Hierarchy in teams (never) leads to lower team performance

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It is a commonly held belief that hierarchies can prevent some team members from speaking up openly and from innovating. Then again, others feel that hierarchies are of help at work by providing a reference point to know who is responsible for what and whom to turn to for a specific decision. Turns out both views aren’t terribly wrong.

By Petra Pflugfelder and Isabella von Stockert

Over the past several years more and more organisations have been abolishing traditional hierarchical structures (Bittelmeyer, 2014) and replacing them with more agile structures and organisational models, such as a circular organisation. This seems to be a more future-oriented way of cooperation and is praised as a solution to all problems. However, there are also studies that clearly point to the positive aspects of hierarchies: e.g., increased willingness to cooperate or enhanced performance motivation if structural hierarchies offer incentives like clear career paths (Halevy, Chou & Galinsky, 2011).

When it comes to team hierarchy, there are often two competing views on the effects of hierarchy: It is either gratefully perceived as a means for coordination and structure (functional perspective) or as a frequent conflict trigger (dysfunctional perspective). Hierarchies can be distinguished at different levels of expertise, influence, rank or status. To get to the bottom of the question of whether hierarchy is helpful or disruptive and what other circumstances may play a role, researchers from the U.S. and the Netherlands conducted a meta-analysis of 54 studies, which led to the following result: Overall, the presence of a hierarchy in a team has a negative impact on team effectiveness – measured by performance (quantity, quality and efficiency of results) and the willingness of team members to remain part of the team in the future (Greer, de Jong, Schouten & Dannals, 2018).

This can be explained as follows: The effect of the dysfunctional perspective is significantly stronger than that of the functional perspective. For example, a hierarchy may help to coordinate interactions. However, it has a significantly stronger – i.e., negative – effect when it comes to differing interests caused by differently ranking groups in the hierarchy resulting in conflict. In addition, there appear to be three factors that further intensify this dysfunctional component:

  • strong differences in the competencies of the team members,
  • an unstable composition of team members and
  • the possibility of challenging the hierarchy when it is not perceived as rigid.

At the same time, only one factor was found in the meta-study that reinforces the potentially coordination-promoting effects of hierarchy: If the team’s tasks are ambiguous and cause uncertainty (high task uncertainty). On the other hand, task complexity and task interdependence, which are often pointed to, do not play a reinforcing role.

Hierarchy and Innovation

As companies increasingly rely on creative teams (Hoever, van Knippenberg, van Ginkel & Barkema, 2012), it is worthwhile to have a closer look at the effect of hierarchy on innovation and creativity. Here, a somewhat different picture emerges: While some studies show that hierarchy does not play a role (e.g., Edmondson, Bohmer & Pisano, 2001) and others support that hierarchy is conducive to innovation (e.g., Sanner & Bunderson, 2018), Evans and Sanner (2019) brought together these results and the underlying arguments in a new paper and came to a more differentiated conclusion:

Since the course of a project can be divided into different phases, one may also assume different demands for coordination, i.e. hierarchy, within these phases. A more pronounced degree of hierarchy is particularly useful at the beginning and end of many projects, since these phases are characterised by uncertainty and the search for orientation due to unclear goals or unclear final decisions. In between, there is often a phase of more independent working in which objectives and tasks are clearly defined, in turn requiring less coordination. Agile forms of work, such as SCRUM, take up exactly these aspects and operate accordingly. In line with this, other hierarchy-creativity studies (e.g., Keum & See, 2017) also clearly distinguish between the idea generation phase and the subsequent selection of the most promising ideas: The idea generation benefits from little hierarchy in order to reduce the fear of team members to make a fool of themselves in front of others – the idea selection, on the other hand, benefits from critically considering the evaluation of the higher ranked, because in this way also one’s own suggestions are more strongly challenged.

Effectiveness of Hierarchy

In general, hierarchy is helpful and effective in the following three cases:

(1) When there is a clear chain of command in the team, because teams learn better that way (Bresman & Zellmer-Bruhn, 2013),

(2) when there is a performance culture ensuring that people with the highest performance have more influence and that the hierarchy is based on expertise (Sanner & Bunderson, 2018), and

(3) when feedback and goals are formulated toward the whole group, higherups promote collaboration among team members which in turn increases team learning and performance (Van der Vegt, de Jong, Bunderson & Molleman, 2010).

In knowledge-based companies, where innovation and learning are critical success factors (Kim & Mauborgne, 2003), these criteria form a good basis for already existing hierarchies in organisations.

Whether hierarchy is beneficial or hindering ultimately depends on a number of factors. Knowing them helps organisations to make conscious decisions about where hierarchy is helpful in the company and when flat hierarchies or no hierarchies are helpful and effective in terms of results.

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