Organisational change: Should you introduce a flat structure?

19th February 2016

More and more companies are implementing flat-business structures and even ‘managerless’ systems. How can you decide whether it’s right for your business?



A flat-business structure scraps top-down management in favour of putting every employee on the same playing field. While a traditional hierarchy improves efficiency, it can also be a barrier to organisational change. Companies like Google and Zappos opted for flat structures to create environments that foster innovation. So what type of businesses can benefit from a flat structure?

Adaptable and innovative

A flat organisation typically has thin levels of management where all employees have the power to make decisions. According to researcher Tim Kastelle, this set-up is great for companies that are looking to innovate, need to respond to a rapidly changing environment and have a shared purpose.

In 2014, e-commerce retailer Zappos implemented a ‘holacracy’ operating structure with no job titles or managers. Its 1500 employees are now organised into about 400 different ‘circles’ where they can have multiple roles and be personally accountable for decisions. Zappos CEO Tony Hsieh says he wanted to set up an environment where “the personalities, creativity and individuality of all the different employees come out and can shine”.

Staff in the spotlight

One of the biggest benefits to adopting a flat structure is that employees generally benefit from more responsibility and autonomy. If employees are creating their own project goals, they are more driven to achieve them.

Additionally, employees in flat organisations tend to be more adaptable to changing circumstances and can develop their own operational processes without seeking the approval of upper management.

And the benefits don’t end with increased employee engagement. Fewer management layers mean flat organisations spend less on salaries and can outsource other business functions like IT and recruiting to further reduce costs.

A productivity dampener?

On the flip side, while a flat structure aims to heighten employee productivity, it can also work the other way. Human Capitalist warns that flat structures may not work for companies that require strict policies and controls, such as airlines and hospitals. If your organisation relies heavily on each team member doing their own job, then it may be critical to have a well-established hierarchy.

Additionally, in a flat organisation, some staff may end up working passively without a clear leader. They may also be unsure about who to speak to for complicated issues.

Google discovered this in 2002 when it flattened its organisation to generate more concept development among employees. However, instead of making their own decisions on projects, staff went directly to co-founder Larry Page. After becoming overwhelmed with a large amount of requests, Page reinstated all managers after two months.

Flow-on effects

Adopting a flat structure can have a number of positive effects for businesses seeking an innovative and entrepreneurial culture. Companies with flat structures stay closer to customers by responding more efficiently to their changing needs.

Additionally, by giving everyone in the company an equal voice, businesses can discover new ideas and insights. For example, video-game developer Valve implemented a flat structure and ended up creating the highly successful platform Steam, which generates an estimated US$1 billion a year.

Overall, the key to a successful flat structure and strategic organisational change is clear communication with all employees and a cohesive culture and vision.
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