on traditional management approaches and become like the rest of the companies.

Sun Tzu also understood the advantages of building and maintaining alliances. His work will continue to influence decision makers as companies look for ways to embrace technology to drive organic collaboration and leadership effectiveness in networked organization structures. AI-powered organizational network analysis can significantly accelerate the adoption of new agile business processes to harness the power of today’s rapidly evolving distributed organizations.

Francisco Marin

Co-founder & CEO at Cognitive Talent Solutions

Categories: Blog

Cognitive Talent Solutions

Cognitive Talent Solutions focuses its activity on Organizational Network Analysis (ONA) and Organizational Restructuring powered by AI. ONA allows you to visualize and analyze both formal and informal relationships that exist within your organization, enabling you to model a business strategy that effectively exchanges information and ideas to help your company thrive in a rapidly changing environment.