Top-down hierarchies are typically characterized by command-and-control systems of authority that create harmful stress and internal competition for advancement within organizations. The pervading perception is of “limited room at the top,” where positions of authority become scarce resources. Members withhold or hoard information by focusing competition energy internally rather than externally, creating silos of information and causing the negative stress reflected in absenteeism and higher healthcare costs. Voluntary turnover creates brain drain as creative individuals tire of internal politics and seek more harmonious work environments. “Change management” is an issue, as members’ natural compulsion to provide feedback and insights are squelched by management dictates. The triangular shapes of top-down hierarchies are nonrandom and limited, according to Benoit Mandelbrot, which may explain why top-down organizations typically grow through acquisitions rather than by expanding from within.
In the equations of living systems in Nature, the mathematical constants are both random and scalable, which ensures pattern integrity during evolutionary adaptations. Fractal Organization Theory recognizes an emergent human operating system that is creative, adaptive, healthy, and evolutionary. The qualities of a fractal organization include shared purpose and values that create pattern integrity; universal participation in ideas and solutions for continuous improvement; decision making at functional levels; leadership devoted to employee development as a source of intellectual capital; and competition energy directed outward instead of inward. In fractal organizations, resource allocation is based upon desired outcomes and information is shared efficiently through daily interactions and regular conversations, which generate ideas and enable economical development and delivery of products and services. Relationship development enables the effective flow of information between individuals and among teams. At all scales of a fractal organization, members share information iteratively and make decisions collectively in response to changing conditions.