Why it’s dangerous to have a company without positions, according to the pioneers of Google’s Startup Accelerator

Many entrepreneurs are inspired by romantic ideas of how wonderful startup life can be, and are looking for a way out of the typical corporate culture. They dream of getting rid of bureaucracy, hierarchy, irrelevant policies, unfair inequality, and all the other corporate annoyances. The appeal to bring it all back is especially strong for innovators who see themselves as maverick disruptors. If you believe it’s possible to reinvent a product, service, or industry, it’s easy to extend that thinking to reinventing the way people are treated. Many business processes can seem as antiquated as a VHS machine in the broadcast age.

It’s relatively easy to be a management maverick in the early days of a startup, when a handful of co-founders and early hires share the same passion, goals, and energy. You can throw away all those business processes and run as an equal, non-bureaucratic, high-performance team. And you can congratulate yourself for being a management disruptor and a product or service disruptor.

But sooner than you think, your anti-corporate vibe will be hard to sustain. If you insist on clinging to maverick leadership as the startup grows, the result can be a dysfunctional and unhealthy culture, which can lead to deep conflicts between the team’s founders and the team.

It’s no wonder that maverick founders hate the very idea of ​​dominance. What could be a bigger drag on creativity and courage than a chain of command, which requires approval from the top before anything can be done? Hierarchy seems to produce bureaucracy. Senior leaders often lose touch with the realities of the business and the needs of users or customers. Decision-making slows down, and teams get stuck in a cycle of over-explanation to remove blame and paperwork to keep managers informed. Who would want their exciting new start to be this kind of organization?

One of today’s leading thinkers on organizational design, INSEAD’s Phanish Puranam, has studied the unspoken reasons why governance is unpopular. Hierarchy opposes the idea of ​​equality that everyone is equal, and it means that some people deserve more power and autonomy than others. It forces people into narrow and specialized roles, which creates deep dissatisfaction among those who value diversity in their work. It forces managers to create reporting systems to coordinate and coordinate team efforts, but people see these management reports as boring and red tape, not as a valuable tool. And positions force managers to do intangible work that is difficult to measure, compared to the more visible and measurable work of writing lines of code, closing sales, or completing projects. Tangible outputs are seen more and more as important, so non-managers start to resent them as unnecessary.

People often conflate leadership with bureaucracy—for good reason, because they tend to go hand in hand. All other things being equal, a company of fifty people with a management layer will have more meetings, documents, and approval processes than a company of five. However, it is possible to reap the benefits of good governance to help a growing startup achieve its goals without suffering from administrative slowdowns. Maverick managers run into trouble when they block the rule in the hope of reducing the rule but instead create chaos.

In the early days of Google, Larry Page and Sergey Brin piloted an almost flat organization, eliminating engineering managers and having a few hundred people report directly to one VP of engineering, Wayne Rosing. Their goal was to break down barriers to the rapid development of ideas and replicate the college environment they can enjoy in grad school. But this test of maverick management lasted only a few months. Too many people went directly to founders for minutia, such as questions about expense reports and minor interpersonal disputes. Projects that needed resources did not get them, while the sale of projects became a problem. Engineers were eager for feedback and guidance in their career development. Soon everyone noticed that at least others governance helps.

Other maverick startups like Valve, Zappos, GitHub, Medium, and Buffer have also experimented with flat organizations. Tony Hsieh, the founder of Zappos, used the radical self-management fad known as “holacracy” in 2014, to widespread outrage. Holacracy delegates authority and decision-making in surprising ways: Employees raise their hands to do a task, then freely assemble a fully empowered task force to make decisions. Proponents of Holacracy call it self-management, but its critics call it under-management. Two years after accepting the plan, Hsieh gave everyone an ultimatum to either commit to holiness or take a severance package; a third of the 1,500 workers quit. (Ironically, that move was an extraordinary exercise of power and authority.)

Within three years, Zappos was shedding sanctity and re-creating a certain amount of dominance. They found that as the company continued to grow, teams craved rules and guidance in the face of what felt like chaos—especially in critical business functions like budgeting and setting priorities. Self-managed teams also spend more time negotiating, instead of having a manager making quick decisions to keep everyone moving forward. John Bunch, who co-authored the release of Holocracy, recounts that business metrics began to falter, and the company’s reputation for exceptional customer service was in jeopardy.

The evidence is clear that a healthy hierarchy with effective managers can help reduce operational ambiguity. It can help guide a group toward shared goals, resolve conflicts, accelerate progress, and ensure that people’s development and well-being are taken care of. Columbia professor Adam Galinsky has shown in several studies that if you need a collaborative team to solve complex problems, you’re better off having a boss in the mix than a group of equal friends.

Similarly, Saerom Lee of Wharton studied the effect of rankings on a large sample of video game studios responsible for more than 190,000 games. He found that every additional layer of management was associated with about a 1% drop in customer ratings for the studio’s games, caused by a reduction in diversity of opinion when managers split large teams into smaller teams. On the other hand, adding one additional layer of management is associated with a 14% increase in global sales, which is caused by a reduction in pointless testing and ineffective conflicts. That’s a huge gain in commercial success in return for a very small drop in perceived product quality.

Hierarchy should not be rooted in bureaucracy. Used within reasonable limits, it can add speed and clarity to your team, driving better results. Startups don’t need to fear dominance.

Excerpted from the book The Bonfire Moment: Bring Your Team Together to Solve the Toughest Problems Startups Faceby Martin Gonzalez and Joshua Yellin. Copyright © 2024 by Martin Gonzalez and Joshua Yellin. Reprinted courtesy of Harper Business, HarperCollins Publishers.