July 25, 2024

Did you know the average company has roughly five to six job levels? There are interns, entry-level employees, intermediate staff, first-level managers, middle managers and executives. But what if we told you you could cut out a few of the middlemen? 

Flattening an organization’s hierarchy has become a popular business trend as companies seek ways to cut costs through workforce reductions. While smaller companies have typically used flat organizational structures in the past, some industry behemoths have started flattening their org charts, including Meta, Alphabet and FedEx.

Now may be the time to fire your managers, too.

What is a flat organizational structure? 

A flat organizational structure is a type of organizational design that has a reduced business hierarchy and uses a decentralized decision-making process. In a flat organizational structure, there are very few levels of management between top-level executives (often known as the C-suite) and low-level employees. Essentially, a flat organizational structure cuts out middle management.

These are the main characteristics of a flat organizational structure:

  • Fewer levels of hierarchy. There are fewer levels of middle management, so the top-level executives are closer to the bottom-level employees.
  • Wide spans of control. Supervisors oversee many employees.
  • Decentralized decision-making. Employees have more autonomy and decision-making power.
  • Open communication. Communication channels between executives and employees are more open and direct.

Simply put, there are no mid-level managers getting in the way. With less bureaucracy and red tape, businesses that ditch their managers and embrace a flat organizational structure instead can become more efficient.

Flat organizational structures are often found in startups and small businesses, as this type of structure allows them to be more agile and adaptable to change. However, larger organizations have also adopted this structure in recent years to harness innovation, collaboration and employee engagement.

What are the advantages of a flat organizational structure? 

A flat organizational structure won’t work for every company, but there are five key business advantages you should consider.

1. It allows for faster decision-making.

If agility and speed are paramount to your business, a flat organization can help you succeed faster. Flat organizations are often more flexible and adaptable than traditional hierarchical structures because employees have more autonomy to make decisions and take action. With fewer layers of management, decisions can be made more quickly, allowing organizations to rapidly respond to changes in the market or competitive landscape.

2. It promotes creativity and innovation.

Speaking of taking action, a flat organizational structure encourages employees to take risks and come up with new ideas. This level of autonomy and encouragement for idea generation can lead to increased innovation and creativity. This is great for organizations that want to stay ahead of the curve in terms of finding unique business solutions and dominating market share. A company that can readily identify ways to improve its products or services is also beneficial for consumers.

3. It enhances organizational communication.

In a flat organizational structure, communication between employees and upper management is more open and direct. Instead of passing information through several layers of people, employees can go straight to the high-level source they need to speak with. This enables faster and more effective communication and collaboration throughout the organization.

4. It increases employee engagement.

Implementing a flat organizational structure can improve employee engagement. Because they have more responsibility and autonomy, employees in flat organizations are often more engaged, motivated and empowered to make meaningful contributions to the company.

5. It can reduce overhead costs.

Flat organizational structures often result in lower overhead costs, as there are fewer layers of management and less bureaucracy. Employee compensation can account for roughly 40 to 80 percent of your gross revenue, according to FreshBooks, so reducing your employee costs by cutting back on managerial positions can reduce your total overhead costs.

>> Read next: 6 Steps to Improve Your Organization’s Performance

What are the limitations of a flat organizational structure?

Although a flat organizational structure tends to yield many benefits, weigh the potential drawbacks before you go canning every manager.

1. It can cause confusion around roles and responsibilities.

Fewer levels of management may lead to a lack of clarity on who is responsible for what tasks. In turn, this can cause confusion, inefficiencies and the potential for power struggles among employees. Mitigate this downside by providing clear job descriptions for each team member so every person knows what they are responsible for.

2. It can reduce employee accountability.

Speaking of responsibilities, a flat organization can result in unclear lines of authority and accountability, which can lead to problems such as finger-pointing and a lack of ownership over decisions and outcomes. Similar to the solution noted above, it’s critical to outline clear roles and responsibilities for every employee — and hold each worker accountable for those tasks.

3. It can limit career progression within the organization.

With fewer levels of middle management, opportunities for employees to move up the corporate ladder may be limited. This can ultimately lead to higher levels of dissatisfaction and employee turnover. Exploring the issue of attrition, McKinsey found that 41 percent of people quit their job because their organization lacked opportunities for career growth or upward mobility. Yikes.

To keep your best talent from leaving for greener pastures and sparking turnover contagion, establish clear growth opportunities and career pathing for each worker. Keep in mind that employee growth isn’t just about being promoted to the next job level or position. You can foster employee growth and career progression through learning and development opportunities, mentoring positions, increased autonomy and responsibility, and employee upskilling.

4. It can make supervisors feel overburdened or burnt out.

In a flat organization, there are fewer levels of management, which means the supervisors you do have will need to handle a wider range of tasks and responsibilities. Overloading any one person’s plate can ultimately lead to burnout. Ensure you are properly staffed to avoid overworking your leaders.

Employee burnout can hurt your organization in many ways by decreasing productivity, engagement, quality control and employee retention. Every business, regardless of organizational structure, should take calculated measures to prevent burnout in the workplace.

Overall, while a flat organizational structure can be beneficial in certain situations, it may not be suitable for all companies or industries. Businesses must consider their unique needs and goals before determining whether limiting or entirely eliminating managerial positions is in their best interests.

How do you create a flat organizational structure?

Cutting out your company’s middlemen and restructuring into a flat organization will take time and preparation. Here are some tips to help get you started.

  1. Identify your need for a flat organization. Some businesses thrive with flat structures, while others need more hierarchy to survive. Identify the extent of your need for a flat organizational structure. You may even find that a combined approach is best, flattening out certain teams or departments and leaving others as is.
  2. Define employee roles and responsibilities. This step is key to preventing some of the possible setbacks listed above. As you remove layers of management, clearly define the roles and responsibilities of each remaining employee to ensure everyone knows what their job entails and to whom they report. This includes defining roles and responsibilities for future employee positions as well so you can properly staff your business going forward.
  3. Foster a culture of autonomy, collaboration and open communication. Encourage employees to take ownership over their actions, communicate openly and honestly with one another, and collaborate with each other whenever possible. This helps to create a supportive, transparent and productive work environment.
  4. Provide learning and development opportunities. Since the rungs on the corporate ladder of a flat organization are much fewer than that of a tall organization, employees will have fewer opportunities for upward mobility. As a result, it’s vital that you offer training programs and development opportunities to help employees develop their skills and advance their careers in other ways. This will also help them become more valuable members of your organization.

A company that follows these steps can create an effective flat organizational structure that isn’t weighed down by unnecessary levels of management. This can lead to a more efficient and effective workplace, one where employees feel empowered to make a difference and contribute to the success of the organization and where progress isn’t held up by layers of red tape.

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