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What the King of France and a Fortune 500 CEO Have in Common

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By Trevor Madigan, CEO of The Vision Lab

What do Louis XIV and a Fortune 500 CEO have in common?

For most of the 20th century, it was their style of management.

Louis XIV was a famous autocrat--by forcing all the nobles to move to his opulent palace at Versailles, he ensured that no one could make a decision about government without first going through him.

Likewise, the advance of industrialization bred a fascination with top-down managerial control. Frederick Taylor's system of "scientific management" sought to tweak and optimize workers' tiniest motions on the assembly line. Automaker Henry Ford famously extended his control outside of the factory, hiring agents to ensure his workers' home lives were arranged according to Ford's rules. These innovations would have been quite attractive to Louis XIV, who famously separated his morning toilette into dozens of separate motions, each overseen by a separate courtier.

But in the 21st century, just as at the end of the 18th, a revolution has arrived. New research is bringing the wisdom of top-down management into question.

The "French Revolution" of the modern economy: there's no such thing as a boss

Counterintuitively, it seems that management is more effective when it loosens, rather than tightens, control. Since the early 2000's, a burgeoning body of research on shared leadership has found that a variety of groups, from Department of Transportation road maintenance teams to airline cabin crews, perform better when leadership roles are distributed among team members rather than concentrated in a single person. A joint 2011 study by the University of Iowa and Texas A&M University found that self-managed teams outperformed their more hierarchical counterparts, provided that adequate incentives were in place.

This isn't just a newly discovered facet of human psychology. It's the result of a wholesale transformation of the economy itself. In a recent article in McKinsey Quarterly, Oxford professor Eric Beinhocker and entrepreneur Nick Hanauer compare today's economy to an ecosystem, like a lake or forest--"a complex, dynamic, open, and nonlinear system" whose behavior can't be explained by the deterministic rules of neoclassical economics. A new paradigm is needed for this economy, one that does away with rigid, Louis XIV-style thinking.

But really, companies--like countries--still need leaders.

Every time a city doubles in size, its rate of innovation increases by as much as 15%. But similar advantages don't redound to large companies--research shows that businesses often become less productive as they grow in size. That's no surprise: corporate bureaucracy is designed to maximize efficiency, not encourage employees to take risks. It's the opposite of the fluid ecosystem of opportunities that exists in modern urban communities.

How to make a large company more like a city? One possible route is getting rid of bosses completely. The online shoe company Zappos, for example, has instituted a "holacracy," where authority is delegated to teams and roles instead of to managers. The startup investment platform AngelList structures its organization as a collection of one-person start-ups: each employee is encouraged to independently design and execute her project as an entrepreneur.

This approach isn't popular with everyone. Axing management entirely is too extreme for most companies--and many employees. For example, when Zappos offered a severance package to any employees that wanted to leave before it instituted the holacracy, 14 percent took the company up on its offer. It's also not an approach that works well for larger companies. (Zappos, at 1,500 employees, is the largest organization ever to attempt a holacracy.) Besides, research has shown that though a rigid hierarchy is harmful, having some defined leadership can improve information-sharing and increase productivity overall.

So how can companies get the advantages of a looser structure and flatter hierarchy--while still keeping leaders in place?

Better feedback mechanisms flatten hierarchy.

One reason large, hierarchical organizations lose out: the group of people making decisions is--paradoxically--smaller. As the workforce expands, decisionmaking gets centralized in the hands of a few managers or executives. This is a mistake, since a large company's size, in the right situation, can actually be a strength. Most people have heard of the concept of the wisdom of the crowd--the idea that a group of many will often outperform a single expert. Research has shown that this effect is stronger when members of a group are more diverse and don't meet face-to-face--both characteristics of the "crowd" of employees a large company.

But harnessing this advantage is difficult. You can hardly gather all the employees of IBM around a conference table to chat. And most quantitative, easily scalable methods for collecting feedback from a large group--like surveys--draw from a set list of responses. These restrictive methods capture very little of the nuance of actual human communication. Imagine a version of Wikipedia created by picking options from a drop-down menu. It would hardly be the repository of complex information that it is today.

Luckily, new technology is enabling more open-ended crowdsourcing methods that still allow quantification. A humorous example of this is Kittenwar, a website that asks users to pick the cutest of two kittens--then another pair, and another, and so on. This is what researchers Matthew Salganick and Karen E. C. Levy call a "pairwise wiki survey"--and it's an extremely effective method for extracting complex information in a quantifiable way. The power of crowdsourcing methods like the one that Kittenwar uses is that they are open-ended, but still produce quantitative data that can be systematically analyzed. Simple inputs produce a complex set of data. It's a Wikipedia built by clicks.

The future of government: a crowdsourced court

Fittingly, this new phase of crowdsourcing may have its greatest impact in the same arena as Louis XIV did: national government.

Governments are already using crowdsourcing to engage their constituencies in collaborative decisions, beyond simply voting once a year. The Defense Advanced Research Projects Agency has crowdsourced designs for new combat vehicles; in fact, the federal government as a whole ran more than 85 crowdsourced prize competitions in 2013 alone. When New Zealand's government decided to consider replacing its old, colonial flag, it asked constituents to upload designs for the new flag--without any screening whatsoever.

But newer, more sophisticated models for gathering feedback from crowds could kick this trend into high gear. A recent World Bank study argues that crowdsourcing through mobile phones could be key to building civic participation in fragile states such as Libya, Pakistan, and Kenya. By allowing citizens to directly influence policy outcomes, the authors write, this kind of crowdsourcing "theoretically provides more direct means to effect change than do periodic elections."

With the help of new crowdsourcing technologies, we may be able to do away with the "L'etat, c'est moi" model--in business and in government--once and for all.

With additional research by Liz Lagerfeld of Hippo Reads.

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