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Flat Organizational Structure

Business Dictionary defines a Flat Organization as "An organizational structure in which most middle-management levels and their functions have been eliminated, thus bringing the top management in direct contact with the frontline salespeople, shop floor employees, and customers."[1]


A flat organization structure is designed to minimize bureaucracy and make employees more productive by empowering them to make decisions. Communication occurs more easily between upper managers and baseline employees, allowing for more rapid change and problem resolution. Flat t structures work best with smaller companies, where it's possible to decentralize some decision-making while maintaining corporate integrity. Large companies spread out across multiple states may have a more difficult time using a flat structure, because it can result in upper managers having a loss of control of the functions of the business. Large companies can use a flat organization structure by setting up each division with a flat organizational structure while maintaining corporate controls and final approval on decisions at the executive level.[2]


Unlike any other corporate structure that exists, flat companies are exactly that...flat. Meaning there are usually no job titles, seniority, managers, or executives. Everyone is seen as equal. Flat organizations are also oftentimes called or referred to as self-managed organizations (there can be some differences but for our case we will put them together). The most famous example of this comes from Valve, the gaming company responsible for classics such as Half-Life, Counter-Strike, Portal, and many others. 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.[3]


Flat Organization
source: CIO Index


Characteristics of Flat Organizational Structure[4]

  • Decentralized Management Approach
  • Few Levels of Management
  • Horizontal Career Paths that Cross Functions
  • Broadly Defined Jobs
  • General Job Descriptions
  • Flexible Boundaries between Jobs and Units
  • Emphasis on Teams
  • Strong Focus on the Customer


Advantages of a Flat Organization[5]

  • Lower Cost: Sometime around the mid-90s, businesses took out middle managers that were simply extra layers that helped organize the business but did not add value. Good luck finding a business that has a lot of middle management bloat today. This cut is basically permanent.
  • It’s easier to manage teams: In flat companies, business teams are organized in smaller units that are closer to the customer and where the team community is easier to manage. Strong teams often follow the “two pizza rule.” If it takes more than two pizzas to feed the team, then it might be best to break the group down into smaller units.
  • Decision-making is closer to the customer: Military organizations put the decision-making too far away from the customer. A flat company does the opposite, allowing employees who talk to customers every day to make decisions.
  • Empowerment of the “front line”: In a flat company, the power shifts in the organizational chart to the front lines, which creates empowerment amongst the ranks. This is a shift in cultural thinking. Give the front lines folks the go ahead to ask and solve customer problems.
  • Team-based problem solving: Instead of dumping problems & challenges in the leader’s lap, employees in flat organizations work as a team and garner input and feedback from many perspectives. This power of the team enables buy-in and change to often happen a little bit easier as folks are a part of the change.


Disadvantages of a Flat Organization[6]

  • Management Can Easily Lose Control: This structure is ideal for startups and small business where the number of employees is still manageable. The system can pose a problem to the whole organization when the ratio of employees to managers become too out of proportion. The management can easily lose control when there are less people to put a brake to bad behaviors and less individuals to support or back them up on their decisions.
  • Work-Relationship Could Struggle: When managers have too many people to manage every day, they may find it difficult to connect with their employees on a personal level, which is crucial in maintaining trust and in stepping up the baseline of employees’ responsibility and accountability for the work and the organization as a whole. This con can have a great impact on the issue of respect and morale of an organization on levels of authority.
  • It Can Create Power Struggle: Under this organizational structure, it is observed that employees often lack a specific boss to report to, especially when the owner or CEO is not around. This can create confusion and possible power struggles among management employees.
  • It Makes Employee Retention Difficult: Who does not want a promotion? Excellent employees who are looking for an improvement in their rank, aside from an increase in their salary, may find it hard to find job satisfaction in this kind of organizational set up. They may end up looking for a job somewhere else where they believe their efforts will be rewarded with a promotion.
  • It May Hinder Growth: Change is often times difficult and poses a lot of what ifs. Because of this, management may decide against new opportunities in an effort to maintain the structure which, as a result, may limit the long-term growth of the organization.
  • There Is Less Motivation: While a flat organization structure may lessen the problems caused by unhealthy competition among employees, it makes it harder for ambitious workers to move up the ladder as there is very little room up there. This could easily erode motivation, giving people no reason to take the extra mile in their work.
  • Can Result to Role Confusion: An employee may go to work for a flat organization expecting to fulfill a defined role, but find out later that he or she needs to do many pieces of other jobs. This makes it hard for workers to focus on their tasks and specialize at their jobs.


Criticisms of Flat Organizations[7]
Drawing on Jo Freeman's famous essay The Tyranny of Structurelessness, Klint Finley has argued that "bossless" companies like Valve might suffer from problems related to the appropriate handling of grievances, the formation of informal cliques, the "soft power" of popular employees, unprofessional and sexist attitudes, and lack of workplace diversity. However, some of these topics are the responsibility of human-resources departments in larger organisations, so it is possible that an effective HR department could resolve these issues within a flat organization. Suzanne Baker argues that new power dynamics can emerge that undermine the equality afforded by a non-hierarchical context. When an organization decides to no longer place value on a person's position, Baker suggests that new hierarchies based on personality type, skill set, and communication style can emerge. If these hierarchies don't get acknowledged, it is much more difficult to address the emergence of a new hierarchy because they remain implicit or undetected. Mark Henricks, a business journalist and a critic of flat organization, argues that "when you have too little hierarchy, decisions don't get made or are made wrongly by employees who lack experience, accountability, or motivation to do the work of the missing managers"


References

  1. Definition of a Flat Organizational Structure Business Dictionary
  2. How does the Flat Organizational Structure Work? BizFluent
  3. Explaining Flat Organizational Structure Forbes
  4. What are the Characteristics of Flat Organizational Structure? Ergonomic Organizational
  5. Advantages of a Flat Organizational Structure The CBI Group
  6. Disadvantages of a Flat Organizational Structure ConnectUsFund.org
  7. Criticisms of Flat Organizations Wikipedia


External References

  • 3 Ways Flat Management Structures Can Kill Your Business Fast Company
  • An Inside Look at a Flat Organization That Serves Millions First Round Review
  • Comparison Between Hierarchical and Flat Organization Structures ISPAT Guru
  • Flat Organizational Structures Rising Fast Roy Talman & Assoc.
  • What Kind Of Leadership Is Needed In Flat Hierarchies? Fast Company
  • Ditching Flat: How Structure Helped Us Move Faster Chris Savage