Flat Organizational Structure

Abstract

A flat organization, also known as a horizontal organization, is a system of governance and administration with few to no layers of management between managers and employees. In some cases, flat organizations are called—often incorrectly—a “leaderless” organization. The purpose of a flat organization is have workers that are more productive; workers in a flat organization are allowed greater participation than in traditional corporations as pertains to decision-making, implementation, workplace roles, and idea generation. There are different kinds of flat organizations, all of which have important pros and cons; however, it is often said that it is the most democratic of all organizational structures.

Overview

“Flat,” or “horizontal” structure, refers to a type of organization characterized by having few or no levels or stages of management intervention between the head of the organization and the rest of the staff. It tends to be a de-centralized structure, relative to the more traditional organizational models. The theoretical framework of the flatter structures is based on democratic models and on a large body of research that shows that workers are more productive when they are directly involved in decision-making and are not closely supervised by managers above them. Although flat structures are increasingly popular, its detractors argue that this type of structure is possible only in middle-sized and small firms, or when a corporation’s smaller units are integrated into a larger control structure. Furthermore, others posit that as companies grow, they may be able to maintain simplified structures, although not as flat as in the beginning. Flat structures are most popular among firms focused on productivity and constant innovation.

Flat organizations promote the involvement and participation of workers in decision-making processes. It also makes it easier for workers to be noticed when they promote ideas or contribute in any other way to productivity. Many consider it the most democratic organizational structure. Rather than give orders, team leaders foster the generation of ideas and help team members make decisions. In many ways, then, managers are facilitators rather than bosses in the traditional sense. Flat systems offer further advantages: communications flow better, it is less costly, there is less bureaucracy, and decisions and outcomes occur faster. One of the characteristics of flat organizations is the ability to adapt to changes more easily than is possible for centralized and hierarchical organizations.

However, some companies do not find flat structures convenient. For these organizational structures to function well, managers must share all the information and research with workers; this might not work with companies that prefer to guard information closely. Among the disadvantages of flat organizations is the difficulty of maintaining them as a company grows. Furthermore, work descriptions for “fluid” job positions may be too fuzzy, sowing confusion among workers. Some departments, such as accounting, often require conventional structures. A flat structure, then, may need more time to create and implement than traditional models. Experts posit concerns about managers or supervisors with too much work, scant control, and less expertise.

Advocates of flat organization counter skepticism by emphasizing that for a horizontal structure to function, workers must be well trained. Skilled workers are the most productive and are in a position to contribute expertise and practical knowledge to decision making, especially when decision makers do not have to navigate multiple management layers. When workers are given more responsibility in a flat organization, ideas and suggestions reach all pertinent staff and decisions are taken faster. Feedback is also faster than in a traditional organization, whether it comes from workers, managers, or even customers and venders.

Given that the interactions between workers is frequent, flat organizations depend upon and foster more personal relations between workers and management, allowing for higher rates of productivity. Moreover, as mentioned before, there are better opportunities for workers to excel. This requires a non-authoritarian attitude from management. Besides sharing information often and forthrightly with workers, managers must be open, tolerant, and even, according to some advocates, allow themselves to be more vulnerable.

It is important to bear in mind, however, that in flat organizations, given that there are fewer managers and a greater number of workers reporting to each, there is a risk that supervisors may become overburdened and exhausted and, in consequence, workers may become confused and frustrated. With too many people taking ideas and information to a sole manager, a project may become difficult to achieve. However, these are issues that can be resolved by developing and implementing appropriate protocols and better practices. In the end, most flat organization advocates stress that when individuals work together, they obtain better results than when they work autonomously or under too many supervisors and directives.

To change an organization from hierarchical to flat may prove difficult, because people do not like change. It can take a large investment in time and effort to transform a conventional organization into a flat one. Changing how a company functions involves changing how people relate to work. Moreover, it requires that individuals develop high levels of self-motivation, greater team work, and even more selflessness. Workers must also become efficient managers of their time and resources. Nevertheless, employees tend to find that the benefits outweigh the negatives and that it improves their skills, standing with the company, workplace relations, and self-esteem.

Although young and innovative companies are the most likely to adopt a flat structure, or begin as one, older and larger corporations have begun to go flat, too. Two of the main reasons they cite for this step is the ability to cut costs, by reducing bureaucracy and other expenses, and shorten processes significantly. Some corporations that have adopted flatter models are Internet-based music provider Pandora and established corporations such as Cisco and Whirlpool.

Applications

Some flat organizations are flatter than others. Typical hierarchical structures see power, control, and communication as flowing top-to-bottom through many layers of managerial control. A flat structure, however, fosters opens lines of communication and control, as well as more democratic and collaborative ways. There are fewer layers of control between top and bottom. Very large organizations find it hard to be completely flat, but they can decrease managerial layers throughout the firm, making it much flatter than a traditional hierarchy. Becoming flatter results in higher efficiency and productivity. To date, this is the organizational model many companies, large and small, are increasingly adopting.

A degree of hierarchy remains in some flat (or flatter) firms, even as they foster trends such as greater collaboration, communication, employee participation, less dominant managerial models, better resource allocation, and so on. Moreover, for large firms to implement this model successfully, it is important that they have the appropriate technologies for communication to flow rapidly and as unimpeded as possible. Further, the implementation of technology may do away with the requirement that all work needs to happen at the workplace; allowing workers to work remotely can substantially reduce overhead costs but does assume that workers can be trusted to work without close personal supervision.

A flat organization theory of management views managers as facilitators rather than bosses, meant to support and listen to employees, rather than the other way around. In short, managers share authority and responsibilities with the employees and teams. People who work in a flat organization, then, must be comfortable with flexibility, non-traditional work arrangements, and autonomous ways of working. How this takes place varies among companies. In some, employees have complete freedom and flexibility as to where and when they work. They may also eschew traditional work titles and expectations. Some companies, such as Pandora, went as far as to implement a team solely focused on the workplace experience of employees, taking into consideration their values, personalities, work space, and so on, in order to ensure employee satisfaction and, in consequence, higher productivity.

Some organizations are truly flat. They lack job titles and roles, seniority, and other common workplace items and trappings of traditional organizations. In such companies, all employees are equal and most, if not all, are self-directed. That is, no one in the firm is in charge of telling others what to do, how, and when. In fact, any employee is free to start his or her own project and must organize all factors necessary to make it work, from securing funds to recruiting a team. This extremely flat model may work well for smaller or medium companies but, on the other hand, may appear impossible for corporations with thousands of employees. Some companies that start flat gradually implement some structure as they expand.

Some companies are admixtures of both hierarchical and flat organizational models. A conventional hierarchical company, for example, may have an internal unit, department, or program that operates flatly. In this situation, employees within that flat space are allowed to propose and implement new ideas and to organize teams to work on them. Among companies with this model are Lockheed Martin, 3M, and Internet-based companies such as Google and LinkedIn. The goal is to have innovative teams organize and work more autonomously and with less bureaucracy. A smaller flat unit within a larger traditional system is easier to implement in a large company and can be done in specific departments, such as the research and development (R&D) department, while allowing the rest of the company to operate, as needed, under more layers of control.

Other companies are experimenting with a newer version of flat organization called “holacracy.” A holacracy refers to a management system in which teams form systems—or circles—that are both independent yet symbiotic; that is, they operate autonomously yet have a mutually beneficial or interdependent relationship to one another. This relationship can form to accomplish specific tasks or projects. A holacracy typically operates in a flat organizational structure in which all workers or members have an equal say while, at the same time, they must follow the guidance or direction of a shared authority.

In a traditional organization, for instance, a person is assigned to a leadership role, usually set in a job description and with a specific amount of power. In a holacracy, however, individuals select a role—or several—as needed; they may move between teams depending upon the skills needed in each team, at different points in time. The objective is to operate with the maximum flexibility and productivity possible. This system is a favorite with innovative and cutting-edge companies, such as Medium, an online publishing company; Valve, a popular video games platform; and Zappos, an online shoe retailer known for its embrace of change and innovation.

At the end of the day, however, a holacracy is still a hierarchical structure, even though it provides spaces for consensual and democratic decision-making. Some experts have said that it is best described as a “hierarchy of circles” in which the circles operate within a hierarchy. This novel system has not yet spread far and wide, and critics have argued that while it works well for many employees, it is also a difficult work environment for others who feel more productive and comfortable in a more structured, directed workplace.

Issues

Critics argue that no flat organization can remain completely flat forever; hierarchies will eventually grow among people, organically or naturally, arising from seniority, knowledge, skill, personality, or a combination of these. Experts posit that some people are natural leaders and that groups will eventually identify one. Research shows that even in flat organizations, people tend to naturally consider those with more seniority as more senior hierarchically, for instance, even if the hierarchy is informal. Moreover, without much formal direction, it is hard to recruit teams, as some people prefer to work alone, and others in a team may want to pull in different directions and do things in different ways. Lack of consensus might delay rather than speed up a project.

Another problem with a flat organizational structure is that, for a large organization to implement it, the process can take years and require huge amounts of resources. It is also a challenging process for companies with thousands of employees around the world. Although most companies that have implemented this structure have done well, it is not realistic for all companies. It works best, for most large organizations, to implement a flatter structure that is scalable and adaptable.

Holacracy lacks a space for customer feedback. The holacracy’s system is basically internal and exists in a traditionally vertical system. This might be problematic and, according to some, a holacratic system of circles seems rather like high school cliques, in which each clique exists in a flat system—none has any real authority over the others and leaderships arise organically—but remain within the authoritarian hierarchy of the school.

Finally, other critics have called flat organizations anarchic, that is, headless. In a truly flat organization, all employees seek to be the ones making decisions or seeking power. However, advocates argue that this is not how it tends to operate, because in a flat organization, employees must use persuasive skills to convince others of the soundness of their ideas, rather than act through coercion or authoritarianism, which is likelier in a hierarchical organization and which runs the risk of silencing great ideas. In a flat organization, when a problem arises, employees must act as a jury and arrive at decisions by argumentation, persuasion, and consensus. In other words, it is hardly a chaotic and anarchical situation. As with all situations dependent upon human beings, flat organizations can be healthy and functional, or else, dysfunctional and prone to unhealthy powerplays. This why it is important for a flat organization to promote a corporate culture of best practices, good choices, team work, and the pursuit of respect for differences and consensus.

Terms & Concepts

Anarchy: A system that does not recognize any head or authority. Although it is often linked to states of lawlessness and chaos, anarchy is actually based on states of voluntary relationships and interactions among groups and individuals. The downside is a state of disorder.

Authoritarian: Refers to a governing or management system which enforces obedience to authority figures and the established system at the expense of personal freedom. In a business situation, it would favor orderliness and a slow rate of change based on following proper procedure or orders from above. Authoritarianism is usually related to very structured traditional organizations such as the military.

Centralization: Refers to the position of something relative to the point of convergence (the center). When it comes to organizations, it is not only how close to the center the organizations’ units and employees are, but how big the center is and whether there is one center or more.

Consensus: A general agreement or consent; usually refers to consent arrived at harmoniously and after deliberation.

Hierarchy: A system of organization that establishes clear demarcations between ranks and layers of authority and power. It is also associated with vertical organizations, understanding that it follows a top-to-bottom ranking system and flow of power and communication.

Holacracy: A decentralized organizational and management system through which decision-making takes place democratically and flatly through self-constituted teams within the hierarchy.

Persuasion: The act of convincing others, through persuasive means (e.g., arguments, encouragement, deliberation) to adopt, believe, or do something.

Symbiosis: The close interaction and/or interdependence between two living organisms, for the mutual benefit of both.

Vertical Organization: An organizational structure based on a top-down system in which communication and power flows from managers to workers in a hierarchical chain of command.

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Suggested Reading

Altman, R. (2016). HR organizational structure – past, present, and future. Workforce Solutions Review, 7(4), 13–15. Retrieved January 1, 2019 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=118422867&site=ehost-live

Knowledge Partner for SAP S/4HANA transition. (2016). Siliconindia, 19(10), 97. Retrieved January 1, 2019 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=128463262&site=ehost-live

Šindelář, J., & Budinský, P. (2017). Evaluating the relationship between IFA remuneration and advice quality: An empirical study. Financial Services Review, 26(4), 367–386. Retrieved January 1, 2019 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=129765608&site=ehost-live