How corporate hierarchies have dissolved during the pandemic
Many firms have broken long-standing organisational boundaries – horizontal and vertical, formal and informal – over the past two years. What have they learnt so far from going more ‘open plan’?
One of the more unexpected side effects of the pandemic has been that it has steamrollered organisational hierarchies. Many businesses have emerged from the Covid crisis much flatter – culturally, at least – because of their enforced adoption of remote working.
Their retreat from HQ has removed several of the physical symbols of seniority – the CEO’s well-appointed corner office, for instance. In the era of online collaboration software such as Teams and Zoom, the person leading the meeting no longer sits at the head of the table.
Meanwhile, many firms, particularly those whose sales revenues have been decimated by Covid, have sought to adopt a so-called revenue operations (RevOps) structure. In this set-up, the traditional silos of sales, marketing and customer success are combined, either under a new overall head of RevOps or a revenue board making the leaders of those three teams cooperate more closely. They will share technology, data and, crucially, targets.
Hierarchies have also been under pressure from a dramatic growth in mergers and acquisitions since the start of the pandemic. According to January’s EY 2022 CEO Outlook Survey, 2021 was the strongest year on record in M&A terms, with £4.5tn of deals announced. The poll of more than 2,000 business leaders in 51 countries found that 59% were planning further M&A activity this year,
EY concluded from its findings that “the pandemic has been a wake-up call for many CEOs. The transformation imperative is clearer than ever.”
One company that has been growing strongly through acquisition is Babble Cloud, a specialist in telecoms technology. Its director of RevOps is Alex Williams.
“Babble is an acquisitive company,” he says. “That brings success, but the speed at which we’re growing also creates challenges across the organisation, operationally and culturally. As with any business that’s undergoing rapid change, silos are being generated.”
One of the arguments at the heart of RevOps movement is that “silos separating a firm’s go-to-market teams (sales, marketing and customer success) – and silos separating the go-to-market teams from the ops/engineering teams – are potentially losing the company revenue. As you grow, the silo challenges are going to become even greater,” Williams adds. “In many cases, you’ll have very few people sitting at the top of a business who can get a good flow of information from across the organisation, but you won’t have the same flow below that level.”
Signal.ai, a provider of AI-powered decision-making tools, is a company that has transformed itself, having grasped the problems that silos can cause in certain key departments.
Kirsty Charlton, the firm’s vice-president of RevOps, says: “In silos, team leaders all have their own priorities, which tend to concern their own team’s efficiency. This structure doesn’t enable a whole-company perspective. You might have the VP of sales and all they get all day from their reps are fights over leads, whether they’ve come from marketing or sales.”
She cites the case of one company where the marketing team was celebrating hitting its target for lead generation while the sales team’s morale was poor, having missed its target by 50%.
Changing such a dysfunctional arrangement still isn’t easy, Charlton notes. “People are suddenly working towards a different goal. They love the sound of RevOps. But, if you were to tell the sales team and they are busy managing their pipeline, that would sound like a lot of work to them.”
But companies that have made the effort to transform are seeing handsome returns on their investment. Research by the Boston Consulting Group indicates that such firms have enjoyed productivity and profitability increases of about 15%.
Charlton believes that the Covid crisis has served to flatten hierarchies.
“The gap between leadership and entry level has shrunk massively. Part of this is down to the tech,” she argues. “But the calibre of entry-level staff, in terms of both skills and ambitions, has also increased.”
A shortage of skilled candidates on the employment market, particularly in the tech sector, has meant that employers are having to spend more on getting new recruits up and running at full competence as soon as possible.
“The investment that employers have made in onboarding and upskilling people has increased,” Charlton says. “We are making a massive investment in enablement. To be successful, we must get our people ready within a year. Given the great resignation, those firms that can get their teams up to speed the quickest will win.”
Dr Gianvito Lanzolla is professor of strategy at the Bayes Business School at City University of London. He has observed that a growing number of enterprises have been engaging in transformative partnerships. Notable examples include Apple working with app developers and the Meteorological Office offering data services to airlines.
“Operational models become more open and integrated in ecosystems whereby value is co-created and co-delivered by different companies,” Lanzolla says.
He adds that partners need to be able to manage potentially large power imbalances in their relationship and, possibly, integrate their technologies to an extent.
“Another aspect of technology-enabled business transformations that’s often overlooked is the issue of organisational controls,” Lanzolla says. “The use of digital technology in transformations often triggers employees into trying to ‘game’ that technology. This behaviour can lead to the production of biased data and, potentially, a deterioration in the organisation’s culture.”
Hierarchies in even the most conservative of industries haven’t escaped a shake-up over the past couple of years.
While formal structures in the legal profession haven’t changed, informal ones certainly have, according to Jonathan Bond, director of HR and learning at law firm Pinsent Masons.
“Senior people seem more accessible now, owing to the insight into their home lives that the use of video meetings has brought, the more informal dress codes that have been adopted and the general break-up of traditional working styles and norms,” he says.
Bond reports that, while the time it takes to reach partnership level in law firms has generally lengthened, “the route to being involved in more strategic work has become shorter. This is partly because we’re better at recognising talent and less reliant on the old-fashioned maxim that ‘you can do X only if you have Y years of post-qualification experience’.”
Mark Jenkins, emeritus professor of business strategy at Cranfield School of Management, is an expert in innovation, competitive strategy and high-performing cultures. He would advise any firm that’s “serious about reformatting its business around new technologies that this should have some pretty fundamental impacts, particularly on managerial hierarchies and the whole nature of management. The idea of managers as facilitators, rather than controllers, may be one change that would have a significant effect.”
He notes that some firms have yet not had the chance to consider such matters. “These companies are still operating in crisis mode rather than taking stock on how to advance in the longer term. A colleague of mine uses the phrase ’never normal’, which I think is how some people are feeling at the moment.”
That said, in a never-normal world, few structures exist that are so sacred that they cannot be reshaped into something more fit for purpose in these uncertain times.