The Decentralisation Paradox Of Flat Companies

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.

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.