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The Industrial Revolution brought the decline of small-scale, cottage production and the rise of large, integrated businesses; Adam Smith's invisible hand was replaced with what business historian Alfred D. Chandler Jr., called the "visible hand" of management. But now that pendulum appears to be swinging the other way - to a system of loose networks, virtual businesses and peer-to-peer interactions. A supposed hallmark of the new economy has been the decline of managerial authority. Management gurus, consultants and pundits have proclaimed that hierarchy is out. Modern organizations such as online retailer Zappos have come to favor flat hierarchies with widely distributed authority. And yet, given the demands of the current environment, authors Nicholai J. Foss and Peter G. Klein argue that managerial authority is still essential in situations where (1) decisions are time-sensitive; (2) key knowledge is concentrated within the management team; and (3) there is need for internal coordination. Such conditions, they observe, are also hallmarks of our networked, knowledge-intensive and hypercompetitive economy. While it is true that many knowledge workers no longer need a boss to direct them to tasks or monitor their day-to-day progress, the authors contend that the role of managers and the definition of "authority" needs to change. Managers need to move away from specifying methods and processes in favor of defining the principles they want people to apply or the goals they want people to meet. In other words, the main task for top management is to define and implement the organizational rules of the game. To be sure, procedures for defining rules and frameworks can themselves be delegated and nested. Indeed, when a company's key assets are knowledge workers whose skills and behaviors are difficult to assess objectively, companies will need to increasingly rely on more subjective assessments of performance, which must be carried out by managers.
FALL 2014 V O L.56 N O. 1
Why Managers
Still Matter
By Nicolai J. Foss and Peter G. Klein
Please note that gray areas refl ect artwork that has been
intentionally removed. The substantive content of the article
appears as originally published.
Why Managers Still Matter
In today’s knowledge-based economy, managerial authority is
supposedly in decline. But there is still a strong need for someone
to define and implement the organizational rules of the game.
WE LIVE IN a knowledge-based, rapidly changing, networked world. A supposed hallmark of the
new economy has been the decline of managerial authority. Modern organizations such as online
retailer Zappos have come to favor flat hierarchies with widely distributed authority. We call such
businesses “wikified companies,” using the wiki- prefix to denote the loosely structured, bottom-up,
egalitarian structure popularized by the Wikipedia encyclopedia project and touted by management
thinkers and consultants.1
“Wikifying” the modern business has become a call to arms for some management scholars and
pundits. As Tim Kastelle, a leading scholar on innovation management at the University of
Queensland Business School in Australia, wrote: “It’s time to start reimagining management. Making
everyone a chief is a good place to start.2
Companies, some of which operate in very traditional market sectors, have been crowing for
years about their systems for “managing without managers”3 and how market forces and well-designed
incentives can help decentralize management and motivate employees to take the initiative.4 For
example, in the 1980s, Johnsonville Sausage, based in Sheboygan Falls, Wisconsin, made a big point
of slashing managerial oversight and putting quality control, personnel management, customer
relations and even business expansion in the hands of worker-managed teams. As CEO Ralph Stayer
explained, “My job ... was to put myself out of a job.5
Is managerial
The role of manag-
ers needs to be
redefined in today’s
Managerial author-
ity remains essential
in situations where
decisions are
knowledge is
concentrated and
several decisions
need to be
An important task
for today’s manag-
ers is to define
organizational goals
and principles they
want employees to
The Lego Group, the Danish toy
company, reduced its number of
management layers in recent
years but also expanded its layer
of top management.
The Industrial Revolution brought the decline
of small-scale, cottage production and the rise of
large, integrated businesses; Adam Smith’s invisi-
ble hand was replaced with what business historian
Alfred D. Chandler Jr. famously described as the
“visible hand” of management.6 But now that pen-
dulum appears to be swinging in another direction.
What Frederick W. Taylor, a pioneer in the field of
scientific management in the late 19th century, saw
as rigidly organized factories of docile and obedi-
ent workers has been eclipsed by loosely structured
teams of highly trained and empowered knowl-
edge workers.7 Indeed, the “visible hand” of
management has morphed into a system of loose
networks, virtual businesses and peer-to-peer
This isn’t to say that strong-minded managers
have become extinct. Many highly successful com-
panies in recent years have been run effectively by
powerful, opinionated figures. For many years at
Apple, for example, CEO Steve Jobs made key deci-
sions in a way that can only be described as
dictatorial. Under Jobs, according to author Adam
Lashinsky, “only one executive ‘owned’ a [profit and
loss statement], and that was the chief financial of-
ficer.9 From one perspective, this points to an
extreme concentration of authority. But from an-
other it is entirely consistent with the philosophy
behind the wikified company: If functional execu-
tives don’t have to worry about a budget, they can
focus on applying their own specialist knowledge
to meet local demands.
The Lego Group, the Danish toy company, has
recently moved to a more centralized business
model. As Lego reduced its number of manage-
ment layers in recent years, it expanded its layer of
top management, bringing in functional specialists
and moving senior managers much closer to opera-
tions. Thus, Lego is developing a new model:
becoming both more wikified and more manage-
ment-driven. Lego may be part of a broader trend.
In a study about management hierarchies and
compensation at 300 Fortune 500 companies over
14 years, researchers found that while companies
were “de-layering,” the size of the executive team
(defined as the number of positions reporting di-
rectly to the CEO) doubled from an average of five
to 10. What’s more, executives were intervening
more frequently in operating decisions.10 The
result is counterintuitive: Flat management struc-
tures can have more micromanagement than
vertical hierarchies.
Managerial Authority
Is Here to Stay
From our perspective, the view that executive au-
thority is increasingly passé is wrong. Indeed, we
have found that it is essential in situations where
(1) decisions are time-sensitive; (2) key knowledge
is concentrated within the management team; and
(3) there is need for internal coordination. (See
About the Research.”) Such conditions are hall-
marks of our networked, knowledge-intensive and
hypercompetitive economy.
However, for many everyday business activities,
employees no longer need a boss to direct them to
tasks or to monitor their progress. Such involve-
ment can in fact be demotivating. In a networked
economy characterized by dispersed knowledge re-
siding inside the heads of highly qualified specialists,
leaders need to let go of the notion that things
should be managed from the top. This means that
the definition of “authority” needs to change. Man-
agers need to move away from specifying methods
and processes, in favor of defining the principles
they want people to apply or the goals they want
people to meet. In other words, executives can
design the rules of the game without specifying the
actions of the players. Wikipedia cofounder Jimmy
Wales doesn’t control the content of Wikipedia
entries, for example, but he and his colleagues did
design the structure — such as the format of the
entries, the means by which they are revised and the
procedures for resolving disputes — within which
the enterprise operates.11
Authority doesn’t replace leadership, as some
have argued; rather, it is a type of leadership.12 Be-
sides established guidelines for rewards, instruction,
rules and communication, something else is needed
to help employees react to changes and act when
unexpected events occur. For example, in emer-
gency situations, employees don’t want to have to
wait for permission from the boss to respond —
they need to have a general understanding of “how
things are done here.” Effective leaders excel at
defining such frameworks. Letting organizational
culture emerge and percolate on its own, without
deliberate structure and design, can lead to a num-
ber of problems — not the least of which is a
rough-and-tumble culture that favors certain em-
ployees at the expense of others.13
There are other aspects to the frameworks under
which employees act and cooperate. Today’s em-
ployees are expected to multitask, acquire new skills
and collaborate through knowledge sharing. At the
same time, companies are made up of employees
with increasingly diverse skills and work forces that
are increasingly heterogeneous. Many multina-
tional corporations must face an extreme version
of this challenge. Some skills are so highly special-
ized and complex that managers don’t even know
exactly what their employees can do.
The new environment suggests the need for a
redefinition of the traditional managerial role. De-
spite all the changes that have occurred, there is a
strong need for someone to define the organiza-
tional framework within which a business operates.
We argue that, in the knowledge economy, the main
task for top management is to define and imple-
ment these organizational rules of the game.
To be sure, procedures for defining rules and
frameworks can themselves be delegated and
nested. As management consultant Gary Hamel
points out, “more and more of the work of manag-
ing and leading — the work of setting priorities,
devising strategy, reviewing performance, divvying
up work and allocating rewards — is going to be
distributed to the edges of the organization.14 But
managers at the center will still maintain a pivotal
role in determining both what and how to delegate.
A particularly important aspect of organizational
design is what economists call “incentive instru-
ments” — the formal and informal elements that
motivate employees. Not only do these instruments
have to be designed, they also must work together. A
“soft” culture that encourages employees to collabo-
rate may be difficult to align with strong performance
incentives. Finding the right mix is crucial.
What’s more, in a fast-moving economy, man-
agers must revisit the design of the company’s
incentive instruments frequently because compa-
nies change their activities and organizational
structures and add new employees with possibly
different values. There may be a need to change in-
centive formulas — how much is tied to individual,
team or company performance. Incentives may
need to be strengthened or weakened. Lincoln Elec-
tric, a global manufacturer of welding equipment
headquartered in Cleveland, Ohio, has maintained
an elaborate system of performance incentives for
more than 80 years. It may seem that the company’s
reward system is so well designed that the company
basically “runs itself.” In actuality, however, the sys-
tem has been tweaked continually.15
There are economies of scale and learning econo-
mies in the task of adjusting incentives, which
suggests it should be centralized. Boards of directors
have compensation committees to fulfill this func-
tion; companies have managers. Further, when a
company’s key assets are knowledge workers whose
skills and behaviors are difficult to assess objectively,
companies need to increasingly rely on more subjec-
tive assessments of performance, which must be
carried out and enforced by managers.
This article is based on several years of
empirically and practically based research
into the internal organization of leading
companies. We have studied and con-
sulted with companies in the medical
devices, toy, manufacturing and financial
services industries and concluded that or-
ganizational design — decision authority,
incentive structures, monitoring systems
and the like — is often more important
than culture, tacit capabilities and other
“softer” elements of organizational
structure and behavior, not only for
mature companies but for emerging
businesses and industries as well. Our
research includes case studies of single
companies and statistical analysis of
large data sets.
We offer a general, theoretical expla-
nation for how entrepreneurial initiative,
innovation and responsibility should be
distributed within companies in our re-
cent book, Organizing Entrepreneurial
Judgment.i In addition, Foss has pub-
lished several quantitative, survey-based
articles on delegation within companiesii
and has coauthored Innovating Organiza-
tion and Management,iii which includes
case studies about the changing internal
organization of Danish companies. With
Tina Saebi, Foss is editing a forthcoming
book on business model innovation,
Business Model Innovation: The Organi-
zational Dimension (Oxford University
Press, in press) that focuses on how
managerial authority and organizational
design support business model innova-
tion. Klein has published empirical
studies on how large companies organize
themselves to balance authority and
empowerment in financial services and
manufacturing and how technology,
market conditions and organizational
structure coevolve.iv
When Managerial
Authority Is Needed
In knowledge-based, networked economies, market
advantage is often based on surprising competitors
with new products, processes, organizational forms
and business models. Apple’s iPhone, for example,
redefined the smartphone category, a shock from
which BlackBerry, Nokia and other once-dominant
players subsequently struggled to recover. Similarly,
taxi companies and hotel chains didn’t anticipate the
sudden popularity of ride- and room-sharing ser-
vices such as Lyft, Uber and Airbnb. Business history
is packed with examples of companies that were
blindsided: producers of tubes for amplifiers (sur-
prised by the transistor), makers of minicomputers
(surprised by the introduction and diffusion of the
personal computer), vertically integrated steel pro-
ducers (surprised by minimills) and so forth.
Many companies that survived major shocks to
technology, regulation and global competition have
had strong, charismatic leaders with highly authori-
tative styles. In what was arguably one of the greatest
corporate comebacks of all time, Steve Jobs, faced
with a major restructuring, rescued Apple by mak-
ing tough decisions against considerable resistance
(for example, cutting its Newton personal digital as-
sistant platform and setting up a partnership with
Microsoft). It is no coincidence that many of the
best known successful corporate turnarounds are
pinned to single individuals, such as Jobs at Apple,
Sam Palmisano at IBM and Carlos Ghosn at Nissan.
Clearly, organizations use different approaches
to make decisions. Executive teams and self-manag-
ing work groups often rely on dialogue and
consensus. Dialogue can be followed by voting, as in
cooperatives. Alternatively, group decisions can be
made by decentralizing decisions as far as possible.
Such approaches have their advantages. Dialogue
and consensus may give employees a sense of em-
powerment and psychological ownership, and may
produce decisions that commit. Decentralized deci-
sion making allows employees to make use of their
own specialized knowledge without having to con-
sult with their superiors. But, as we have noted,
there are conditions where managerial authority is
critical: when there is urgency to the decision mak-
ing; when decisive knowledge is concentrated in the
top management team; and when there needs to be
tight interdependence between multiple decisions.
Decision-Making Urgency Some decisions, such
as company-level strategic decisions and those in-
volving large transactions, must be made quickly.
Even if the decisions turn out in hindsight to be
suboptimal, making them rapidly may be neces-
sary if the costs of delay are significant. Although
companies may seek to increase decision-making
speed through technology and open, interactive
work environments, decisions that need to be
made rapidly are still best left in the hands of one
senior manager or a small handful of them. These
individuals may possess crucial information about
what needs to be done; having to take the time to
share the information would delay and possibly
undermine the decision.
The bottom line is that centralizing decision au-
thority can often reduce the delays resulting from
more collaborative and consensus-driven approaches.
This seems consistent with the observed tendencies of
organizations of all kinds (including armies and hos-
pitals) to rely on centralized authority in cases of
unforeseen emergency. More important, centralizing
authority can also make better use of what we call
“decisive” knowledge.16
Decisive Knowledge Information is needed for
making good decisions. The decision maker’s
knowledge doesn’t have to be perfect, however, just
good enough. Knowledge is good enough if the de-
cision maker would make the same decision even if
In knowledge-based, networked economies, market
advantage is often based on surprising competitors
with new products, processes, organizational forms
and business models.
he or she had access to additional information —
information that may be costly to obtain. The
economic principle of weighing marginal benefits
against marginal costs teaches us that manufactur-
ing quality doesn’t need to be perfect, only good
enough: beyond a certain threshold, eliminating
manufacturing defects adds more to production
costs than to sales revenues. Likewise, after a certain
point, the cost of getting additional knowledge may
be more than it is worth. For example, if sales in a
particular market follow a regular, seasonal pattern,
it may not pay to do an expensive demand-fore-
casting exercise; the additional information would
add little to estimates based on historical data. In
this case, the existing sales data is good enough to
make a rational decision.
Understanding when knowledge is decisive is im-
portant for organizational design. Decision makers at
the lower end of the organizational hierarchy typi-
cally have access to better information about
conditions in local markets than do their supervisors.
This argues for delegating authority to them. But if
the supervisor already has enough information to
make an informed decision — in other words, if the
supervisor has decisive knowledge — then delega-
tion may be harmful. Delegation allows for the
possibility that the local decision maker will use the
local knowledge to achieve his or her own goals at the
expense of the overall corporate mission. If local
knowledge is highly valuable, this risk may be worth-
while. Otherwise, it makes sense to allow those with
decisive knowledge to make the call, even if others
have marginally better information.
Interdependence Between Decisions Different
factors affecting a decision can be more or less inter-
dependent. For example, accelerating the spread of
electric vehicles requires having a number of things in
place, including technical interface standards, deals
with energy suppliers and well-located recharging sta-
tions. Coordinating the involvement of multiple
parties takes lots of resources, which is why many
companies often prefer to manage complex activities
in house. They need things to be tightly coordinated,
and working with outside parties can mean letting
others have veto power over key decisions.
The economic theory of complementarities
describes this kind of interdependence.17 When
business activities, relationships, technology and reg-
ulation are complementary, it is hard to make
incremental changes to the system: changing one
element of the system requires changing others. Com-
mercializing genetically modified products, for
How can executives distribute authority more effectively? What is the right
level of empowerment, and how do the different elements of organizational
design work together? To determine how and when to use authority, consider
the following questions:
1. Do you have a need for speed? Which is more important, getting deci-
sions exactly right or deciding quickly — and right enough? If time is of the
essence — if there is a high degree of decision-making urgency — then
allowing senior managers to make the decisions without relying on dialogue
and consensus may be better for the organization.
2. What do employees know, and when do they know it? For a given deci-
sion, is the critical knowledge held by senior managers, middle managers or
lower-level employees? Can knowledge at lower levels of the company be
neatly summarized and communicated to higher-level managers? The “wikified
company” model assumes that the relevant knowledge is tacit and widely dis-
persed, so that decision authority should be delegated as far as possible. But
this is not always the case. Employees closer to the action often have better
knowledge about local conditions. But senior managers may have more infor-
mation about corporate strategy, overall market conditions, legal or regulatory
issues and other things that are just as important. It may be possible to relay
some of the local information to top managers.
3. What knowledge really matters? What does each decision maker need to
know to make the right decision? Is gaining additional information worth more
than it costs? Is decisive knowledge sufficiently represented at the top manage-
ment level? Even if senior managers don’t know everything they’d like to know,
they may know everything they need to know to make decisions that are “good
4. Have employee rights and responsibilities become entitlements? Do
employees feel they own their budgets and decision rights? Taking away deci-
sion rights poses particular challenges. The behavioral economics concept of
loss aversion comes into play: People tend to value things they had and lost
more highly than things they have never had. The gains from centralization
must be strong to overcome these costs, and managers must be prepared to
explain clearly why the changes are needed.
5. Does the company have a well-functioning procedural justice system?
Does your company have reliable, established and transparent procedures for
explaining structural changes to employees? Can you explain why autonomy
must be curtailed? Do employees feel that their concerns about autonomy and
responsibility are heard and taken seriously?
6. Does your company’s planning include changes in company structure?
Company structure and overall strategy need to be aligned. Company structure
is very much about who holds decision-making authority over company assets.
Major strategic changes are usually accompanied by changes in company struc-
ture. Strategic planning should take into account what structural changes are
required to facilitate strategic changes, such as changes in the business model.
example, requires companies to invest in the underly-
ing technologies. But it also requires complementary
investments — in seed marketing, intellectual
property rights protection, processing and delivery
mechanisms that separate GMO and non-GMO
products, and so on. Not surprisingly, given the need
for tight coordination, the biotechnology revolution
has required agricultural production and distribution
to become more vertically integrated.
Mixing Authority and Delegation
While companies cannot exist and thrive in a dy-
namic world without authority, they also need to
develop mechanisms for decentralizing and dele-
gating. Many companies have board-approved
“delegation of authority” policies that specify the
division of labor among the company’s leadership
team and the board. However, delegation of author-
ity over company assets, including employee time,
can be pushed down in the organization. Authority
over decisions can also be delegated by making the
top leadership group larger. What is the right mix
between authority held at the top level and dele-
gated authority over the use of company assets?
Our framework provides part of the answer.
(See “How to Mix Authority and Empowerment,
p.77.) If fast decision making is essential, the
knowledge held by senior managers is highly deci-
sive and activities are highly interdependent, then
centralized authority is necessary. Decision-mak-
ing authority should be in the hands of the CEO
and the extended leadership team.
Determining the right size of the leadership team
has been the subject of much debate.18 The average
large U.S. company has a management team of 10.
However, as the number grows, it’s common for fac-
tions to form and tension to arise.19 Although Lego
thrives with a top management team of more than
20, many of the team members are located in differ-
ent geographical locations. Fault lines may be less
likely to form within a distributed team.
The psychological forces that limit the size of top
management teams are less relevant for how decision-
making authority should be distributed in the
organization. After all, friction between divisions or
business units is fairly common and does not necessar-
ily cause problems. However, there are psychological
forces that managers should pay attention to.
First, employees develop feelings of entitlement.
They come to believe they really do “own” the bud-
gets and accounts they control. Experimental
research suggests that individuals attach particu-
larly high valuations to what they own (or believe
they own).20 Shifting decision-making authority
from middle managers to the top management
team may frustrate managers who feel something
has been “stolen” from them. However, in dynamic,
highly competitive economies, senior managers
must be able to adjust organizational structures to
adapt to changing environments. By definition, this
will involve changing job descriptions and deci-
sion-making authority.
Second, no one likes to be overruled. Although
everyone knows that senior managers can overrule
middle managers, prudent senior managers will in-
tervene only when strictly necessary. Concern about
being overruled can cause middle managers to ques-
tion what authority they really have. Frequent
meddling by superiors without an obvious reason
can make middle managers anxious and less inclined
to act. Research shows that overruling by senior
managers harms motivation and productivity.21
To be sure, in a dynamic business environment
some amount of overruling is to be expected. It
should be minimized, however. For senior managers,
this means accepting some decisions even without a
detailed justification rather than investing time and
effort to gain all the necessary information. If em-
ployee decisions are to be overruled, procedural
justice concerns are all-important: Employees need
to be told carefully and patiently why their decisions
are being reversed.
Senior managers must be able to adjust organizational
structures to adapt to changing environments. By
definition, this will involve changing job descriptions
and decision-making authority.
Third, if top management holds too much deci-
sion-making authority, it is difficult to harness
employee-specific knowledge and motivate em-
ployees to make good decisions. But the presence of
dispersed, valuable, tacit knowledge is not a trump
card that counters all the potential advantages of
centralization, even in the wikified economy.
Management practice has always been closely
intertwined with broad societal trends. Anti-
authoritarianism has been a strong force in many
parts of the world since World War II, reinforced by
the counterculture of the 1960s. We think the
“wikified company” trend reflects a similar distrust
of authority and a belief that treating employees
as responsible, autonomous and intelligent indi-
viduals pays off. This view tracks a more general
sense that, thanks to the Internet, mobile telephony
and social networks, we are in a new age of collab-
oration, participation and sharing. Vertical
relationships are being replaced by horizontal ones,
and hierarchy is giving way to what Harvard Law
School professor Yochai Benkler calls “commons-
based peer production” not only in business but
also in culture, politics and society at large.22
We sympathize with this ethos, which in a num-
ber of ways is an improvement over the paternalism
of an earlier age. Managers may want to embrace it,
not just to be in accordance with the zeitgeist but
also because it is likely to pay off, since it leads to a
better use of employee knowledge and increases the
motivation of those employees who are skeptical of
authoritarian management. That said, managers
must be careful not to understate the continuing
rationale and benefits of managerial authority,
even in the wikified economy.
Much innovation activity is shifting toward
business model innovation. For example, in the face
of declining opportunities for future blockbusters,
many big pharmaceuticals companies are trying to
remain competitive by developing new business
models with a heavy service dimension. IBM’s 2006
Global CEO Study revealed that CEOs saw business
model innovation as the most important kind of in-
novation, and there is no indication that it has
become any less important.23 Business model inno-
vation involves strategic and organizational change
processes in which decision-making urgency, deci-
sive knowledge and tight interdependence are often
key. When such innovation takes a company into
uncharted territory, there is massive uncertainty.
This only elevates the importance of senior man-
ager intuition and foresight. The top management
team not only must define the direction but also
needs to get involved in the everyday experimenta-
tion and decision making that make the new
business model come alive. Many decisions cannot
be delegated because so much of the essential
knowledge and initiative are concentrated at the
top echelons.
For all of these reasons, we think the reports
about the death of managerial authority are greatly
exaggerated. In today’s world, managerial authority
needs to be exercised smartly. Talking about an
ethos of participation but acting in ways that are in
direct contradiction is a recipe for disaster. Mana-
gerial authority still works — but it needs to be
accompanied by strong, credible communication
and a commitment to fair procedure.
Nicolai J. Foss is a professor of strategic manage-
ment and globalization at the Copenhagen Business
School and a professor at the Norwegian School of
Economics in Bergen, Norway, and the Warwick
Business School in Coventry in the United Kingdom.
Peter G. Klein is a professor in the division of
applied social sciences at the University of Missouri
in Columbia and a professor at the Norwegian
School of Economics. Comment on this article at, or contact
the authors at
1. See, for example, D. Tapscott and A.D. Williams,
“Wikinomics: How Mass Collaboration Changes
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2. T. Kastelle, “Hierarchy Is Overrated,” November 20,
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ber 1990): 66-83; and C. Hartman, “Managing the
Journey,” Inc., Nov. 1990, 44.
6. A.D. Chandler, Jr., “The Visible Hand: The Managerial
Revolution in American Business” (Cambridge: Harvard
University Press, 1977).
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(London: John Murray, 2012), 69.
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and M. Guadalupe, H. Li and J. Wulf, “Who Lives in the
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Important Than Authority,” April 21, 2014, http://blogs.
13. C.C. Miller, “Yes, Silicon Valley, Sometimes You Need
More Bureaucracy,” New York Times, April 30, 2014.
14. G. Hamel, “This is How Bureaucracy Dies,” Fortune,
April 16, 2014.
15. See, for example, B.G. Posner, “Right From the
Start,” Inc., Aug. 1, 1988; and F. Koller, “Spark: How
Old-Fashioned Values Drive a Twenty-First-Century
Corporation” (New York: PublicAffairs, 2010).
16. N.J. Foss and P.G. Klein, “Organizing Entrepreneurial
Judgment: A New Approach to the Firm” (Cambridge,
U.K.: Cambridge University Press, 2012).
17. P. Milgrom and J. Roberts, “Complementarities and
Fit: Strategy, Structure, and Organizational Change in
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18. J. Useem, “How to Build a Great Team,” Fortune,
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A.C. Homan, “Diversity Faultlines, Shared Objectives
and Top Management Team Performance,” Human
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20. See D. Kahneman, J.L. Knetsch and R.H. Thaler,
“Experimental Tests of the Endowment Effect and the
Coase Theorem,” Journal of Political Economy 98, no. 6
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21. S.L. Robinson and D.M. Rousseau, “Violating the Psy-
chological Contracts: Not the Exception but the Norm,”
Journal of Organizational Behavior 15, no. 3 (May 1994):
22. Y. Benkler, “The Wealth of Networks: How Social Pro-
duction Transforms Markets and Freedom” (New Haven,
Connecticut: Yale University Press, 2006).
23. IBM Global Business Services, “Expanding the
Innovation Horizon: The Global CEO Study 2006,” n.d.,
i. Foss and Klein, “Organizing Entrepreneurial Judgment.”
ii. Foss, “Selective Intervention and Internal Hybrids”;
N.J. Foss, K. Laursen and T. Pedersen, “Linking Cus-
tomer Interaction and Innovation: The Mediating Role
of New Organizational Practices,” Organization Science
22, no. 4 (July-August 2011): 980-999; and N.J. Foss,
J. Lyngsie and S. Zahra, “The Role of External Knowl-
edge Sources and Organizational Design in the Process
of Opportunity Exploitation,” Strategic Management
Journal 34, no. 12 (December 2013): 1453-1471.
iii. N.J. Foss, T. Pedersen, J. Pyndt and M. Schultz,
“Innovating Organization and Management: New
Sources of Competitive Advantage” (Cambridge, U.K.:
Cambridge University Press, 2012).
iv. P.G. Klein and M.R. Saidenberg, “Organizational
Structure and the Diversification Discount: Evidence
From Commercial Banking,” Journal of Industrial Eco-
nomics 58, no. 1 (March 2010): 127-155; P.G. Klein,
“Were the Acquisitive Conglomerates Inefficient?”
RAND Journal of Economics 32, no. 4 (winter 2001):
745-761; and H.S. James, Jr., P.G. Klein and M.E.
Sykuta, “The Adoption, Diffusion, and Evolution
of Organizational Form: Insights from the Agrifood
Sector,” Managerial and Decision Economics 32,
no. 4 (June 2011): 243-259.
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... Michel a, en parallèle, organisé plusieurs ateliers à l'intention de dirigeants de PME qui désiraient évoluer dans le même sens. Les questions autour de la compatibilité des nouvelles approches de gestion plus agiles et organiques avec les organisations publiques se posent aussi autour des tensions entre l'importance de la fiabilité qui caractérise les procédures au sein de ces organisations (Kamensky, 2016 ;Foss et Klein, 2014) et l'adaptabilité nécessaire de celles-ci par rapport aux incertitudes qui caractérisent désormais l'écosystème de n'importe quelle organisation, incluant les organisations publiques (Magpili et Pazos 2018). Kamensky (2016) donne en exemple l'approche traditionnelle managériale consistant à fixer à l'avance des objectifs de performance et la difficulté de les modifier en cours de route pour une meilleure prise de décision. ...
... Ce constat est en parfaite adéquation aux rôles que les leaders doivent jouer auprès des équipes, soit principalement un rôle 99 d'habilitation. Parallèlement à quelques compétences moins conventionnelles proposées par Magpili et Pazos (2018), soit la résilience, la capacité d'apprendre des erreurs et les attitudes à l'égard du risque, à la lumière d'une compilation des compétences que nous avons identifiées dans la littérature, nous proposons ci-dessous une liste non exhaustive des compétences souhaitables ou à développer par les leaders dans les nouveaux modes d'organisation (Klotz, 2019, Magpili, 2018, Kamensky 2016Accard, 2015, Foss et Klein, 2014, Stewart 2006, Elloy, 2005 De l'équipe responsabilisée jusqu'à la structure holacratique, les variantes peuvent prendre plusieurs formes et le degré d'autonomie et de responsabilité accordé aux équipes varie d'une organisation à l'autre. Au Québec, ces nouveaux modes d'organisation et de gestion demeurent plutôt émergents au sein des grandes bureaucraties. ...
Technical Report
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La gestion en mode matriciel et transversal et la gestion agile et organique dans les organisations : Apprentissages pour la fonction publique québécoise
... These experiments make for fascinating case studies, but the JBA provides a useful way to untangle fact from fiction and look more closely at the costs and benefits of these alternatives to the traditional firm. For example, it is common to find that while a company may reject formal hierarchy, it is often replaced by informal hierarchy and other subtle means of retaining the functions of management (Foss and Klein, 2014). In practice, the "original judgment" of ownerentrepreneurs always exists in some form or another, even if on paper a company has no formal top-down decision structure (Möller and McCaffrey, 2021b). ...
... Julkisessa keskustelussa itseohjautuvuudella saatetaan välillä viitata täysin esihenkilöttömiin organisaatioihin, välillä itsensä johtamiseen, välillä entistä palvelevampaan ihmislähtöiseen johtamiseen (Kostamo ym. 2020;Martela & Jarenko, 2017) saaden jotkut tahot epäilemään, että kyse on pelkästä johtamisvillityksestä, joka näkyy puheissa muttei organisaatioiden arjessa (Burton ym., 2017;Foss & Klein, 2014). ...
Self-management in Finnish working life – where and who experience it? Recently, self-management has been presented as a solution to higher motivation, agility, and innovativeness. Despite increased interest in the topic, many of the theoretical claims have yet to be studied quantitatively. This research aims to illuminate where and who experiences self-management within the Finnish workforce, with a heterogeneous sample of 2 000 Finnish employees. We distinguish between organizational self-management (OSM), as the extent of decentralization of power within the organization, and employee self-management (ESM) as how much power the individual employees experience. Our analysis shows that the male gender and a higher level of education were associated with higher levels of ESM, but these relationships disappeared once the position and salary level were controlled. The level of OSM was slightly higher for young organizations, in the third sector, and in certain industries such as information and communication.
... It has already been emphasized several times that self-management should be the overriding principle of people management and leadership. When, however, the literature often concludes that modern line managers no longer need any formal authority at all, this is simply misleading because there are of course situations in which they do need it (Foss and Klein 2014). In organizational practice, therefore, line managers still almost always have a pronounced (continued) ...
Any study on management and leadership must begin with a clear definition. Organizational management, in the sense of managing an organization or its subunits, can be defined as a steering influence on market, production, and/or resource operations that may address both people and non-people issues with the aim of achieving the unit’s objectives. Organizational people management, in the sense of managing the personnel of an organization or its subunits, is an influence on employees with the aim of achieving the unit’s objectives by generating work performance and meeting other requirements. To manage a unit or its members is synonymous with or leading them.Management and leadership influence can be exercised in two ways: through anticipatory norm-setting or through situational intervention. Both forms can be exercised in hard, externally directed ways or in gentle, non-directive ways. Since hard external influence usually triggers resistance, it is advisable to primarily exert influence in a gentle manner (e.g., in the form of systematic self-direction, instrumental behavioral reinforcement, nudging, collective social norms, or implicit communication). These and other theoretical considerations on management and leadership are discussed in this chapter.
We consider a downstream duopoly model with a monopolistic common supplier and mutual outsourcing between the two symmetric downstream firms. The market structure captures the recent procurement environment in the smartphone industry. We also incorporate managerial delegation into the duopoly model because deciding on organizational forms within a firm is critical to achieving better performance in almost all industries. There is an equilibrium in which only one of the firms delegates its downstream production to its sales manager. A delegating firm becomes less aggressive. The profits when both firms delegate can be higher than those when no firm delegates. Social welfare when both firms delegate can be smaller than that when no firm delegates. Les répercussions des fournisseurs et de l'impartition mutuelle sur les formes d'organisation. Nous examinons un modèle de duopole axé sur les effets comportant un fournisseur monopolistique commun et l'impartition mutuelle entre deux firmes symétriques en aval. La structure de marché saisit l'environnement récent d'approvisionnement au sein de l'industrie des téléphones intelligents. Nous intégrons également la délégation de responsabilités dans le modèle de duopole, car les décisions relatives aux formes d'organisation dans une entreprise sont essentielles pour réaliser un meilleur rendement dans presque toutes les industries. Il y a un équilibre où seulement une des entreprises délègue sa production en aval à ses directeurs commerciaux. Une entreprise qui délègue devient moins agressive. Les bénéfices réalisés lorsque les deux entreprises délèguent peuvent être supérieurs à ceux gagnés lorsqu'aucune entreprise ne délègue. Le bien‐être social lorsque les deux entreprises délèguent peut être inférieur au bien‐être social lorsqu'aucune entreprise ne délègue.
This study examines the global demand for Chief Digital Officers (CDOs) to determine a universal CDO archetype in terms of competencies and tasks. It uses Bayesian statistics and Latent Dirichlet Allocation (LDA) topic modeling to measure multiple dimensions in a sample of 518 job postings for CDO positions. Findings show the hybrid nature of newly appointed CDOs, who feature a mixture of both business administration and technological skills. Further, the study highlights the pivotal role of CDOs in terms of strategic change in companies. The study has three major contributions. First, it showcases the value of LDA in job profiling research. Second, it bridges the existing knowledge gaps in CDO literature with empirical evidence from a global dataset and identifies a core CDO profile based on data extracted through LDA. Third, it illustrates the current market requirements for CDO positions, which is useful to both companies and candidates.
This chapter describes the role of line managers in the theoretical context of the Complementary Management Model. Their people management and leadership activities can be structured on the basis of the theory’s seven elements: management functions, management tasks, management actors, management routines, management unit design, management instruments, and management resources. The principle of management as a dual service is concretized in each of the 24 management tasks that describe the prerequisites of human performance. Ideally, they should be performed by the employee autonomously. The line manager only intervenes as a compensatory entity when self-steerage fails.Since such management structures cannot and should not regulate all aspects of day-to-day management, dilemma situations and micropolitics are unavoidable realities of management work and are also discussed. The performance of the line manager naturally results from the underlying definition of management and leadership and is measured in terms of management input, management behavior, and management results. Manager development (or leader development) is an umbrella term for all measures used to qualify and develop line managers and is also discussed in detail.
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Dijital teknoloji kullanımların küreselleşmesi, akıllı telefonların kitlesel olarak kullanımı bilgiye, sosyal ağlara ve görsel-işitsel uygulamalara erişim kolaylığı sayesinde insanlığın büyük bir kısmına ulaşmıştır. Dijital teknoloji, işletmeyi güçlü biçimde dönüştürmeye devam etmektedir. Bugün, birçok kurum ve kuruluşlar dijital yönetim uygulamalarına geçmiş durumdadır. Bunlarda biri de adından da anlaşılacağı gibi, çalışanlardan oluşan bir ekibi yönetmek için bilgisayar algoritmaları ve yapay zekâ tekniklerinin kullanıldığı “Algoritmik Yönetim” dir. Dijital alanda teknik ilerlemenin hızlanması, algoritmik yönetim uygulamalarının kullanılmasını artırmıştır. Bu çalışmada algoritmik yönetim kavramı çerçevesinde örgütlerde uygulanan bazı algoritmik yönetim uygulamalarına ilişkin literatür taraması yapılmıştır. Çalışmanın temel katkısı, örgütlerde algoritmik yönetimin ortaya çıkışının önceden var olan kurumsal dinamikler, roller ve yetkinliklerle nasıl etkileşime girdiğine odaklanmaktır.
This paper investigates how an organization’s formal hierarchy affects the gender diversity in its applicant pool. One perspective based on theories of gendered organizations suggests that, because women may perceive “flat” organizational structures with few hierarchical levels as egalitarian alternatives to traditional tall hierarchies that reinforce male dominance, these flat structures may disproportionately attract female applicants and thus ameliorate gender inequality and segregation in the workplace. However, we argue that flat hierarchies may reduce the gender diversity in the applicant pool because, compared to men, women will perceive flat hierarchies to offer them fewer career advancement opportunities, to be more difficult for them to fit into, and to saddle them with more work. Using a field experiment with 8,400 job candidates, we show that job postings featuring a flat hierarchy reduce the proportion of interested female candidates by 18% and decrease the share of female applicants by 25%. Our follow-up survey experiment with 9,000 subjects suggests that this decrease in female attraction corresponds with cross-gender differences in perceived career advancement opportunities, fit, and workload. These results imply that the growing trend of flat hierarchies could inadvertently exacerbate workplace inequality and gender segregation.
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Alfred Chandler's portrayal of the managerial revolution of the late nineteenth and early twentieth centuries does not extend well into the late twentieth century, when widespread vertical disintegration began replacing the classical multi-unit managerial enterprise. This paper attempts to explain the new economy in a manner consistent with Chandler by providing an enlarged theoretical account of industrial evolution. in this account, clusters of Chandlerian firms appeared as a temporary episode within a larger Smithian process of the division of labor.
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Faultline theory suggests that negative effects of team diversity are better understood by considering the influence of different dimensions of diversity in conjunction, rather than for each dimension separately. We develop and extend the social categorization analysis that lies at the heart of faultline theory to identify a factor that attenuates the negative influence of faultlines: the extent to which the team has shared objectives. The hypothesized moderating role of shared objectives received support in a study of faultlines formed by differences in gender, tenure, and functional background in 42 top management teams. The focus on top management teams has the additional benefit of providing the first test of the relationship between diversity faultlines and objective indicators of organizational performance. We discuss how these findings, and the innovative way in which we operationalized faultlines, extend faultline theory and research as well as offer guidelines to manage diversity faultlines.
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In a series of classic works, most notably The Visible Hand (1977) and Scale and Scope (1990), Alfred Chandler focused the spotlight on the large, vertically integrated corporation, which emerged in the late nineteenth century to replace what had been a fragmented and localized structure of production and distribution. In Chandler's account, the driving force behind the transformation was increased population and higher per-capita income, combined with lowered transportation and communications costs made possible by the spread of the railroad and telegraph. Adam Smith had predicted an increasingly fine division of labor as the response to a growing extent of the market; and, although he was actually quite vague on the organizational consequences of the division of labor, Smith was clear in his insistence on the power of the invisible hand of markets to coordinate economic activity. Chandler's account challenges this prediction: internal or managerial coordination became necessary to coordinate the "new economy" of the late nineteenth and early twentieth centuries, and the visible hand of managerial coordination replaced the invisible hand of the market. Many would argue that the late twentieth (and now early twenty-first) centuries are witnessing a revolution at least as important as the one Chandler described. Population and income are again a driving force, but the railroad and telegraph have been replaced by the computer, telecommunications technology, and the Internet. In this epoch, Smithian forces may be outpacing Chandlerian ones. Management retains important functions, of course, including some of the same ones Chandler described. But as the central mechanism for coordinating high-throughput production, the visible hand - many would argue - is fading into a ghostly translucence. This paper is a preliminary attempt to explain why this is so - to provide some theoretical insight into the organizational structure of the new economy. The basic argument "the vanishing-hand hypothesis" is as follows. Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets. But the components of that process - technology, organization, and institutions - change at different rates. The managerial revolution Chandler chronicles was the result of such an imbalance, in this case between the coordination needs of high-throughput technologies and the abilities of contemporary markets and contemporary technologies of coordination to meet those needs. With further growth in the extent of the market and improvements in the technology of coordination, the central management of vertically integrated production stages is increasingly succumbing to the forces of specialization.
Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such "internal hybrids," particularly in their radical forms, are inherently hard to successfully design and implement because of a fundamental incentive problem of establishing credible managerial commitments to not intervene in delegated decision making. This theme is developed and illustrated, using the case of the world-leading hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the "spaghetti organization." Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by organizational means, neglecting, however, that about a decade later the spaghetti organization has given way to a more traditional matrix organization. In contrast, an organizational economics interpretation of Oticon organizational changes is developed. This lens suggests that a strong liability of the spaghetti organization was the above incentive problem: Frequent managerial meddling with delegated rights led to a severe loss of motivation, and arguably caused the change to a more structured organization. Refutable implications are developed, and the discussion is broadened to more general issues of economic organization.
Entrepreneurship, long neglected by economists and management scholars, has made a dramatic comeback in the last two decades, not only among academic economists and management scholars, but also among policymakers, educators and practitioners. Likewise, the economic theory of the firm, building on Ronald Coase's (1937) seminal analysis, has become an increasingly important field in economics and management. Despite this resurgence, there is still little connection between the entrepreneurship literature and the literature on the firm, both in academia and in management practice. This book fills this gap by proposing and developing an entrepreneurial theory of the firm that focuses on the connections between entrepreneurship and management. Drawing on insights from Austrian economics, it describes entrepreneurship as judgmental decision made under uncertainty, showing how judgment is the driving force of the market economy and the key to understanding firm performance and organization.
This study examines whether the Iron Law of Oligarchy exists in Wikipedia by analyzing how a key policy of the website regarding verifiability evolved into its current form. The study describes the decision-making processes of Wikipedia and shows that there are many factors preventing or slowing the development of oligarchy on Wikipedia. The study provides data advancing theoretical concepts related to the Iron Law of Oligarchy and the evolution of virtual communities and organizations; results and knowledge gained can also improve Wikipedia policies related to verifiability. Michels wrote: “who says organization, says oligarchy.” I argue that we should follow this with a caveat: “who says wiki-organization, says no to oligarchy.”
For decades, management consultants and the popular business press have urged large firms to flatten their hierarchies. Flattening (or delayering) typically refers to the elimination of layers in a firm's hierarchy and the broadening of managers’ spans of control. The alleged benefits flow primarily from pushing decisions downward to enhance market responsiveness and improve accountability and morale. Has flattening delivered on its promise? This article demonstrates that flattening management layers can have the opposite effect from their intention. In fact, flattened firms typically exhibit more control and decision making at the top.