Denkwerkstatt // Lateral Management

Principle of success: Lateral Management

Digitalization will change economy and society with far-reaching consequences for organizations, managers and people in a similar dramatical way as it did electrification a hundred years ago. Already, many simple activities are executed by machines. Digitalization will not only change production, but also the products itself, distribution channels, marketing, and markets. Existing business models will be destroyed in
short-term. The way we work and how we live will be changed.

Already 100 years ago the legendary economist Joseph Schumpeter analyzed such break-overs. Surprisingly, he found out that not the inventions but new organization of work are the real driver of changes. The real adding value occurs by a new way of cooperation.

As Leadership and cooperation in the 20th century were organized hierarchical, in our digital future they will be characterized by cooperation on eye-level.

Roland Geschwill and Martina Nieswandt analyzed successful organizations, that follow new paths to let middle and upper management work more freely and self-responsible, and to include employees largely into decision-making processes.

For management-boards does this mean to let go a mentality that is confident to master everything by their own. Digitalization of economy means an increase of complexity. However, complexity can only be managed by many and not from single individuals. Therefore, it is vital to organize leadership, decision-making, and cooperation in a new manner  Only by doing this, upcoming challenges can be mastered. The basics for another way of management were already discussed by different keen thinker as Max Weber, Peter Drucker, Niklas Luhmann, Warren Bennis and Harris Owen. Couraged firms use lateral management to fundamentally rework the culture of existing organizations.

What does that mean for us and our working environment? Which chances will the process of digitalization offer to organizations, people and managers? Denkwerkstatt für Manager dealed with these questions and already implemented at different organizations new ways of leading, deciding and cooperating.

Lateral leading determines lateral management

Digitalisation does not only change business models - it also demands a new type of management, decision-making and co-operation. Dr. Roland Geschwill explains why management on equal terms alone is not sufficient and what lateral management is.

The world of work is being made increasingly individual and flexible. Furthermore, the demands of management and employees for information, communication, transparency and participation are growing year-on-year. No wonder lateral management, i.e. management on equal terms,  is the trend. However, lateral management alone is not sufficient. Companies aspiring to be successful in the age of digitalisation should use lateral management as a success principle.

Lateral management includes aspects of communicative work with people essentially. The focus is on guided conversation, motivating people, giving and receiving feedback as well as convincing others. However, management includes responsibilities beyond mere communication and managing people. Lateral management is therefore considerably more complex than lateral leading. In addition to the way of leading it also includes decision-making and co-operation.

 Basic conditions have to change

 The difference becomes clear when it comes to decision-making. For a long time managements alone decided on important issues. With lateral management employees in subordinate positions are also empowered to make decisions independently. Flexibility of work has a counterpart here in the diversity of decisions - decisions made by a large number of people instead of a few individuals.

Successful lateral organisations such as DM markets, AOK Baden-Württemberg or Gore-Tex are not only committed to a lateral style of management on equal terms but have also established the principle of independent decision-making in the organisation as such. In these companies managers on lower levels are allowed to take decisions independently. This shows that the basic conditions for lateral management need to be supported by a lateral culture in the organisation because otherwise the lateral interactions will come to nothing.

After all, managing without power has its limits for the individual. Those who manage in that way will usually be dealing with people who hold substantial positions in power hierarchies. And then, psychologically speaking, their position will frequently be one of impotence. In this case, of the three elements understanding, power and trust, only understanding and trust will remain. In a concrete case this will seem like the principle of hope. Horizontality as the basis for partnership-based communication will not be guaranteed because the basic conditions are characterised by vertical hierarchy.

The aim of lateral management is to create basic conditions in organisations that really make horizontality possible. In sociological terminology this calls for a change in the organisational context. Consequentially, it is the responsibility of management to establish the basic conditions for lateral management in the organisation on the basis of a binding commitment.  Therefore, management must create structures that actually facilitate lateral management. This is the only way to ensure that horizontality in organisations becomes profitable through fast and efficient management, decision-making and co-operation.

 Cultural transformation

 When managed correctly, the transformation of power hierarchies into lateral organisations only takes 2 to 3 years. In the beginning the top management has to learn to let go and trust the other levels of management. Someone who trusts will sometimes have to come to terms with disappointments but will have more and more positive experiences over the course of time. A constructive approach to setbacks is responsible for a large share of the success in cultural transformation. In the end it means giving up power. Without a commitment from top management to relinquish power and to trust, middle management will not engage in a lateral culture.

 When lateral management is introduced, those in middle management are faced with the need to take decisions themselves which would previously have been referred to a higher level. This involves learning new things as well as a new type of relationship with colleagues and staff. Moreover, transformation always starts with the individual and has to be practised.

 A further necessity in the process of cultural transformation is that new decision structures have to be designed in a formal way. A successful example in this connection is that of the DM markets. Every branch manager in any of the markets of which there are now more than 3,000 can to a large extent take decisions autonomously concerning human resources, product ranges and shop design in a so-called consultative individual decision without reference to headquarters in Karlsruhe. However, they have two consult with other branches and headquarters before making the decision. Decision structures such as those at DM need to be defined and implemented when lateral management is first introduced. In the case of start-ups this transformation process is easier than in longstanding companies.

 Consequently, lateral management has a lot to do with organisational development and requires more than the introduction of the new lateral leadership style. A one-dimensional implementation of lateral management would therefore fail. Cultural transformation is essential.


Suggested reading

Roland Geschwill / Martina Nieswandt
Laterales Management
Das Erfolgsprinzip für Unternehmen im digitalen Zeitalter

Springer Gabler 2016
270 pages
ISBN 978-3-658-111-3-11
€ 24.99 (D)
Also available as an ebook

The authors

Together with Dr. Martina Nieswandt, Dr. Roland Geschwill is the founder and director of the Denkwerkstatt für Manager, a  think tank for managers. As consultants, management trainers and coaches they have been developing individual strategies, concepts and measures since 1986 in the areas of digitalisation, corporate strategy, management and team development, first-mover projects, potential analysis, cultural change and facilitation. Their work is characterised by sound, creative ideas which open up new perspectives. Furthermore, the Denkwerkstatt für Manager team has developed effective instruments for managers to measure and prove the success of their work. They have already published the following books: “Employer Branding“ (with Florian Schuhmacher), "Der Rhythmus der Innovation" as well as “Fast Cultural Change. The Role and the Influence of Middle Management”.