Darwin, during his travels, observed tribes that were egalitarian. He also felt that they lived in wretched conditions and ascribed their condition to lack of hierarchy. Darwin mentioned ‘‘The perfect equality among the individuals composing the Fuegian tribes must for a long time retard their civilization. As we see those animals, whose instinct compels them to live in society and obey a chief, are most capable of improvement, so is it with…mankind. In Tierra del Fuego, until some chief shall arise with power sufficient to secure any acquired advantage, such as the domesticated animals, it seems scarcely possible that the political state of the country can be improved’’
Taylor furthered the thought with introduction of scientific management. With it he also introduced the element of control. Managers were to plan, i.e. break work into sub-tasks and provide instructions on performing them and monitor the workers. Workers were to deliver on tasks. The output of each worker could be measured and compared with that of others and to the budgeted time for that task. And he introduced hierarchy to monitor the people down below.
The idea that hierarchies are needed for efficient functioning of groups soon pervaded social sciences. The organisational design reflected it with organisations designed as hierarchy of individuals. The supervisor-supervisee relationships were defined as were roles and responsibilities of supervisor. The control in the organisation moved from top to bottom. The organisations grew in size. But as the work became for complex, output of work was not always tangible and continued human presence to monitor it became difficult. Policies and procedures with reward punishments systems were developed to ensure that people do not deviate from stated norms and expected behaviors. As the organisations moved from entrepreneurial stage to large organisations, the human touch was lost and systems took over. Failure to prevent fraud was considered as systems failure. And hence organisations became bureaucratic. The segregation of responsibilities results in additional steps and checks and balances. The increasing numbers are a drain on profitability. The classic reaction of the society cannot be described better than the Sarbonnne Oaxley (SO) Act which was a reaction to discovering frauds in corporate America. I say society, for while SO might have been applicable to American Companies, but the same sentiment prevails across the world.
This bureaucracy is slowing down organisations and hence reducing their competitiveness. The organisations are faced with conflicting challenges. With globalization and increased efficiency of electronic media, the markets are becoming more information efficient forcing organisations to respond faster. The smaller organisations especially entrepreneurial organisations are able to innovate and respond faster to the market. The organizations today need flatter structures, more collaboration and knowledge sharing between its employees. More importantly the need of hour is a new control mechanism that reduces need for approvals without diluting controls.
One way of dealing with these conflicting demands is to break the organisation into smaller organisations. The other is to develop organisation of teams where hierarchy of individuals is replaced by hierarchy of teams. As the information dissemination become faster, companies would lose their strategic advantage equally fast as the competitors would quickly either imitate or respond to the challenge. The only way, companies can beat competition would be by taking advantage of tactical opportunities. This would mean devolving decision making to persons in the field. Bureaucracy decision making would lead to loss of opportunity. Hence devolving decision making to the local teams would be a safer bet. Teams could be horizontal and vertical.
Susan A. Mohrman and Kay F. Quam have depicted it nicely in the illustration below
Source : Consulting to Team Based Organisations : An Organisational Design and Learning Approach. Center for Effective Organisations.
The decision making can be devolved to teams with lesser checks and balances. Diversified teams with no hierarchy within the team and take decisions by consensus can be trusted to take appropriate decisions. The peer pressure itself will provide checks and balances. India rural communities have used peer pressure to great effect to enforce value systems. The pressure to face community or loss of face was a good deterrent that made every one fall in line with community diktat. Dr. Yunus used it effectively to improve credit rating of individuals in rural areas. The biggest punishment for a person was getting ostracized from the community. The pressure comes from shared values and the code of conduct evolves and would change over a period of time. It is also a great way for the companies to show that their value systems are more than a piece of paper and are actually implemented.
My feeling is that the companies will have to learn to work with teams and redesign their processes to suit teams so as to retain their competitive advantage. Ofcourse, till the times others do not catch up with it.
Rajneesh Rastogi 
Rajneesh, If you look at the performance appraisal system of large MNC, they encourage to have evaluation largely on the team based performance. Individual performance remains only to the extent of certain portion.
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