We're in the midst of a transformation in how businesses are organized. Typical corporate hierarchies are starting to look overrated, and changes in coordination technology have the power to make work and innovation even more democratic. However, according to MIT organizational theorist Thomas Malone, most of us are still victims of a centralized mindset, the idea that in order to manage things it’s best to put somebody in charge who gives orders to other people. He urges us to look at the many new ways of organizing that allow more people to have more involvement in decisions--and for better results.

"Most people don't begin to realize how important and how pervasive and, in many cases, how desirable those new ways of organizing are going to be," said Malone, Professor of Management at MIT Sloan and the Founding Director of the MIT Center for Collective Intelligence, in a conversation with MIT Sloan Management Review Editor-in-Chief, Michael S. Hopkins. "At the Center, we are looking at how people and computers can be connected so that collectively they act more intelligently than any one person, group, or computer has acted before." When taken seriously, this question leads to a view of organizational effectiveness that is very different from the prevailing wisdom of the past.

The new paradox of power: Give it to gain it

The most rapidly evolving kinds of "collective intelligence"--a phenomenon where a shared or group intelligence emerges from the collaboration and/or competition of many individuals--are those enabled by the Internet. Wikipedia and YouTube are the best-known examples of collective intelligence. Similarly, InnoCentive is a web community that outsources companies' research problems and invites answers from anyone who wants to contribute, awarding a handful to cash prizes to the best of the bunch. And at MIT, the Climate CoLab uses crowdsourcing to harness the collective intelligence of thousands of people all over the world in an attempt to solve the problems of climate change.

These design patterns presented in technology-enabled collective intelligence is also represented more generally in the shift from traditional hierarchies to flatter organizational structures. For years, pockets of the U.S. military have been slowly taking decisions out of the hands of high-ranking commanders and entrusting them to teams of soldiers, who are told what problems to solve but not how to solve them. And last year, Zappos adopted a controversial flat organizational structure referred to as "holacracy." By order of CEO Tony Hsieh, the company abolished managers, eliminated job titles, denounced its organizational hierarchy and instead adopted a radical new system of self-governance. Automattic, the firm behind WordPress, only employs a couple hundred people, who all work remotely, with a highly autonomous flat management structure. GitHub is another highly successful firm with a similar structure.

Malone's book from 2004, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life, proposed that in an increasingly networked world, strict hierarchies would be less viable. The book also foreshadowed the decentralized “bottom-up” management model that has influenced companies like Zappos.

Another example of collective intelligence at its best is apparent in a different kind of workforce altogether--that of honeybees. As revealed by the research of Thomas Seeley at Cornell University, honeybees select the very best site at least 80% of the time--without the influence of the queen bee. By working together as a unified system, the organization (bee colony) is able to amplify its intelligence well beyond the capacity of any individual member of the group. And they do this with no bosses or workers--with no hierarchy at all.

Louis Rosenberg is CEO of Unanimous A.I., a "swarm intelligence company" that develops technologies for collective intelligence that allow groups to combine their thoughts and feelings in real-time, to answer questions, make decisions, or just have fun. Like Malone, he believes that if there are ways for companies to make smarter decisions, it’s worth understanding them and exploring if new technologies can help us implement such methods.

Rosenberg authored an article on Next Web in which he references the honeybee phenomenon and its influence on "human swarming," a practice of connecting teams through specialized networking software that allow them to form closed-loop systems and tackle problems as a unified intelligence. One such platform modeled after biological swarms is called UNUM, which enables online groups to work in real-time synchrony, collaboratively exploring a decision-space and converging on preferred solutions in a matter of seconds. Real-world testing suggests it has great potential for harnessing collective intelligence.

"I often refer to what I call in my book the paradox of power," says Malone. "That's the idea that sometimes the best way to gain power is to give it away. Linus Torvalds, the developer of the Linux open source operating system, gave power away to thousands of programmers all over the world and was rewarded with a different kind of power. Pierre Omidyar, the founder of eBay, and the CEOs who followed him at that company, gave power away to their customers, and were rewarded with a different kind of power." Read more on MIT Sloan Management Review.

The risks of not-so-wise crowds: Boaty McBoatface

Even a relatively flat organization can have barriers to unleashing their collective intelligence, however. As Malone's research on group intelligence and the measurement of that intelligence shows, some groups are clearly smarter than others. This differentiation can be attributed to a variety of factors, including the degree to which all group members participate equally, social perceptiveness within the group, and the number of women in a group. To learn more about Malone's research, watch his INNOVATION@WORK webinar, Building Better Organizations with Collective Intelligence.

Groups that are less effective include those that operate more like herds--a single individual darts in one direction and the rest of the group follows. This herding tendency is exacerbated by social media and other modern technologies that enable random impulses to go viral. For example, a study out of MIT, Hebrew University of Jerusalem, and NYU shows that if you randomly assign the first vote in an up-voting system like Reddit, that single first opinion will influence the final result by 25%, even if thousands of votes follow. (An author of this report, Sinan Aral, teaches the upcoming Executive Education program Digital Marketing and Social Media Analytics.)

In other words, not all crowds are as wise as we’d like to think. The United Kingdom recently asked the public to help name its new, state-of-the-art polar research ship. As reported on NPR, the UK was seeking an "inspirational name" that exemplifies the "vessel's mission, a historical figure, movement, landmark, or a famous polar explorer or scientist." Alas, the current front-runner in the Internet-based poll, is "Boaty McBoatface." While this is amusing from a news perspective, it does demonstrate the potential risks faced when organizations try to leverage the "wisdom" of crowds. To be fair, the man who coined the front-running name was attempting to be funny and had no idea he'd inspire a such a herd effect.

Where collective intelligence makes sense

In the shift toward the decentralized workplace, Malone says we're likely to see these changes first in the places where the benefits are most impactful. "The benefits of having lots of people make decentralized decisions are that people are more highly motivated, they work harder, they’re often more creative," says Malone. "They’re willing to be more inventive, to try out more things. They're able to be more flexible when they can adapt to the specific situation in which they find themselves rather than having to follow rigid rules sent down from on high that may or may not apply in this particular situation. And often, they just plain like it better."

Those benefits of decentralized decision-making won't be important everywhere. "In, say, certain kinds of semiconductor manufacturing, the biggest benefits come from things like economies of scale, and we may see more centralization to take advantage of that. But in a knowledge-based and innovation-driven economy, in high tech, R&D-oriented industries, the critical factors of business success are often precisely those benefits of decentralized decision making: freedom, flexibility, motivation, creativity."

According to Malone, in cases where a decentralized way of working actually works better, those new companies will have an advantage. They'll grow or be replicated by lots of other similar companies. And eventually, the old companies that haven't figured out how to change themselves will either be acquired or go out of business or belatedly imitate the new ways of doing things.

There is a growing body of evidence that shows that organizations with flat structures outperform those with more traditional hierarchies in most situations. There are other forces at work as well that may make it imperative to test out new, flatter organizational structures. Young employees and millennials, for example, don't respect hierarchy for the sake of itself. They want fast-moving, lean platforms on which to build their work. Technology is also lowering barriers to entry--small, capable teams are creating enormously valuable businesses with seed capital in software and hardware at a fraction of the cost of big company R&D. New experiments have never been easier or cheaper to conduct.

Ask yourself, what are the specific actions you might hope to do in new ways because of collective intelligence? Are you trying to create new products? Are you trying to make decisions faster? Who should be making these decisions? There are now many opportunities for decisions to be made by people not only throughout organizations, but outside of organizations, like customers and suppliers.

Of course, decentralization, communication technologies, and collective intelligence can't and won't take the place of leadership, or even make it less important. These new ways of working will just put more weight on leadership qualities like vision, encouragement, and inclusion.