1장
When Managers Matter Most: Challenging the Bossless Revolution
In a world increasingly captivated by flat organizational structures and self-management, "Why Managers Matter" arrives as a bold counterargument to the trendy narrative of bossless companies. The book has garnered attention from business leaders like Microsoft CEO Satya Nadella, who praised its "clear-eyed assessment of management's essential role." Nicolai Foss and Peter Klein's work has struck a chord in Silicon Valley, where despite the rhetoric of flat structures, many tech giants still operate with strong leadership hierarchies. The timing couldn't be more relevant-as remote work and digital transformation accelerate, companies are questioning fundamental organizational principles that have governed business for centuries. This provocative analysis asks a simple yet profound question: in our quest for innovation and autonomy, are we mistakenly discarding the very structures that enable organizations to function effectively?
2장
The Bossless Company Myth: Separating Rhetoric from Reality
The "bossless company" narrative has become increasingly influential in contemporary business thinking. Proponents claim that traditional managerial hierarchies are becoming obsolete, soon to be replaced by flatter organizations, peer-to-peer networks, and extreme decentralization. Paul Michelman's prediction that "layers of management will fall" as centralized systems disappear typifies this view. The narrative typically cites technological advances like blockchain and electronic interfaces, along with changing worker expectations, as driving forces behind this revolution.
However, this perspective often relies on cherry-picked examples rather than comprehensive evidence. Companies like Zappos are frequently highlighted for embracing "Holacracy," a self-management system, while the fact that they quietly abandoned it after encountering numerous problems-including ironically increased bureaucracy-receives far less attention. Similarly, video game developer Valve is celebrated for its supposedly flat structure where "nobody reports to anybody else," yet closer examination reveals clear leadership from founder Gabe Newell and informal power networks that former employees describe as feeling "a lot like high school."
The bossless narrative fundamentally misunderstands what companies do and how they work. Basic economic theory suggests organizing a firm requires someone to do the organizing-otherwise everyone would be independent contractors. While delegating responsibility has benefits, flattening hierarchies brings costs like coordination difficulties, particularly with interdependent tasks. The "perils of the bossless company" include inefficiency, lack of agility, and stagnation-precisely what the narrative claims to avoid.
This contradiction creates a striking paradox: popular management thinking increasingly rejects bosses and hierarchies, yet evidence and common sense suggest hierarchy is natural and essential. The authors aim to demonstrate that decentralizing and delegating are valuable management tools when conditions are right, but they are not synonymous with bosslessness or the death of hierarchy.
3장
The Cultural Roots of Anti-Management Sentiment
The bossless company narrative reflects broader cultural shifts emphasizing liberation, autonomy, and empowerment. This perspective gained traction as traditional corporations declined-the US steel industry, for example, shrinking from 650,000 workers in 1953 to just 142,000 by 2015. Even before this decline, corporate hierarchies faced criticism in popular culture for excessive bureaucracy and conformity.
The counterculture's rejection of corporate life traces back to works like Jack Kerouac's "On the Road" (1957), which presented a romantic alternative to the soulless corporate existence portrayed in "The Man in the Gray Flannel Suit." The Vietnam War further undermined faith in hierarchical organization when Secretary of Defense Robert McNamara's rigid planning approach, honed at Ford Motor Company, failed against a more agile enemy. This military defeat coincided with the 1967 Summer of Love-the official beginning of the counterculture.
In 1968, management consultant Warren Bennis published "The Temporary Society," introducing the concept of the "adhocracy"-flexible, informal organizational forms enabling adaptive behaviors. Alvin Toffler popularized this concept in his 1970s bestseller "Future Shock." Critics note that these influential writers essentially generalized the university model-an idealized loose collective of adaptive knowledge workers-as a universal organizing principle for the future.
The human potential movement of the 1960s, led by Abraham Maslow with his hierarchy of needs, encouraged companies to help employees reach "self-actualization." Werner Erhard's EST seminars similarly influenced business thinking, though implementation could create workplace divisions between adherents and non-believers, as happened at Reebok.
While the counterculture's Age of Aquarius has passed, its values of individual autonomy, empowerment, and freedom from convention have resurged. Today's students increasingly pursue entrepreneurship rather than traditional corporate careers, often combining ambition with desires for social responsibility. Tech companies present themselves as alternatives to traditional workplaces, reinforcing the narrative that conventional companies are outdated.
4장
Nothing New Under the Sun: The Long History of Flat Organizations
The bossless company narrative appeals through its presentation as fresh and revolutionary, but experiments with flatter hierarchies have been around for nearly two centuries. Ricardo Semler pioneered radical decentralization at Brazilian manufacturer Semco in the 1980s, replacing conventional hierarchy with an "organizational circle" of counselors, partners, and associates. Under Semler's leadership, Semco grew from 90 employees and $4 million in revenue to 3,000 employees and $212 million by 2004. However, after Semler's departure, the company declined dramatically to just 50 employees, suggesting the "bossless" structure depended heavily on his personal leadership.
Bill Gore's lattice organization at W.L. Gore emphasizes decentralized decision-making and lateral coordination over traditional hierarchy. Gore eliminated management titles, calling everyone "associates," with leaders chosen by consensus and performance determined by peer review. The company maintains small plants (under 150 workers) to facilitate effective informal relationships and communication.
Burns and Stalker's influential 1961 concept of "organic structure" contrasted with traditional "mechanistic" organizations. Their research showed that firms with flexible roles, lateral coordination, and peer assessment adapted better to environmental shocks and innovation. Similarly, Douglas MacGregor's distinction between "Theory X" (authoritarian) and "Theory Y" (participative) management approaches in 1960 argued that treating employees as self-motivated partners rather than requiring strict direction produced better results.
The employee-led, flat organization has roots in the cooperative movement of the 19th and early 20th centuries. While cooperatives remain influential in agriculture, they've had limited industrial success. The notable exception is Spain's Mondragon Corporation, a federation of worker cooperatives founded in 1956 employing over 80,000 people. However, as Mondragon expanded, it added regular employees and overseas subsidiaries organized as traditional companies.
Most supposedly revolutionary organizational forms have historical precedents. Decentralized networking dates back to Victorian times, and "open innovation" was pioneered in the late nineteenth century. The term "decentralization" emerged in 1820s France. Academic interest in organizational structure goes back to Max Weber's 1922 theory of bureaucracy, which defined bureaucratic management as featuring formal hierarchy, written rules, and professionally trained managers.
5장
Spotify and Zappos: Old Wine in New Bottles
While flat structures can work in specific circumstances as shown by successful companies like Valve, W.L. Gore, and Semco, closer examination reveals they still employ hierarchy and strong management. Many supposed "bossless" companies offer more style than substance, with traditional structures merely rebranded with clever new labels.
Spotify exemplifies the N-form company structure, coined by Swedish academic Gunnar Hedlund to describe hierarchies emerging in Japanese companies in the 1980s-90s. Unlike traditional Western hierarchies that silo activities in business units with primarily vertical communication, the N-form uses temporary projects as organizational building blocks, features direct lateral communication between employees across functions, and maintains a fluid, looser managerial hierarchy based on current projects.
Spotify organizes around "squads" - small development teams of fewer than ten members working on specific software components using the "scrum" approach. "Tribes" group related squads working on similar problems, managed by tribe leaders. "Chapters" cut across tribes to connect people with similar competencies, led by chapter leads who function as HR managers. "Guilds" serve as interest groups for knowledge sharing. Despite appearing revolutionary, this structure is essentially a rebranded matrix organization - a management approach dating back to the 1950s aerospace industry - with hipster terminology masking conventional hierarchical elements.
Zappos adopted Holacracy in 2013 as Tony Hsieh sought to scale while maintaining innovation and entrepreneurship. The transition proved challenging-18% of employees accepted a severance offer to leave, including 38% of the tech department. By 2020, Zappos had quietly retreated from pure Holacracy, retaining concepts like "circles" but reinstating traditional managers. Three major problems emerged: excessive bureaucracy through too many meetings (lateral coordination required more communication than traditional hierarchy), difficulty scaling (interdependencies between units became harder to manage without clear authority), and diminished customer focus as employees became preoccupied with making the new system work.
While Spotify's "squads" and "tribes" and Zappos's Holacracy have attracted attention, they aren't substantially new or truly bossless. Managers have implemented cross-functional teams, multiple reporting lines, and overlapping interaction circles for decades. The bossless narrative oversells the benefits of flat structures while downplaying both the role of good management and the drawbacks of these approaches.
6장
The Spaghetti Organization: A Cautionary Tale
On August 8, 1991, international media including CNN gathered at Oticon's new headquarters in Copenhagen to witness CEO Lars Kolind unveil his "spaghetti organization"-a radically decentralized, IT-supported structure. This medium-sized hearing aid company attracted global attention not for technological innovation but for organizational revolution. Management guru Tom Peters featured Oticon prominently in his 1992 book "Liberation Management."
Kolind's radical "Think the Unthinkable" proposal reimagined Oticon as a market-like organization without traditional hierarchy. The "spaghetti organization" abolished formal job titles and departments in favor of self-organizing projects. Employees could join any project they wanted, multitask across functions, and even initiate new projects. While hierarchy was drastically reduced, the Products and Projects Committee remained at the apex with approval authority.
Despite initial success with increased profitability and innovation, Oticon's spaghetti organization was abandoned by 1996. The radical structure generated too many ideas while creating confusion and chaos. Employees grew frustrated with colleagues who overcommitted their time across multiple projects, the lack of planning and clear routines, and especially the seemingly arbitrary interventions by the Products and Projects Committee.
The Oticon experiment teaches three key lessons about bossless organizations: First, radical decentralization can generate excitement, creativity, and energy-for a while. Second, this excitement eventually dissipates as self-organizing processes encounter frustrating coordination problems. Third, management never truly disappears in decentralized organizations; it simply becomes more informal and potentially more unpredictable, with senior managers often micromanaging due to fewer middle management layers.
The fundamental error of the bossless company narrative is applying market language to firms. While firms operate within markets, what happens inside them is categorically different from market transactions. Companies are established by specific people for specific purposes, with Tesla's mission to accelerate sustainable transport being one example. Unlike markets, which lack a single objective and aren't designed by anyone, companies are purposefully designed with operating procedures and business processes to achieve specific aims.
7장
When Flatter Organizations Actually Work
While the bossless company narrative misunderstands the fundamental difference between firms and markets, flat hierarchies with high employee empowerment can work under specific circumstances. These circumstances mirror those driving the "vanishing hand" phenomenon-industries moving toward standardized interfaces and specifications. When components fit together in obvious ways to form a value proposition, managers have less to coordinate.
This applies to workers inside companies too: simple production processes or tasks that can be broken into self-contained "modules" require less management. Companies like Valve and Oticon succeeded with flatter structures because their production processes have relatively few interdependencies, allowing autonomous work. Most businesses, however, involve significant interdependencies that require management coordination, both proactively through systems and structures, and reactively through careful intervention to align individual decisions with company objectives.
Morning Star, a billion-dollar food processing company with just 600 permanent employees, has become famous for its radical self-management model that supposedly eliminates hierarchy, managers, and titles. The company operates through a system where employees negotiate "Colleague Letters of Understanding" (CLOUs) directly with coworkers, specifying personal missions, key activities, and performance metrics.
Morning Star appears bossless but has actually delegated managerial tasks to employees through the CLOU system. This works because the company operates in a traditional industry with predictable, linear processes that can be precisely described and often automated. The tomato processing business involves few technological changes and limited feedback between production stages. However, this model would likely fail in more complex, dynamic environments where activities are interdependent rather than linear, and where unpredictable changes require central coordination rather than contractual specifications.
Most companies operate in unstable environments with constant technological changes, shifting customer demands, supplier issues, and competitive threats. When problems affect only one part of a modular company, they can be contained. But when issues impact the entire organization-like ethical violations or critical production failures-hierarchical coordination becomes essential.
8장
The Inevitable Return of Hierarchy
Despite popular narratives about bossless companies and flat organizational structures, the most successful organizations are often run by powerful, opinionated figures who maintain clear hierarchical control. Apple under Steve Jobs, Amazon under Jeff Bezos, Tesla under Elon Musk, and even supposedly flat organizations like Oticon and Zappos have dominant central leaders who shape strategy and culture. In knowledge-based economies characterized by rapid change and uncertainty, concentrated managerial power has become even more essential, particularly when dealing with major disruptions or implementing transformative changes.
Many successful corporate turnarounds-from Apple's resurrection in the late 1990s to IBM's transformation under Lou Gerstner to Marvel's reinvention under Isaac Perlmutter-were led by single authoritative individuals who could make tough decisions quickly without getting bogged down in consensus-building. These leaders often had to make unpopular choices, like Jobs' decision to drastically reduce Apple's product line or Gerstner's pivot of IBM toward services. Interestingly, while companies are delayering hierarchies and removing middle management layers, they're simultaneously expanding executive teams and increasing top-level intervention in operations. This has led to the counterintuitive finding that flatter structures can actually lead to more micromanagement than traditional vertical hierarchies, as senior leaders become directly involved in lower-level decisions.
Even in creative organizations where innovation and individual expression are paramount, clear leadership remains essential. For creative geniuses like conductor Karl Bohm, chef Rene Redzepi, or drummer Buddy Rich, nothing short of perfection would suffice-every team member must perform at their absolute peak level. While these autocratic leaders were known for their demanding nature, their reactions reflected genuine passion and an uncompromising desire for excellence rather than ego. However, different leadership styles can achieve similar results - figures like Gandhi and Lincoln achieved remarkable outcomes through quiet resolve and moral authority rather than dramatic confrontations or histrionics.
The fundamental insight that leadership and hierarchy serve essential organizational functions remains as true today as when organizational theorists like Max Weber, Chester Barnard, Ronald Coase, Alfred Chandler, Herbert Simon, and Oliver Williamson first recognized it. In fact, managerial authority is actually more crucial than ever in our knowledge-based, networked economy. Management proves especially essential in two hallmark conditions of our modern economy: when knowledge is the key competitive resource and when competition is primarily based on innovation. Complex innovations like the iPhone, Tesla's electric vehicles, or Google's search algorithms don't emerge spontaneously from flat teams - they require careful orchestration, foresight, and planning from managers leading specialized teams toward specific goals. Even in seemingly collaborative environments like Silicon Valley startups or creative agencies, clear hierarchical structures typically underpin successful execution.
9장
Hierarchy as an Evolutionary Advantage
The traditional hierarchical company has remarkable staying power despite claims that flat structures are inevitable in today's world. Contrary to popular belief, hierarchical companies actually emerged during periods of radical technological change and trade expansion in the mid-19th century through WWI, and continued spreading afterward. Far from being suited only to stable conditions, the traditional company represents a successful evolutionary adaptation to unpredictable environments.
As economist Sidney Winter noted, the company is a "hopeful monster"-a successful evolutionary transformation that should be modified cautiously. The hierarchically organized company works precisely because it effectively addresses the universal problems of coordination and cooperation that all social groups face.
Hierarchy addresses these twin problems in several ways. Coordination means determining what should be done, by whom, when, and how-creating a plan that clearly delineates responsibilities and linkages between roles. Cooperation involves getting people to follow this plan even when doing so conflicts with self-interest. While some social problems can be solved peer-to-peer or through common standards (like USB ports or power plugs), and markets coordinate through price signals (as Hayek argued), hierarchy provides structure for more complex organizational challenges.
Alfred Chandler, the foremost historian of the corporation, demonstrated through detailed studies that hierarchy is an unbeatable machine for coordinating activities at the lowest cost. His 1962 work "Strategy and Structure" showed how firms like DuPont and General Motors evolved from simple functional hierarchies to M-form structures as they diversified, proving that structure follows strategy. Chandler's later work revealed that managerial hierarchy itself was crucial to enabling mass production and prosperity.
Ronald Coase's groundbreaking 1937 paper asked why firms exist when markets theoretically coordinate through price signals. His answer: transaction costs-the expenses of using the price mechanism. Finding information, bargaining, writing contracts, and ensuring quality all impose costs that firms can reduce. Employment contracts are deliberately open-ended, giving bosses flexibility to direct workers without negotiating each task separately.
10장
The Future of Management: Enabling Authority
Managerial authority and hierarchy aren't disappearing-they remain the most effective solutions to coordination and cooperation problems in human interactions. While markets and prices enable economically rational decisions, they can't function alone. Companies with their inherent authority structures complement markets, allowing human intelligence and creativity to flourish at scale while providing specialists with predictability and accountability.
However, hierarchy must adapt to massive changes in values, demographics, technologies, and business practices. The central challenge for designing effective hierarchies is balancing two opposing forces: employees' desire for empowerment and autonomy (which mobilizes creativity and specialized knowledge) against the need for large-scale managerial authority (particularly when rapid environmental changes require coordinated adjustments across interdependent activities).
While firms remain hierarchical, their structures are changing through delayering and increased delegation. Authority itself is evolving into two distinct forms: "Mark I" authority involves traditional command functions like hiring, firing, instructing, and supervising; "Mark II" authority focuses on creating structures, forging consensus, aligning behavior around goals, and fostering change. The modern workplace requires shifting toward Mark II authority, as knowledge workers don't need constant direction but do need well-designed systems in which they can flourish.
Trust forms the foundation of effective delegation, exemplified by Nordstrom's famously concise employee handbook: "Rule #1: Use best judgment in all situations. There will be no additional rules." Research confirms that vague but trusting signals improve motivation while micromanagement harms it. Trust becomes essential because workplace expectations often go unstated and change over time. "Psychological contracts" between employees and management establish mutual expectations, but these are easily broken.
Some organizations effectively practice "dynamic delegation," where authority shifts according to circumstances. "Extreme action teams" like emergency medical units or military special forces exemplify this approach, with leadership typically held by the most experienced member who delegates to avoid overload but reclaims authority in critical situations. Research shows this improvisational process works because it operates within an established hierarchical structure.
Modern hierarchy focuses on designing systems rather than dictating actions-creating processes, rules, and norms that attract self-motivated workers and organize them into flexible structures. As Haier's Zhang Ruimin explains, today's leader is "more the ship's architect or designer" than its captain. Digital tools can enhance managers' ability to delegate, supervise, and lead change, but they must resist the temptation to measure everything and downplay human judgment.
11장
Rediscovering the Value of Management
The bossless company narrative, while appealing to modern sensibilities, lacks credible empirical support. Proponents often base their arguments on carefully selected outliers like Valve or Morning Star, ignoring thousands of conventional companies that consistently outperform. They mistakenly prescribe extreme organizational models as universal solutions, disregarding crucial factors like industry context, company size, and operational complexity. This oversimplified approach overlooks how hierarchy and managerial authority remain fundamental to coordinating complex human activities at scale.
Modern management operates in a complex environment where traditional command-and-control methods clash with demands for employee empowerment and innovation. The digital revolution presents a particular paradox: while technology enables greater decentralization, it simultaneously provides unprecedented tools for centralized control and monitoring. Enterprise software, data analytics, and communication platforms give headquarters deeper visibility into operations than ever before. However, this capability often leads to excessive monitoring and intervention, potentially crushing local initiative and creative problem-solving. Companies must strike a delicate balance between maintaining necessary control and fostering innovation.
The economic impact of effective management cannot be understated. Research shows that superior management practices correlate strongly with productivity, innovation, and sustainable growth. When companies implement sound management principles, they generate wealth that translates into improved living standards, better healthcare access, and enhanced social services. In this way, good management literally "saves lives" by contributing to societal prosperity and well-being.
Today's hierarchies bear little resemblance to their industrial-age predecessors. Modern organizations have evolved sophisticated systems that blend formal authority with collaborative networks, cross-functional teams, and matrix structures. While Steve Jobs' Apple or Henry Ford's assembly lines relied on rigid top-down control, contemporary companies like Microsoft or Toyota implement more nuanced approaches. They maintain clear lines of authority while encouraging bottom-up innovation and cross-boundary collaboration. The trend toward workplace informality - open offices, casual dress codes, flexible schedules - hasn't eliminated hierarchy but rather reshaped how authority operates.
Companies haven't abandoned managerial oversight; they've refined it. Delayering initiatives often aim to increase senior management's influence by removing middle management layers that can obstruct strategic execution. Modern processes emphasize outcomes over micromanagement, using sophisticated performance metrics and feedback systems rather than direct supervision.
Looking ahead, successful organizations will likely blend traditional hierarchical elements with selective implementation of self-management principles where appropriate - particularly in creative or knowledge-intensive functions. However, core operational activities will continue requiring clear authority structures and accountability. The key lies in exercising managerial authority intelligently: maintaining transparent communication, ensuring procedural fairness, and building trust through consistent leadership behaviors. While management styles evolve, the fundamental need for coordinated direction in complex organizations remains unchanged. As Mark Twain might observe, those predicting management's demise have fundamentally misread organizational reality.
