What is a ‘low power distance’ company, and should you create one?

What is the definition of 'power distance'?

Power distance is a measure of how subordinates and people in power share responsibility. In a high-power distance culture, lower-ranking individuals acknowledge power and defer to it, accepting their ‘place’ in the social strata without questioning authority. There’s a significant conceptual distance between the two groups. The opposite – low power distance – indicates less of a difference in responsibility and more power of the subordinate to question how things are done.

Power distance is a concept originally rooted in anthropology. Cultural studies look at it to comprehend the differences among people with varying levels of power, as well as people's outlook regarding these differences, and the consequential effects of them.

It’s a relevant factor when looking at entire societies and nations, because the stratification of people across various different economic, cultural, ethnic, and demographic causes differences in agency and opportunity to participate in society in a fair way.

In cross-cultural societies, there is a broad spectrum of power distance, going from high to moderate to low. But there’s also a lot of variation between regions, nations and continents in this respect, too. For instance, in a country like Saudi Arabia, there is a high power distance in organizations: the employer and the employee hardly interact with each other except for in critical matters. However, in the United States, many companies display a lower power distance culture, and the employer and employees interact more frequently.

The Power Distance Index (PDI) was created by Dutch psychologist Geert Hofstede, and is a ranked measure of power variations between groups. High power distance societies might have large gaps between wealthy and poor citizens, and a lack of opportunity for social mobility. Others with a smaller power gap might have cultural tendencies towards collectivism over individualism, for example.

Here’s some national differences in PDI, although it’s important to remember that these are based on subjective opinion and the research of a small number of institutions – they’re not definitively ‘true’, but have been ranked by researchers based on multiple different avenues of study.

Cultures with the lowest and highest power distances

High power distance cultures

In this case, every member of the society, institution, company, family etc., has their own well-defined position in the hierarchy, and it needs no further clarification. Here, people with more power are usually the decision-makers and questioning their authority is rare.

Countries highest on the PDI are said to be:

• Malaysia
• Guatemala
• Panama
• Philippines
• Mexico

Low power distance cultures

In these places, members of any society, company, or institution have more equal power. With low power distance, decision-making often requires additional justification amongst members, and hierarchies are either not formally structured, or completely abolished.

Countries lowest on the PDI are said to be:

• Austria
• Israel
• Denmark
• New Zealand
• Ireland.

What is a low power distance culture in business?

There’s a more consultative, democratic relationship between people at varying power positions in low power index cultures. Emotional distance is comparatively small; it’s more likely that there’ll be a friendly relationship between a manager and employee, even if they’re not what you’d call ‘friends’.

Likewise, there is comparatively low unequal power distribution among individuals, and there’s more interdependence on each other within the group. In such cases, you might observe a ‘flat’ management hierarchy or decentralized authority structure. One famous examples of this is the Valve software company – which shows both the advantages and disadvantages of such an organization:

“At Valve there are no job titles and nobody tells you what to work on. Instead all the employees at Valve can see what projects are being worked on and can join whichever project they want. If an employee wants to start their own project then they are responsible for securing funding and building their team. For some this sounds like a dream for others, their worst nightmare.”

During decision-making and goal-setting for the company, employees are more likely to have a say in things. As a result, there is a more extensive distribution of decision-making responsibility throughout the entire organization.

You’re also more likely to find an "open door" policy in companies like these. With an open-door policy, the ones in high-power positions are more open to listening to the opinions of subordinates, to the point of being approachable enough to leave their office door open.

This kind of business culture is more likely to be seen in countries that are lower on the PDI, such as the United Kingdom, the Netherlands, Denmark, Germany, the United States, and Scandinavian countries.

Though it can be encouraging to have democratic leadership in low power distance businesses, as it’s seen as more employee-friendly and engaging, it may have a negative effect on decision making. It can cause the organization to falter in delivering on its vision or agreeing to execute actions quickly and decisively.

What does it mean to work in a low power distance company?

There’s a few ways to identify a low power distance company:

- Flatter organizational pyramids – in the org chart that shows who reports into whom, it’ll look more like a network than a pyramid. Rather than long chains of subordinates, you’ll see a few managers or senior leaders dotted around a network of relatively equal coworkers.

- Narrow salary range – the distance from top leadership to entry-level worker should be short in terms of earnings. A CEO earning 100x more than a frontline worker shouldn’t be the case in companies like this.

- A general feeling of civility and mutual respect should permeate the culture. References to ‘underlings’, ‘minions’ and ‘lackeys’ shouldn’t be the norm, even when joking – staff will see each other as more equal and closer to leadership.

Whether these aspects are important to you or not depend on how you like to delegate responsibility. Let’s have a look at how these traits affect day-to-day workplace operations.

How different power distances manifest within companies

In a high power distance business, employees understand their subordinate position to their employers. As a result, they are more submissive and respectful to their superiors. Managers are more liable to give orders to employees than consulting them in decision-making.

Moreover, there’s a noticeable display of status differences: managers and employees don’t eat together, they work in separate rooms, don’t park their cars in the same spots, and so on.

However, in low distance power culture business, managers or employers are not as bothered with the status quo, and they often include their employers in decision-making. Employees, though respectful, are less submissive to their boss.

In a low power distance culture business, employees directly influence the distribution of power in the office. This is because, in such cultures, the employees have more power in decision-making. However, this is completely the opposite in high-power distance culture. The high or low power distance culture greatly affects employee behavior as the inferior or lower employee may not impact the workplace to a great extent.

In high power distance businesses, supervisors and employers are generally more concerned with managing resource allocation, punishments, and rewards at macro and micro levels. Through these exercises of power, they reinforce their superior position while leading their subordinates. In most workplaces, this hierarchical differentiation builds an invisible power gap that cultivates a culture of caution and fear of upsetting the status quo.

Is it better to have a low or high power distance in your company?

The answer to this depends on what sort of company culture you really want to build, and what your company objectives are. Here’s a quick look at the pros and cons of each end of the power spectrum.

Advantages of high power distance in the workplace

Some of the management benefits of high power distance culture are:

1. Employees don’t participate as much in decision making and are content with the decisions of their superiors (at least, outwardly – they might have private resentments). They tend to passively follow instructions without too much open dissent.

2. Juniors respect the senior or superior employees not out of the former's competence or skills, but because of their superior position.

3. These cultures can lead to a more orderly, structured organization with clearly defined boundaries between responsibilities.

4. A company with a clearly defined vision and mission can better achieve its objectives if everyone is onboard with its direction.

Disadvantages of high power distance in the workplace

It’s not always an ideal setup, though, especially for companies rooted in creativity. Some of the downsides to high power distance are:

1. When there’s a need to make quick decisions, hierarchical friction can get in the way. This may lead to poor outcomes or a lack of expediency in navigating decisive moments.

2. In high power distance workplaces, unethical behavior can be more common, because of the acceptance of power and reluctance to question it.

3. Managers can be more prone to micromanaging their subordinates. Whether through egoistic tendencies or lack of trust in their teams, obsessive ‘helicopter’ management is more likely in this environment.

4. The unwritten psychological contract employers have with their employees tends to get overlooked, and can lead to higher rates of burnout, absenteeism and turnover.

Advantages of low power distance in the workplace

In these workplaces, employees have relatively more independence and influence compared to their opposite. So an average employee has more responsibilities and engagement in decision-making due to the flatter hierarchy. For management, this has multiple benefits:

1. A greater level of coordination and communication, which can lead to better creativity and innovation.

2. Unethical behavior is more likely to be kept in check; open discussion around issues means that infractions are more likely to be called out.

3. The company becomes a more desirable place to work, so attracting talented workers is easier.

4. Increased autonomy of employees reduces the need to micromanage. If they’re more proactive, less time will be wasted on bureaucracy and people management.

5. It may be easier to cultivate a culture of psychological safety in a low power distance workplace, which has been shown to be a critical ingredient for high performing teams.

Disadvantages of low power distance in the workplace

A low power distance culture can seem like a happier, more peaceful one – especially in Western societies that are comfortable with democratic organization. However, it’s not guaranteed that it’ll make for a more effective company.  Here are some of the downsides:

1. Conflict may arise because of a higher number of decision makers. With team members deciding on objectives and course of action – a task usually done by a manager in a high-power distance culture – there are more people involved in decisions, and more opportunities for things to go wrong.

2. Lack of clarity because of decentralized power structures. As roles are not as strictly defined in a low power distance company, it can lead to trouble identifying vision and moving forward with plans.

3. Although the role of management in low power distance culture may diminish, the management work is still there – the problem is, the burden of it is passed on to colleagues.

4. This type of culture is not immediately for people who are not comfortable with lack of direction: self-motivated and proactive workers will thrive better here. For workers who crave more structure and motivation from management, coaching would be needed to help increase their initiation and prioritization skills.

So it seems there’s no one-size-fits-all solution for gauging the right power distance in the workplace. Power distance is a reflection of the culture that a company exists within, both geographical and societal. But the most pioneering leaders can forge a new dynamic in their company culture if they really feel it’s important.

Whatever the structure an organization has, there’s always going to be conflicts when power dynamics are involved. It’s up to leadership to address any problems proactively and create a healthy working environment for its staff.

‍Schedule a free demo to see how F4S can help you measure your team’s level of power distance, identify friction points and improve team performance.