What AI will do to corporate hierarchies – Thomas Malone

Thomas W. Malone is the Patrick J. McGovern (1959) Professor of Management, a Professor of Information Technology

From The Wall Street Journal 

Ask people about artificial intelligence, and the discussion will most often turn to jobs: which ones will be eliminated and which ones will be created.

But regardless of what happens to the number of jobs, there’s another question that is less often discussed but crucial for maximizing both productivity and employee morale: How is AI likely to change the structure of business hierarchies themselves?

The obvious answer may be that the management structure is likely to get more centralized and rigid. After all, AI will help managers track more detailed data about everything their subordinates are doing, which should make it easier—and more inviting—to exercise stricter controls.

This will no doubt be true in some cases. But look more closely, and I believe the opposite is much more likely to happen in many cases. That’s because when AI does the routine tasks, much of the remaining nonroutine work is likely to be done in loose “adhocracies,” ever-shifting groups of people with the combinations of skills needed for whatever problems arise.

Consider that in a traditional hierarchy—such as a factory—large numbers of people are

needed to do the core work of the organization: operating machines and doing the other tasks that machines can’t do. To coordinate the work of all these people, you usually need layers of managers in centralized hierarchies to make sure the people are doing their jobs according to a standard set of rules. In other words, a bureaucracy.

For example, imagine a traditional automobile factory without much automation. Executives and engineers decide on the product design. Then lots of people are needed in the factory to do all the routine work of cutting and painting metal, assembling parts and checking quality. Several levels of factory managers are needed to be sure the people are present, properly trained and doing their work the right way. This form of hierarchical management for large groups of people doing routine work has worked well for centuries.

But AI dramatically changes this picture. Robots already do many parts of the routine physical work that used to be done by people, and in the not-too-distant future, it’s plausible to imagine robots doing almost all of it. The job of the people is becoming primarily one of designing the new vehicles and production processes, repairing the machines when something goes wrong, and dealing with any other problems that occur during daily operations.

Worker freedom

It would be silly to try to manage the people who do this nonroutine work in the same way traditional factory workers were managed. Like workers in consulting firms, research organizations and innovative engineering groups, these nonroutine workers often know better than their managers what needs to be done and how to do it, so they need a great deal of freedom in how they do their work.

That could mean, for instance, that they need to work with a different group of colleagues to solve each different problem that arises. Fixing, say, a particular machine breakdown might involve electricians and mechanical engineers, while eliminating a frequent defect might require a materials scientist and an operations researcher. Any given employee might work on several projects at the same time, and the mix of projects would be constantly changing.

As long ago as 1970, futurist Alvin Toffler made a similar observation. “Far from fastening the grip of bureaucracy on civilization more tightly than before,” he said, “automation leads to its overthrow.” And Toffler popularized the term “adhocracies” for the looser, less hierarchical organizations that are likely to replace many hierarchies.

In a sense, AI is just one more wave of the kinds of automation Toffler was describing. In online retailing, for example, computers already do most of the actual selling, AI algorithms will increasingly automate pricing decisions, and robots will do much of the shipping. Or take accountants preparing corporate tax returns: The numerical calculations are already automated, and more and more of the judgments about how to apply tax law will be automated over time. And in the mortgage-approval process, most of the work that is done by humans today is likely to be automated with AI and other computational tools in the future.

Read the full post at The Wall Street Journal.

Thomas W. Malone is the Patrick J. McGovern (1959) Professor of Management at the MIT Sloan School of Management and the founding director of the MIT Center for Collective Intelligence. At MIT, he is also a Professor of Information Technology and a Professor of Work and Organizational Studies. 

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