Why Managers Matter Book Summary - Why Managers Matter Book explained in key points
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Why Managers Matter summary

Nicolai J. Foss & Peter G. Klein

The Perils of the Bossless Company

3.5 (177 ratings)
19 mins

Brief summary

'Why Managers Matter' by Nicolai J. Foss and Peter G. Klein highlights the essential role of management in creating and sustaining successful organizations. It challenges the common misconception that managers are merely 'overhead' and presents strong evidence to support the idea that effective management is critical to a company's success.

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    Why Managers Matter
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    What does it mean to have a hierarchical or bossless structure?

    When you think of hierarchy, what do you picture? Feudal overlords making life miserable for peasants? Overpaid CEOs? Layers of middle management that slow down all communications in a company?

    These are examples of hierarchy, to be sure. But they’re extreme examples of ineffective implementation of hierarchy.

    According to Foss and Klein, hierarchy is a response to the difficulties of building a complex organization that involves many people. Hierarchy is needed to effectively manage relationships and cooperation among workers and to keep people’s varied motives and interests aligned.

    Hierarchy isn’t as simple as giving certain people command and control over others. Although it is giving power over others to some people, the purpose and extent of that power must be carefully defined.

    Hierarchy establishes procedures and policies. It gives people a blueprint for managing the complexities of working together and solving problems or disputes. A satisfactorily arranged hierarchy involves not just power distribution but also provides structural support for a company’s operations.

    So if that’s what a standard hierarchy model looks like, then what are the key aspects of a bossless company? This organizational style is also known as a flat structure or a leaderless company. Taking away layers of management within a company is known as decentralizing, and it’s a key aspect of a flat organizational structure.

    At its most basic, this structure sets every employee equal to every other employee. Decisions are made using consensus or a vote. No one has any authority over anyone but themselves, and everyone works together equally to both set and achieve the company’s goals.

    At its most extreme, a flat organization might not even have any job titles or specific responsibilities attached to any one person. Everyone is equally responsible for completing tasks as they see fit in order to achieve the company’s goals, which would, theoretically, also be set by everyone in agreement with everyone else.

    Proponents of the bossless structure argue the bad outweighs the good when considering hierarchy’s effects. But is that really true? In the next section, we’ll explore the benefits and drawbacks of a hierarchical business structure.

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    What is Why Managers Matter about?

    Why Managers Matter (2022) outlines the benefits and drawbacks of different company organizational styles. It explains when and why a company might prefer hierarchies vs. a bossless environment depending on its workflows.

    Who should read Why Managers Matter?

    • Business executives deciding on the best structure for their companies
    • Scholars and leaders comparing hierarchical structures and flat organizations
    • Anyone interested in organizational structure and managerial strategy

    About the Author

    Nicolai J. Foss and Peter G. Klein are professors of strategy and entrepreneurship, respectively. Both have completed extensive research and writings on business strategy and organization studies. They’ve been collaborating for over 20 years and are also coauthors of Organizing Entrepreneurial Judgment and Austrian Perspectives on Entrepreneurship, Strategy, and Organization.

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