Introduction to Flat Organizational Structure

Hierarchical organizational structure has been considered to be the go-to option for many business organizations. However, we need to consider that some organizations also prefer to organize the business activities in a manner that facilitates direct communication between the senior management and employees. This is through the flat organizational structure that involves fewer levels between the top management and the employees of the organization. The visual diagram for the flat organizational structure is represented as follows-

Flat organizational structure

The flat organizational structure helps to facilitate effective decision-making and problem-solving within the organization through effective communication between the top management team and employees. Under the flat organizational structure, there are no hard and fast rules regarding splitting up the department in the functional unit or divisional structures and people can also engage in cross-functional teamwork which can further help in improving organizational effectiveness. For instance, Zappos had adopted the Holacracy organizational structure since 2014 given the impacts of the typical organizational structure. The move towards the Holacracy organizational structure encompasses no titles, no managers, and no hierarchies.

Moreover, the flat organizational structure involves little or no level of engagement from the management. Thus, the employees working under this organizational structure can also enjoy the benefit of the perks and other benefits of working directly with the Chief Executive Officers (CEO) of the organization. Individuals also achieve greater autonomy in the organization in the flat organizational structure due to fewer levels of hierarchy in the flat organizational structure and little engagement of managerial layers in the organization. Hence, a flat organizational structure leads to a short chain of command and a wider span of control due to the presence of a large number of subordinates.

Hence, the flat organizational structure is mainly used by companies that involve a fewer level of management. Many start-ups also adopt this organizational structure due to the presence of fewer employees in the organization and less need for hierarchical management. Furthermore, the flat organizational structure is also used by small business organizations to effectively manage the business operations with a wider span of control and a short chain of command.

Advantages of Flat organizational structure

We have seen that the flat organizational structure involves few managerial layers in organizational structure which gives the idea that clear communication is facilitated between the employees and top-level management. Besides this, there are a number of the benefits of flat organizational structure which are discussed as follows-

Decision making- A flat organizational structure helps in effective decision making and problem-solving as direct communication is facilitated between the top-level management and the employees in the organization which also helps the organization to effectively respond to various emergencies efficiently. A flat organizational structure also helps in quick decision making which further improves the organization's efficiency.

Autonomy and responsibility- The employees in the flat organizational structure achieve greater autonomy which further helps to improve employee job satisfaction. An increase in autonomy also results in an increase in responsibility upon the employees which further contributes to the commitment of the employees to perform better.

Innovation- The chance of innovation increases in the flat organization structure as the employee's commitment and participation in the organization increases due to quick decision-making and communication with the top management. This also leads to an increase in the chance of implementation of new ideas and change in the organization.

Disadvantages of Flat organizational structure

Despite the number of advantages of flat organizational structure, we need to consider that the practicality of adopting the flat organizational structure in the current times is very low. It is almost impractical for the larger organizations with hundreds and thousands of employees to adopt the flat organizational structure. Furthermore, the other disadvantages of the flat organizational structure are discussed as follows-

Poor growth opportunities- The chance of growth in the flat organizational structure is limited as the employees want promotions in the organization but this setup of the organizational structure provides limited opportunities for the long-term growth of the employees which results in a higher employee turnover rate in the organization.

Role confusion- Role confusion in the flat organizational structure can also occur as there is a lack of clear supervision regarding the roles and responsibilities of the employees in the flat organizational structure and there are no strict boundaries regarding the employer roles. This results in employees shouldering their responsibilities that go beyond the job description resulting in various conflicting issues.

Accountability- The sense of accountability among the employees may remain low in the flat organizational structure as there may be the prevalence of more than one boss in the flat organizational structure.

Exemplification of Flat organizational structure

Valve, an American video game developer has adopted the flat organizational structure. The aim behind the flat organizational structure of the company is to organize management processes and clarify the roles and responsibilities of the employees. You must be surprised by the fact that there is little to no level of hierarchy in the company. Is this possible? Yes. Valve has maintained this by focusing on peer relations and adopting a free-form structure with no level of hierarchy in the organization. Gabe Newell, CEO of Valve also avoids interfering in the day-to-day management of the employees. Also, the employees at Valve are free to undertake projects that they find more interesting. This helps to ensure employee interest in the organizational activities and thereby, higher performance. This is possible only due to no hierarchical structure in the organization, peer relations, strong cultural dimensions with a company, and no-centralized plans.

Is it possible to manage employee performance without any formal reporting mechanism? Will employees be committed to working without the supervision of the senior management? Yes. This is also evident from the case of Valve. The internal project management processes without hierarchical mechanisms can also help to ensure higher business performance and commitment.

Valve has internal project groups known as “Cabals”. Cabals are not created by managers or other authorities. Rather, these groups are formed spontaneously by the employees of the organization to achieve common goals. The employees can also adopt specific roles within the group on the basis of expertise which helps to make productive use of the employee’s skill set.

The other major initiative of the company under the flat organizational structure is the stack ranking system. Under this system, the employees are engaged to periodically review the performance of their teammates, and then the compensation is adjusted accordingly. This helps in the performance management of the organization through peer reviews of the employee's performance and also helps to keep the employees motivated to perform better.

Hence, it is found that the flat organizational structure can also be used by the organizations despite various limitations and can help the organizations to achieve higher performance outcomes through effective management processes.