Bureaucracy vs. Holacracy

As an MBA student and a close observer to general market dynamics, I can categorize the types of business changes under three main groups: 1) Episodic, 2) Continuous and 3) Disruptive (Daft 2013), with the third one being substantially critical due to its direct ties with immediate and sudden changes in market constraints, that would severely impact any business that is not well equipped for radical changes. That said, companies that are yet heavy dependent on strict bureaucracy as an internal governing system, will have a very tough time in merely surviving the growing magnitude of competitive rivalry.

Employing large number of officials in order to strictly and carefully follow the roles is a guaranteed recipe for failure. Now it might work in limited government sectors and non-profit organizations, but definitely it will not function for companies that operate on profit and loss basis. And in line with that, I can bring a very relevant example from the large pharmaceutical company, Pfizer, that exponentially inflated in terms of human resources over the course of successive mergers and acquisitions, leading to excessive increase in managerial hierarchies, and significant drop in delivering new drugs, despite the fact that R&D budgets were tripled.As a result, pharmaceutical companies are now adopting a different concept, that is based on small biotechnology setups (Daft 2013).

While speaking of companies that successfully managed to overcome bureaucracy, then Chrysler (under its flagship are both Jeep and Dodge) stands out like a very good example. Where from a company that filed for its bankruptcy and participated in the bailout program from the US government back in 2009, it miraculously turned into a profitable one in only two years after repaying its financial obligations fully to the US government. And the credit behind that success goes to the genius CEO of FCA (Fiat Chrysler Automobiles) Mr. Sergio Marchionne. So what he did was remarkably brilliant, while in the same time quite simple in principle. Where he believed in the flat organizational structure, and for that he put all of his power to fight centralization of decisions along with bureaucracy, to end up with a new setup where 25 of senior Chrysler executives are reporting to him directly, that enabled him to drastically make quicker and better decisions compared to previous failing structure that used to take weeks or even months. However, that didn’t happen without losses for some and gains for others. Where for those who resisted the change and fought to keep the company as it is, were shown the door. While others who expressed eagerness, got promoted and become official members of the new management team (Daft 2013).

Alternatives:

Since ultimate organic or mechanistic structures are going to be accompanied with several side effects, a number of alternative setups have been proposed which happen to be based on a hybrid concept, in order to get the best out of both. In line with that, I thought to briefly refer to this study published by Washington Post, which explains the possibility of operating in a hybrid operational spectrum, between holacracy and bureaucracy, through which higher levels of freedom is given to certain volume of employees, while greater level of control is being imposed on others (Washington Post 2015), which relatively sounds like a reasonable and practical blend.

References:

Daft, R. L., (2013) ‘Organization Theory and Design’. 11th edition. Mason. OH: Cengage Learning.

Washington Post (2015), ‘How to build a great company by blending bureaucracy and holacracy’. Available online from: https://www.washingtonpost.com/news/innovations/wp/2015/09/03/how-to-build-a-great-company-by-blending-bureaucracy-and-holacracy/ [Accessed on November 21st 2016].

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