The Decentralisation Paradox Of Flat Companies

Joost Minnaar
Written by Joost Minnaar March 22, 2023

As you may know by now, many of the Bucket List organizations we visited are structured as a Network of Teams—that is, they do not rely on a managerial hierarchy but on an organizational structure that can be regarded as radically decentralized networks. But once you break up a big pyramid into many smaller pieces, one of the main challenges becomes how to connect all these pieces together again in a highly efficient way. Fortunately, recent research from the “network science” and “collective intelligence” fields has something interesting to say about how to solve this challenge.

Before proceeding, be aware: this challenge is no small feat. Some companies have radically decentralized their organization in such a way that they have to efficiently connect thousands of autonomous teams.

In fact, their teams must be so well-connected that the whole becomes greater than the sum of its parts. Otherwise, why would they form a network in the first place?

The more connections, the better… right?

To solve this challenge, we always assumed that you should design your network in such a way that all teams are very well connected with each other. The more connected, the better, so to speak.

At least, that is the right answer we always assumed. However, the latest research into radically decentralized networks shows something different concerning the best way to share information and resources through a network in relation to its performance.

The main point is relatively simple but counterintuitive (at least to me). If you want your Network of Teams to perform at its best, you must do the following:

  1. On one hand, you want members of the same teams to be “strongly” connected with each other,

  2. But, on the other hand, you want members of different teams to be “weakly” connected with each other.

Allow me to explain.

“While the research demonstrates that you want to have information efficiency within teams, it also shows that you want information inefficiency between teams. And this certainly surprised me.”

Information efficiency within teams

A fundamental network property that determines the Network of Team's performance is information efficiency, i.e., the typical number of “steps” required for information to traverse the radically decentralized network.

But this counts only for solving “simple problems'” and finding “wisdom of the crowd” solutions within teams. As such, it is ideal to only have rich information between team members of the same team.

Solving simple problems

The research shows that a rich information flow within teams improves their capability to solve “simple problems.”

Why? Because a strong connection between team members enables them to gather rich information about the performance of the solutions of other team members. This allows them to learn directly from their peers, reducing individual and team mistakes.

To enable this peer learning, members must be in frequent contact with each other. For example, many progressive organizations tend to organize this via a business rhythm of weekly or monthly team meetings.

Wisdom of the team

The research also shows that a rich information flow within teams also improves their ability to leverage the “wisdom of the crowd” of the team.

Research says this happens because social influence drives team members (with strong connections within the same team) towards converging opinions, which increases individual confidence in the team's answers to problems.

This happens because the most accurate members of the team become “centers of gravity,” influencing other members toward them.

As a result, convergence at the team level happens towards the most accurate response (hopefully), which increases both the individual performance of members and the “wisdom of the team.”

This “wisdom of the team” accuracy can be further improved by reducing the number of team members, hence the small team sizes (max. 12 people) of many progressive organizations.

Starting to make sense yet?

Information inefficiency between teams

While the research demonstrates that you want to have information efficiency within teams, it also shows that you want information inefficiency between teams. And this certainly surprised me.

Why? Because this implies that weak connections between teams force autonomous teams to solve their “complex problems” first in their own way before adopting solutions from other teams.

Solving complex problems

The research also showed that weak connections between teams cause the moderation of information flow between different teams. As such, all teams maintain their ability to explore unlikely and uncommon solutions to their own problems.

That is why progressive organizations should design their Network of Team structure so that the connections between teams are weak by design.

In this way, teams are protected and empowered to nurture the growth of their own opinions and ideas that can challenge the status quo. They can then find and implement unique solutions to their local problems without them being silenced by members of other teams—or by more familiar (but inferior) solutions developed by other teams.

The decentralization paradox

The previous point shows that even though many would expect that it is most effective to have team members of different teams also be strongly connected with each other, it is actually not. At all.

This creates a decentralization paradox, which may be the article's most important point.

It is a paradox because the research shows that, on the one hand, you should aim for information inefficiency between teams. Yet, on the other hand, you still want to create weak connections between all the teams in the network to create the possibility for information to spread when it is needed.

You still want teams to be able to spread information with other teams to allow them to improve their own performance by doing two things:

  1. By evaluating whether to develop or improve their own solutions to their problems or whether to copy solutions already found by other teams

  2. By observing the popularity and quality of the solutions used by other teams

So, yes, you want teams to find unique solutions to their local problems, but you also do not want to reinvent the wheel constantly.

Do you see the paradox here?

The strength of weak connections

Naturally, this leads us to the next question: how strong should the weak connections between teams be?

To be honest, we do not know the answer to this question yet. What we do know is how radically decentralized companies like Buurtzorg, Haier, Viisi, and NER Group have solved the paradox in practice.

Want to learn more about how they did just that? You’re in luck: check out the courses at our Academy, where we break it all down in full detail.

Written by Joost Minnaar
Joost Minnaar
Co-founder Corporate Rebels. My daily focus is on research, writing, and anything else related to making work more fun.
Read more
Apr 29, 2023
Scaling Up with Amoeba Management: The Inspiring Story of Kazuo Inamori
Joost Minnaar Written by Joost Minnaar
This month, I immersed myself in the story of Kazuo Inamori. The tale of how he founded and scaled Kyocera into a multinational is both…
Read more
Apr 05, 2023
4 Key Ways to Facilitate Knowledge Sharing in a Highly Decentralized Organization
Pim de Morree Written by Pim de Morree
A few weeks ago, we finally had the lovely opportunity to visit a pioneering firm that's been on our Bucket List for quite some time. And…
Read more
Mar 25, 2023
Revolutionizing Hierarchy: How Community-Led Practices are Disrupting Line Management
Perttu Salovaara Written by Perttu Salovaara
Instead of self-management, Columbia Road, the digital sales agency based in Finland, replaces traditional hierarchy with community-led…
Read more
Jan 14, 2023
The Rise of Autonomous Organizations: The End of the Middle Manager?
Joost Minnaar Written by Joost Minnaar
For our latest "Bucket List" tour, we traveled all the way to the other side of the world—specifically, Japan. We toured the country for…
Read more
Nov 23, 2022
When the Agile Approach Just Isn’t Enough
Grzegorz Kuczynski Written by Grzegorz Kuczynski
This is a story about a company with 400+ people searching for their ultimate organizational design, moving beyond agile approaches into a…
Read more
Aug 08, 2020
Solve Communication Complexity With Networks Of Small Teams
Joost Minnaar Written by Joost Minnaar
Work is solving other people’s problems. Most progressive companies on our Bucket List think they do that best when structured as networks…
Read more
Read all articles