Impact of Hierarchical Structures

How are modern public companies structured? Quality data on corporate hierarchy has been scarce and is rarely disclosed by firms. In new work with Xavier Giroud, we find that US public firms have ~10 hierarchical layers on average. Using 7M employee resumes, we find among 3,100 US public firms, hierarchical structures (i.e., layers) reveal quite a lot about productivity, firm human capital, innovation, costs, and stock performance. Paper here: https://lnkd.in/g-ghARpq More hierarchical layers correlate with: - higher firm profits - workers at firms with more layers tend to stay at their firms longer and less likely to hire externally - CEOs are paid more at more hierarchical firms, even controlling for firm size - Patenting rates are higher in more hierarchical firms - SG&A and wages are higher, while revenue per employee is lower. Hierarchies come with a cost - Stock volatility and business risk proxies are negatively correlated with the number of layers The data allows us to explore the impact of AI, which theories, such as the knowledge hierarchy framework, predict firms should flatten. We find just that happened. Moreover, during the increased complexity of the COVID-19 pandemic, pharma firms increased their hierarchical layers. Overall, the paper shows that hierarchies are measurable and they matter for a wide variety of corporate decisions. We believe the number of hierarchical layers can become an important variable for corporate finance researchers, and there are many unanswered questions about hierarchies that future researchers can answer. Can't wait to release the data once we find a journal. Figures and tables follow:

After my second postdoc in a specialized area of mathematics, I hit a wall. Despite my passion and publications, the academic job market felt impossible to crack. I decided to pivot to data science, but a question lingered: Was it just me, or was I playing a different game? Instead of just moving on, I decided to turn my analytical skills inward on the system I was leaving. I asked: "Could data explain the different 'rules of the game' for a career in a popular vs. a niche scientific field?" So, I launched a personal deep-dive. I analyzed 121,391 math papers, built nearly 2,000 collaboration networks, and ran a full statistical analysis. The data revealed a stunningly clear pattern: 🔹 Niche Fields (like mine) are hierarchical. Success depends on aligning with a small core of central experts. They are "guilds." 🔸 Popular Fields are modular. They are fragmented "schools of thought," where success often requires navigating a more complex, decentralized landscape. 🔄 Even more surprising: the data revealed a "constraint reversal"--researchers in popular fields actually face MORE structural constraints than those in niche fields when you account for network size, suggesting that breaking into boundary-spanning roles in modular fields requires significant career capital. The data-driven insight was startling: my strategy of trying to bridge my niche work to other "hot topics" was a classic move for a modular field, but likely a career mistake in the hierarchical, expert-driven environment I was in. This project became my bridge to data science. It culminated in a new paper, "Modular versus Hierarchical: A Structural Signature of Topic Popularity in Mathematical Research," and has taught me that the most powerful data projects are often the ones that start with a genuine, personal question. I'm incredibly proud to share the final paper, now live on arXiv. The source code, data, and reproducible analysis pipeline for this study are publicly available in my GitHub repository: 📄 Paper: https://lnkd.in/e3VMa2kX 🛠️ Codebase: https://lnkd.in/ewBp7tdV #DataScience #CareerPivot #PhDLife #Academia #NetworkScience #PersonalGrowth #DataStorytelling

The Hierarchy Illusion: A Network Reality Had a fascinating conversation yesterday about corporate hierarchies being dead. Initially, I dismissed it as another "future of work" hot take. But the more I reflected, the more it resonated with patterns we're seeing in workforce communication. Recent corporate reputation events tell a compelling story. They weren't triggered by C-suite announcements or carefully crafted PR statements. Instead, single voices created seismic shifts in reputation and public perception. This isn't just about whistleblowers or social media – it's about how information actually flows in modern organisations. The traditional cascade model – where messages flow from top to bottom through carefully managed layers – represents how we wish communication worked, not how it actually works. Our data shows something far more interesting: information moves through networks, finding paths of resonance and relevance regardless of hierarchical structures. What's particularly fascinating is that successful communication patterns mirror neural networks rather than organisational charts. Messages gain traction through authenticity and relevance, not authority. While we're still measuring success through cascade completion rates and read receipts, the real impact happens in the spaces between – in the informal networks where information flows naturally. This isn't about abandoning structure or embracing chaos. It's about recognising reality. The most effective workforce communication will come from understanding and working with these network patterns, not fighting against them.

In today’s business world, authority isn’t enough. People no longer follow titles they follow behaviors. And one of the most overlooked factors eroding leadership impact? Ego doesn’t always show up loudly it often appears in subtle ways: resisting feedback, avoiding humility, or staying detached from the front lines. Yet the cost is real, and the data makes it clear... Harvard Business Review reports that companies embracing service-based leadership models grow at a rate 2.3 times faster than their counterparts who follow traditional, hierarchical models... 3 Counterintuitive Habits of High-Impact Servant Leaders 1. The Invisible Authority Test Leadership effectiveness is often measured in performance reviews and quarterly results, but one of the simplest predictors of long-term impact lies in who willingly takes initiative in small, service-based moments. Whether it’s volunteering to take notes during a team meeting, cleaning the whiteboard after a strategy session, or offering to grab coffee for a junior team member 2. The Power Flip Framework Inverting traditional power dynamics can significantly enhance leadership adaptability and decision-making quality. By regularly inviting feedback from the most junior team members, encouraging constructive challenges to executive decisions, and offering assistants or support staff a voice in operational prioritization, leaders embed humility and co-ownership into their culture. 3. The Proximity Principle High-impact leaders consistently spend a measurable portion of their time engaging in tasks that fall well outside their executive remit. This may include taking customer support calls, shadowing frontline sales reps, or participating in logistical operations. Far from being symbolic, this practice sends a consistent cultural message: leadership is about contribution, not hierarchy. According to Deloitte, teams led by such hands-on leaders report 17% higher engagement levels, a key driver of both innovation and retention. In a world where the gap between leaders and teams is widening, the most effective leaders are not those who climb higher, but those who choose to go deeper. Because in 2025 and beyond, depth not dominance is the true measure of leadership relevance.

Hierarchy is killing your company's potential, and I learned this the hard way. In a previous role at a rigid organization, I faced a frustrating barrier: I couldn’t even speak to my skip-level leader due to the strict hierarchy. Ideas were lost in layers of bureaucracy, innovation was stifled, and talent left in droves. A flat organizational structure, on the other hand, can significantly boost your company’s performance. Here’s how to make it happen: 1. Eliminate unnecessary management layers: ↳Trim the fat and streamline decision-making. 2. Empower employees at all levels: ↳Trust your team to make decisions. 3. Foster open communication channels: ↳Break down silos and encourage collaboration. 4. Implement cross-functional teams: ↳Mix skills and perspectives for better results. 5. Focus on skills, not titles: ↳Value expertise over hierarchical position. 6. Create a culture of accountability: ↳Ensure everyone owns their work and outcomes. 7. Encourage bottom-up innovation: ↳Recognize that great ideas can come from anywhere. Flat organizations thrive in today’s world—they’re agile, innovative, and employee-centric. Don’t let hierarchy hold you back.

Dear Friends, Greetings. Are You a Good Match? We are used to companies ensuring a good match between the requirements of the job and skills that persons have while selecting employees. Some companies go a step further and seek a match between the person’s values and their own. Now the “done” thing is matching the person’s mission with the company’s purpose. Professors Markus Reitzig and Kathrin Heiss suggest that companies should have yet another match-making criterion: person-structure match (People Follow Structure: How Less Hierarchy Changes the Workforce. MIT Sloan Management Review, Summer, 2025 Issue). They say “among the most dramatic transformations observed in the corporate landscape these days are moves from traditional, hierarchical organizing to working with flatter structures featuring fewer layers of command. These structures offer more autonomy but also impose burdens of self-organization on employees.” In an empirical study using data from more than 5,500 companies in the U.S. financial services industry that had significantly de-layered their hierarchies from 2000 to 2022, they find that, on average, workforces feature a higher share of conscientious, agreeable, and open individuals (three of the big five personality traits that many HR professionals use to assess their employees; the other two being extraversion and neuroticism) a year after the company has de-layered its structure. As to why so, the authors explain “when companies reduce the depth of their hierarchies, the remaining managers’ spans of control widen, and as a result they can no longer micromanage their direct subordinates but must delegate more decision-making to workers. Those employees should then be able to organize their own work to a greater degree. Individuals who particularly enjoy this novel autonomy typically rank high on conscientiousness and show a high need for achievement." “At the same time, agreeable individuals help ensure that self-organizing means including people who are willing to perform supportive tasks on behalf of everyone.” The most interesting and important finding, however, “is the overall qualification level of the workforce neither rises or falls as a result of the restructuring. There is not necessarily one best structure that encourages an organization’s most-skilled workers to stay." The implications for organizations that are considering flatter structures: ·        If indeed a flatter structure would lead to better performance, then changes to Style and Systems have to be made ·        In India, where promotions play a very large role in motivation, a flatter structure may increase employee turnover ·        Employees, in our context, still seek plenty of guidance and hand-holding to get work done. A flatter structure would provide fewer such opportunities and performance could suffer. Organizations want to reduce employee turnover and attract sought-after talent. Any restructuring effort should consider these wants too.

This PhD dissertation from Anthony M. R. may interest people – it explored how bureaucratic structures influence or hamper adaptive responses of emergency management leaders, drawing on complex adaptive systems. Some findings: ·        “Traditional bureaucratic structures can impede an emergency management leader's ability to balance formal organizational structure and adaptive behavior required to achieve successful operational outcomes in crises” ·        “Emergency management organizations, characterized by rigid hierarchical, bureaucratic structures focused on control, negatively influence emergency management leader's ability to leverage collaborative networks” ·        “No plan survives first contact with the enemy, and in a catastrophic incident, it’s the same, you want to have the flexibility within your systems to be able to go off-script, but you want to be able to do it in a trusted environment” ·        “bureaucratic organizational structural characteristics can limit organizational adaptability and influence successful response outcomes during a catastrophic incident” ·        “When faced with bureaucratic operational constraints, participants described how emergency management leader decisiveness and processes adaptation were critical skills needed to achieve required outcomes in a catastrophic incident” ·        “the organization's size influenced the degree of bureaucracy. The larger the organization, the greater the bureaucratic influence” ·        “effective response operations require emergency management leaders to navigate layers of bureaucracy in a catastrophic incident” ·        “routine emergencies were primarily addressed at the local first responder level following SOPs ·        with organic resources .. because of the limited effects on societal systems, routine emergencies are mitigated through existing plans or by local first responders following SOPs” ·        In contrast, in a catastrophic incident, “organizational structure is forced to adapt to address the overwhelming effects on the emergency management system. This organizational adaptation is manifested by establishing an emergency operations center, modifying plans, or integrating additional external resources” ·        “Emergency management leaders in catastrophic incidents need to exercise adaptive responses and operational flexibility” ·        “the structure provided by formalized processes within bureaucratic structures provided a foundation for organizational adaptation” and a “framework established by codified plans and procedures provided a baseline to adapt from to meet the novel challenges resulting from the effects of a catastrophic incident” ** Part 2 and link in comments ** Ref: Riscica, Anthony M., "The Influence of Bureaucratic Structures on Emergency Management Leaders’ Adaptive Responses" (2022). Walden Dissertations and Doctoral Studies. 13092.