Down with Lean, Flat Organizations

Flat organizations lead to burnout and neurosis, not nimble efficiency. The important issue is empowerment, creativity and initiative, not efficiency. Let’s fall out of love with flat organizations.

Compare, for example, Dell Corporation and Southwest Airlines. Dell deserves great credit for its successes, but basically the company has had one good idea: custom-assembled (but otherwise commodity) PCs coming out of a lean supply chain, made efficient by the World Wide Web. This idea and its offshoots are at the end of their life cycle. Dell has discovered it doesn’t want individuals to order computers from its web site after all, because customers are not as susceptible to up-sells when they are not speaking with a live salesperson. Dell has similarly discovered unexpected competition from Apple, which has churned out product innovations at a steady clip and has moved customers beyond the desktop and laptop.

In the process, Dell has become known as a pressure-cooker workplace. Smart, amiable young people go to work at Dell and emerge as nervous wrecks. Their sacrifices have not kept Dell’s stock price anywhere near its historic peak. This is not exclusively a Dell problem. Lean organizations, by virtue of eliminating layers of management and work-in-progress inventories, are more communications-intensive than any historic enterprises. Emails arrive at a pace that forces managers to be modern equivalents of Lucy and Ethel in the chocolate factory.

Southwest Airlines is only somewhat lean (it never embraced the efficient hub-and-spoke route system), but its employees are empowered. Any employee at any level may have an idea and run with it, even spend money on it. Was the employee’s idea a good idea? The company worries about that later, after the customer’s problem has been solved. Almost uniquely in the industry, Southwest is solvent, it attracts creative employees whose ideas ultimately save the company money, and its fares have remained reasonable. It is among the few airlines that customers actually enjoy flying.

Most companies, of course, debate ideas before they are implemented. Here’s a research project that would advance organizational science: One employee has an out-of-the-box idea. How many people should s/he “run it past” before the idea is spiked, or massaged into bland uselessness? What is the magical length of a communication chain, below which an idea can turn into a useful experiment, and above which initiative is (inadvertently or not) punished?

Many companies use the "skunkworks" strategy, but no one has investigated when, why, and at what scale skunkworks work. Management grad students, take this one up.