Do we actually still need leaders in times of digitalization? In recent years, we heard many voices calling the end of the hierarchy. One reason for this is the rising speed of technological progress, wherefore, those who have the expertise should make the decisions. We are living in a know-how economy. The average level of education has increased over the decades. Experts have gained more power within the company because they get more job offers from competitors. Whether a person with certain know-how feels comfortable in the organization or not has to do a lot with the leadership culture. Good arguments should prevail. If a leader shows off his hierarchical power, the willingness of the expert to leave the job increases. The impact of decisions can also be much easier and faster evaluated since most relevant information is available within a click on the internet.
Nevertheless, hierarchical leaders don’t need to be afraid that they will die out like dinosaurs one day. This has good reasons:
- Managing directors have legal responsibilities and have to delegate some of them. In the case of a work accident or insolvency, it is the responsibility of the top management to deal with it and not the responsibility of the experts.
- The hierarchy also has an important efficiency function, which is: resolving stalemate situations. Probably most of us know similar situations: different opinion-makers repeat their points of view and arguments but do not adequately respond to the arguments of the others. As a consequence, not only valuable time passes but also the working climate gets worse in protracted stalemate situations. Maybe both approaches could work well, maybe it’s just that different values and personalities clash together. The more complex our world becomes, the more likely, decision-making processes can turn in circles. In this case, it is the task of the line manager to bring about a decision or to make the decision himself/herself.
- The leaders who are legitimized by the owners tend to be responsible for the corporate strategy as well. If employees from as many levels as possible are involved, there is a higher change of identification but the leaders must coordinate this process. In some cases, they even have to give clear instructions: for example if the employee and company goals do not match when it comes to change processes.
In some situations, a hierarchical leader is needed, for instance in stalemate situations. In this case, the leader has to facilitate the decision-making process or make decisions herself/himself.
Although lateral leadership is on the rise, it still needs both leadership approaches. How many consistently democratic company government systems (e.g. holacracy) have survived for more than 10 years? Very hierarchically organized companies are currently not in the winning position either. The right balance seems to count. And what representatives of situational leadership have said for a long time already, it depends on the specific situation.
O’Reilly III and Tushman went in a similar direction with the ambidextrous idea: Businesses are facing two quite different challenges during the digital transformation:
- To disrupt themselves through innovation and thus avoid being disrupted by others and
- as soon as the innovation arrives in continuous implementation, ensure that the relevant processes fit and are actually being lived.
Innovation management needs more lateral leadership, while process management needs more of hierarchical leadership. However, when processes are being defined and continuously improved, it takes again the input of many, especially from the people who work with it on a daily basis. In that case, lateral leadership can help. Even the control of the implementation of processes can be mostly done by transparent self-monitoring, for instance using KPI boards. On the other hand, it is also helpful for the innovation management if the company or the divisional management set strategic guidelines to move the development in the direction of the company’s vision.
Summary: We can say that the right balance between lateral and hierarchical leadership increases the probability that the best solutions prevail, that the employees are happy to participate which in combination usually leads to business success.
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