Org Strategy, Org structure

Can Organizations Stay Flat as They Grow?

By: Tim Brewer

A flat organization is one that has very few horizontal layers of management. Therefore, its org chart would look relatively flat and wide.

Whereas top-down or bottom-up organizations describe how decisions flow through the organization, the tallness or flatness of the organization refers to how many levels of hierarchy there are.

Flat organizations have very few layers, and their organization chart looks like a short pyramid, as compared to tall organizations that have many layers, and are thin and high.

F internal - 780 x 455 (1)

Naturally, there are advantages and disadvantages associated with flat organizations.

Pros and Cons of Flat Organizations

Here are the potential benefits:

  • Less layers should mean better communication within the organization
  • More autonomy and responsibility for employees
  • Employees may feel more motivated, and are more productive as a result

Whereas, there are some possible drawbacks:

  • Lack of promotion opportunities for staff
  • Higher workloads for managers
  • Managers have many people to manage

At First, We Are Flat

When companies start out, they generally have just a handful of staff, and so everyone feels close to one another. Decisions can be made easily, changes can happen quickly and everyone may feel close to the customer.

The org chart would look very flat - perhaps with only one or two levels. There are no departments as such, although everyone will probably have their own title and responsibilities.

This can be a fun time to be in an organization, with the risk of things not working out, but the promise of what can be created ever-present.

Most companies stay small, and that is fine, and it may be their choice. Sometimes the market is a small niche one, with only a few customers, or the business owners may prefer the homely environment of the small business, the closeness of everyone concerned and the simplicity.

Indeed, most businesses are small, and they make up the backbone of the economy.

Growing Pains

As companies grow, the temptation is to add departments and layers of management to help delegate tasks and authority throughout the organization. The feeling is that business has become too complex for one level of management and employees to coordinate.

It’s at this stage that important structural decisions are made, which can have critical immediate and potentially long-term implications.

Some organizations - once they grow past 25 or 30 staff - start to become more and more bureaucratic, with a resultant decline in productivity. The ‘system’ takes on a life of its own, and begins to rule the roost.

Why Does This Happen?

Adding layers of management and new departments can create silos of information, ‘little empires’ for certain managers to rule, and put significant distance between the executive team and those closest to the customers - the front-line employees.

Communicating up and down a tall structure can become onerous, with ‘Chinese Whispers’ and misunderstandings causing breakdowns in coordination.

Layers upon layers of management can also build up ongoing costs in the organization, making it uneconomic, bloated and slow to move.

In large organizations, staff can feel like a small insignificant cog in a large wheel, removed as they are from top-level management decision-making.

Staying Small, While Getting Big

A long-debated question has been: how can a company grow into a significant and large size, without imposing inefficient bureaucracies on itself?

Some companies have managed this - retaining the fun, excitement and togetherness of a small company, while operating with hundreds and thousands of employees.

Sir Richard Branson, founder of the Virgin empire, wrote in his autobiography (1) that when any Virgin department or business grew larger than 25 staff, it would be cut in two.

Over at Amazon, Jeff Bezos decreed that no team could be large enough that couldn’t be fed by two pizzas. At Google, founders Larry Page and Sergey Brin eliminated engineering management, only to reverse their decision but still retain a relatively flat structure.

Larry-Page-Sergey-Brin

Brin and Page redesigned Google with a cross-functional team-based organizational structure, like a matrix: functionally based, product-orientated and relatively flat.

Within Canva, the co-founders Mel Perkins and Cliff Obrecht decided on a ‘holocracy’, where teams would be doing what they deemed best, and various people would take turns in leading projects. Top management may not need to know exactly what each team was doing al the time, trusting them to do what was best for the mission.

In general, modern management theory has applauded large companies that have managed to keep their organizations relatively flat, using cross-functional teams, holocracies or matrix structures.

Successfully scaling a flat organization is the holy grail. In an HBR article (2) E Vaaraet et al suggest that the key is in applying some form of structure that encourages self-direction:

“The idea is simple: You’re free to make a decision as long as you feel confident that it will benefit your clients, colleagues, and numbers, and that it will do so both today and tomorrow.

“The company collectively articulates objectives and key results but gives its tribes a high degree of freedom in figuring out how to achieve them. Formal rules and processes are out. Instead, to share learning and information across teams and functions, the company encourages active dialogue on Slack and in community gatherings - a minimal approach to coordination that several companies in our cluster refer to as ‘no nonsense’.”

As another Harvard case study discovered (3), the company behind Wordpress, Automattic, has a few hundred employees, all working remotely in a flat organizational structure. They manage to power 20% of the world’s websites in this manner.

As that piece concludes: “It’s time to start reimagining management. Making everyone a chief is a good place to start.

Functionly-icon: Retaining Flatness While Growing

We at Functionly are here to help. If you want to experiment with re-organizing your company, then you can do so, for free, using our easy-to-use drag and drop tools.

Getting this piece right may be the difference between your business taking off and scaling beautifully, or not.

Get started today with free tools from Functionly.

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Sources

  1. Losing my Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way, Richard Branson, 2011
  2. How to Successfully Scale a Flat Organization, E. Vaaraet all, Harvard Business Review, 7 June 2021
  3. Hierarchy Is Overrated, T. Kastelle, Harvard Business Review, 20 Nov 2013

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