We recently had the opportunity to speak at a conference of the top 300 leaders in one of our client companies. They are 14 months into completing a major realignment toward global brand business units as well as the redesign of all enterprise functions, aimed at global efficiencies. They have begun the change process and asked us to deliver a keynote presentation to paint a picture of the nature of this new “collaborative” matrix organization and what it means for leadership behaviors in the future.

We told the audience that a short history lesson from historian Niall Ferguson would provide an important metaphor. The history of the world is largely the story of what Ferguson calls “the tower and the square.” The metaphor is powerful. Throughout history, the tower represents the reigning authority and hierarchy that has existed across millennia. The square is the community of people and the network that resists hierarchy and conspires against the tower.

From Luther and the reformation in Europe 500 years ago seeking to remake the Catholic Church, to the Bolshevik revolution, to the Egyptian revolution that began on Facebook, networks have sought to conspire against the tower – to reset the power. For most of history, the tower overshadows the square because the history of humanity is largely about military conquest and building defenses, which require command and control. Those “towers” in Western and Eastern cultures established organizations capable of building great walls, pyramids, and roads across continents and great cities.

There is an inherent and healthy tension between hierarchy and networks. When power is absolute and sits in one place for too long, the square must resist. But looking across the centuries, the two have co-existed mostly to our benefit.

Fast forward to the modern era. In business over the past 25 years, the path to global brands and global operating systems has not been a straight line. You only have to look at the naïveté behind the “single global market” movement – resisted in many parts of the world and politicized today in trade war talk – to see the limits of hierarchy. Global companies have realigned their organizations in waves of decentralized, local models and centralized, global models.

What’s clear is that hierarchy and networks both play a role in today’s global organizations. Hierarchies will always be important. But we must learn to reduce our reliance on hierarchical organizational arrangements. Today’s global organizations are not centralized or decentralized. They are networked, they are digital, and they are agile.

Today, the tension in global organizations is between two forces, both potential forces for agility – as well as bureaucracy! We think of small and separate business units that move quickly and locally when we think agile. And there is good reason to think this. But these models are also prone to duplicated resources, bloating, and viewing the world through an internal, P&L lens. The other kind of agility is enterprise agility – the ability of the entire company to make fast adjustments in where to play and where to invest in markets. Innovation, technology and talent is also important, as Apple has demonstrated. Both forms of agility matter in the 21st century, and the tension between the two is a good thing. The essential role of leaders is to manage the tension between these two models in order to gain the benefits of both small, divisional, local units as well as the benefits of large, integrated organizations that exploit the collective assets of scale. In the collaborative organization, the tower and the square are both important. Hierarchy and networks must coexist to deliver the value that shareholders expect from large companies.

Greg Kesler

Managing Partner