There are benefits and pitfalls for both a flat structure and an organization that is hierarchical. Determining your organizational structure will depend on the needs of teams, culture, and how you intend to grow. We will begin to explore the advantages and disadvantages of both models to give you a better understanding of what model fits your operation.
What is a Flat Organization?
A flat organization is defined as a structure with minimal or no levels of management between leadership and general staff. There is less supervision overall, and it promotes an environment where staff is more involved in the decision-making process. Flat structures are more commonly seen with smaller or start-up organizations.
Advantages:
Increased levels of collaboration – when the entire staff is involved in the decision-making process, this encourages collaboration throughout all aspects of the organization.
Transparency - Without levels of management, this also increases the speed of communication between employees, which leads to transparency throughout. Ideas also start to come more easily when there is more growth of collaboration.
Cost savings – Since there are fewer levels of management, flat organizations can reduce their expenses on salaries, primarily in the short term. Typically, high levels of management command higher salaries and receive promotions based on length of service.
Performance-based promotions - This allows pay increases to individuals based on performance rather than seniority. There is more freedom in the decision-making process that is not restricted by bureaucracy (typically in a hierarchical model), which motivates staff to reach their goals more easily. There are also cost savings in outsourcing specific business functions to consultants, such as Accounting or Human Resources.
Disadvantages:
Having too many direct reports – Leadership may find that as the organization grows and hires additional staff may lead to having all of those individuals report directly to those leaders. If a supervisor or leadership has too many direct reports, it may be hard to give attention to each individual if more people require their attention.
Limited promotion options – employees may find it harder to advance within the company with no opportunities to grow to additional job levels.
Unclear job responsibilities - This tends to produce a lot of generalists but no specialists. The individuals perform a broad range of duties. On the other hand, in a hierarchical structure, there are multiple levels branching into specialized positions. For example, payroll specialists or benefits coordinators are specific roles often done by one person in a larger organization.
What is a Hierarchical Organization?
Hierarchical organizations are the most common whereby an organization follows a pyramid structure. Every employee has someone to report to; the CEO/President reports to the board. There are multiple levels of management and specialized positions.
Advantages:
Defined level of leadership and management – Having a defined leadership level will provide clarity on organizational direction.
Promotion levels - There are opportunities for promotion to motivate staff to perform their best.
Having levels of management often encourages staff to specialize in specific areas that best represent the department or organization as a whole.
Disadvantages
Barriers in communication - Having multiple departments and levels of management can create a slow down of communication, which can hinder productivity.
Red tape - This ties into an increased bureaucracy that can hamper growth and delay change.
Increased costs - Having multiple layers of management and specialized positions can increase organizational costs due to additional salaries, benefit costs, insurance costs, and operating expenses.
Deciding to transition to a flat organization takes careful consideration and planning. Leadership will have to pay close attention the needs of the organization and the growth trajectory to determine how the new structure can support and align with organizational strategy and goals.
For more information on this topic, reach out to a member of the Kiwi HR Services team.