It defines how leadership is arranged throughout the various departments of the business, what the lines of communication are and each individual’s responsibilities and authorities. A well-established organizational structure is essential for a successful business model, as it allows employees to work more efficiently since there is a logical structure in place for how the business operates. The type of organizational structure a company should employ differs depending on its size, business goals and its industry. In this article, we will break down the flat organizational structure by exploring what it is, offer an example of how a business uses this structure, its advantages and disadvantages and if/how you should adapt the flat organizational structure to your business.
What Is a Flat Organizational Structure?
Most companies will adopt either a hierarchical or flat organizational structure. A more traditional approach is to have a hierarchical structure, also known as a tall hierarchical structure, with set and defined levels of management with supervisors, managers and directors to whom employees will report. However, in a flat organizational structure, there are few or no managers for employees to report to. This type of structure uses little supervision and promotes employee autonomy, involvement in the decision-making process, and eliminates micromanagement.
How Does a Flat Organizational Structure Work?
Most people are familiar with the hierarchical organizational structure, where there is a clear chain of command. For example, in a medium-sized business, you will typically have the CEO as the senior authority, followed by managers of the separate departments, supervisors of the smaller teams and team members. Each person, apart from the highest-ranking CEO, will have someone who delegates to them and a person they report to. While there are benefits to the hierarchical structure in that there is clear scope for progression and it allows employees to become experts in their chosen fields, there are also obvious disadvantages. For example, these types of organizations are often prone to bureaucracy, which can slow down creative development and make it harder for teams to work together. A flat organizational structure cuts out the middle management from your organization. Every employee handles their own projects, clients and professional growth; however, it doesn’t mean that every person works on their own.
Key Characteristics of a Flat Organizational Structure
It encourages employees to work together. By eliminating the departments and managers micromanaging employees and their day-to-day tasks, employees have the freedom to collaborate and work together. Employees have more of a say in how the business is run and the day-to-day operations. Transparency is another key component of a flat organizational structure. Granting such high autonomy to employees requires a great deal of trust, and equality and fairness are essential. Agile learning is another important characteristic of the flat organizational structure. With any growing business comes change and opportunities for growth, and this structure allows employees to be agile and learn new skills on-the-job as they come.
Example of a Flat Organizational Structure
Many modern corporations have adopted a flat organizational structure. One of the most famous examples of this is the video game company, Valve. Valve has been striving to become completely ‘boss-less’. Valve does have CEO Gabe Newell; however, he opts for a hands-off management style. His approach is to encourage employees to have a say on what is most important to them and the customers they work with. His employees only work on projects they think will have the biggest impact on the company and do not work on any projects that other employees have asked them to. They can make these decisions completely autonomously. And his approach seems to work, with a Gamespot survey ranking it the most desirable employer in the video game world.
Advantages of a Flat Organizational Structure
Increases Employee Responsibility and Accountability
Employees have more responsibility with this structure, and they are accountable for the actions they take. They will have to come up with ways to manage their time and their tasks. This can make it easier to deal with any errors that an employee has made, as it’s easy to pinpoint who made the error and, therefore, identify what has gone wrong to avoid the same thing happening in the future. Employees have no one to place the blame on. This also works in a positive light, in that it’s easier to give praise to employees, as you are fully aware of who handles what and whose actions have been successful. It makes it easier for people to make changes, as they don’t need to seek approval from several chains of command before implementing something new, making change more efficient and allowing you to reap the benefits sooner.
Improves Lines of Communication
The flat organizational structure also creates more effective lines of communication since you can contact people directly without having to contact an entire department or a manager and possibly wait a long time for a response. You can contact the people you need directly, which streamlines processes.
Fewer Levels of Management Reduce the Amount of ‘Red Tape’ and Allow For Easier Decision Making
Decision-making is also easier as you have fewer people that need to approve changes. This leads to change happening quicker and results being achieved more rapidly.
Allows More Democratic Decision Making
Having all employees involved in the decision-making for the business creates a more democratic environment. Giving everyone the right to implement change instead of only being in the hands of a few will create a sense of trust in your business, and your employees will feel appreciated and valued.
Reduces Costs of Salaries for Middle Management Employees
Having fewer employees in expensive middle management roles will also reduce the costs of salaries for your business, since you are streamlining processes and reducing the need for management roles.
Increases Transparency Between Management and Employees
Employees appreciate transparency. The flat organizational structure enhances transparency for your employees, as information is no longer solely shared with management. All employees are aware of everything going on with the business, and employees can have their say in all business matters that affect them.
Increases Agility as Employees Can Move Between Projects Easily
Since employees are more aware of the entire business in general, and they specialize in more than one area, they can easily move between projects when required or when they feel like they can add something valuable to another area of the business. This creates more well-rounded employees who are well-versed in many areas of the business. This also minimizes the chances of employees becoming bored in their roles and therefore increases employee retention.
Disadvantages of a Flat Organizational Structure
Employees Lack a Managerial Point of Contact, Leading to Confusion
Sometimes, with a lack of a managerial point of contact, employees may be confused about whom they contact when they have a question or a particular issue they need to be resolved. Making sure that your structure is clear and that employees know whom they should contact in specific events will avoid this problem. You’ll need to inform your staff about the role that each employee plays, which can be a very tricky concept to work out.
Increases Chances of Power Struggles
Unfortunately, some people just like to be in control. This can make a flat organizational structure extremely difficult if you have employees disagreeing about something and attempt to pull ranks.
Employees May Lack Specialization as They Focus On More General Tasks
While having employees involved in various aspects of the business might be beneficial, it may result in many of your employees having just a basic understanding of the business and only a few employees with specialist knowledge of a certain area. Some areas of your business may find it more difficult to develop and grow as a result.
It Can Be Difficult to Adapt a Larger Business to This Structure Without Splitting Into Smaller Divisions
If you have a larger business, you may still need to split up departments of your business, which can decrease flexibility and encourage you to sway further away from the flat organizational structure.
Where Does a Flat Organizational Structure Work Best?
Flat organizational structures tend to work better for smaller companies and start-ups where there are fewer employees and less need for hierarchy. It’s much more complicated to adopt a flat organizational structure in a larger corporation with many departments and employees. For a smaller company, this division isn’t as necessary. You can allow employees to take charge of their own projects and tasks. This promotes employees to make decisions based on their own opinions of what they think will benefit the company. The flat organizational structure increases transparency for employees, and they’re more likely to feel valued and trusted. The flat organizational structure works best when it’s easier for employees to communicate with each other. When it’s well-executed, larger businesses can use the flat organizational structure.
Adapting a Flat Organizational Structure for Best Performance
You may feel that incorporating a flat organisational structure would be too difficult to manage as your business grows, and that the need for a hierarchical system will prevail. This is not always the case, though. It is possible to scale a flat organizational structure as your company grows. Some of the best ways you can scale your flat organizational structure as your business grows is by following the example of Finish company Futurice.
Create Autonomous Units
One step that Futurice took in implementing its flat organizational structure is by creating smaller teams. Harvard Business Review reported that the company divided up into smaller ‘modules’. This granted Futurice higher autonomy to eliminate the need for management.
Using Communication Tools
Another step that Futurice have incorporated is effective communication. It encourages active dialogue and promote sharing and learning from each other through communication tools such as Slack.
Boost Use of AI in Your Business
Boosting the use of AI is another key component that Futurice relies on for its flat organizational structure. There are many tools that businesses can use to improve knowledge-sharing within a company, and it is a crucial part of ensuring that employees can share information efficiently.
Final Thoughts
There are many advantages of a flat organizational structure, like enhanced transparency, less micromanaging and reduced costs for your business. However, there are also rather strong disadvantages, and it’s difficult to get it right for a larger business. You must weigh up the advantages and disadvantages before making radical changes to the structure of your business, and you must ensure your employees are well aware of any new processes that you implement.
