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The Office Hierarchy Is Officially Dead

A majority of organizations have ditched top-down management for a network of teams, a new study finds.

After predictions of its demise, the traditional office structure is crumbling. Only 38 percent of companies in a recent survey say they are "functionally organized." For large companies with more than 50,000 employees, that number shrinks to 24 percent. 

These organizations are moving away from the top-down hierarchies, inherited from the industrial age, suggests a Deloitte survey, released Wednesday, of more than 7,000 companies. Traditionally, jobs were organized by function—sales people worked with sales people; marketing people with marketing—and success meant moving up the chain. But in a modern workplace, people have less-defined jobs and move laterally from project to project, said Deloitte's Josh Bersin, who worked on the study. "We're now operating businesses as networks of teams," he said. Companies that haven't already made this shift are thinking about it—92 percent of those surveyed cited organizational redesign as the top priority.

The general thinking is that top-down management is slow and painful. Studies have found that hierarchy leads to conflict in teams, which is how most work is done these days. "The traditional structure doesn't necessarily work in every environment," said Jeff Luttrell, the director of talent acquisition for the mid-Atlantic region at Alorica. "In this age we don't just report in to one group anymore," 

 Companies that stick with the hierarchy fall behind, added Bersin. "They can't innovate, they can't adapt."

So companies are adapting, ditching rigid levels and titles for something more fluid. What that something looks like depends on the organization. There are, of course, high-profile examples such as Zappos and Medium, which have adopted the alternative management structure called Holacracy. Or such companies as Valve, which have completely flat, leaderless organizations. But many more organizations are naturally shifting to teams in a less formal, often messier, way. Bersin calls the new structure "amoeba like," in that groups of teams shift and move to adapt to a business's needs. He likens it to the way Hollywood operates, assembling experts to tackle given projects, for a given period of time, and then dismantling and reassembling.

While the hierarchy may be heading toward extinction, the move to team-based work hasn't been entirely painless. The same Deloitte survey from last year found that 74 percent of those surveyed rated the work environment as complex or highly complex. "Companies are struggling with it," said Bersin. "Someday in the future this will all be natural; we're not there yet. We're still thinking about, 'How do I get promoted?'" 

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