The benefits of a flat organisational structure

Andy McComments off.

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As we discussed in a separate blog post Why a flat structure maybe strangling your business it is important for a developing business to periodically reconsider its structure in line with the growth and complexity of the organisation.  Many businesses start out with a Flat organisational structure yet do not review this as important changes occur – which may create internal issues.  However, it is also important to note that for some organisations, the flat structure approach can encourage innovation and further development.

Flat organisational companies are those with excessive layers of management – particularly middle management – stripped out. Such companies have many advantages over their conventional, hierchical counterparts.  Experience and expertise can be better shared and creativity is fostered. Flat companies can be more cohesive. They can function better when there are complicated networks of shareholders, employees, customers, suppliers and partners spread round the world.

Traditionally, control in hierarchical companies is exerted through centralisation, division of labour and formal processes and rules.  Flat organisations rely on a decentralised approach to management. They require a high degree of employee involvement in decision-making. Flat companies are structured around customers, teams, problems and opportunities. They are built to adapt. They decentralise authority, share information, diffuse and distribute competency, and use reward systems that are primarily team-based. The strategies of flat companies put a premium on growth, innovation, the use of technology. They recognise the reality of shorter product life cycles. They pay less attention than traditionally structured companies to cost-containment and operating efficiency.

Real control in flat companies lies in mutual agreements. It is dispersed throughout the organisation with an emphasis on sustainable self-control and problem-solving.  Staff are required to be self-managing, self-organising, self-designing. They are trusted to take personal responsibility for satisfactory outcomes. By pushing decisions downward, flat companies aim not only to boost accountability and morale but also “to remain competitive in the face of increased competition” and “pursue a streamlined, efficient organization that can respond more quickly to customers.”

The flat organisational structure can work anywhere where there is a high level of truth,  what organisations do not need is the business owner/CEO thinking that they have a flat structure when this is a cover for empire building for another member of the management team.

The Flat organisation structure  works best when:

• The environment is changing rapidly. Firms organised around small, autonomous teams are much more nimble than large hierarchies. This makes it easier to respond to change.
• Your main point of differentiation is innovation. Firms organised with a flat structure tend to be much more innovative – if this is important strategically, then you should be flat.
• The organisation has a shared purpose and a clear vision that each team is as important as other teams.

The flat structure approach works best when the employees are rewarded for success on an incentive basis. It puts everyone in the same boat, all pulling together trying to achieve the same goals.

In a flat organisational team, a  strong management team is required and will be allowed to manage the managers will need to  create quality teamwork in each department, and if the departments can work together to create a larger team effort, success will be assured.

The business owner / C.E.O need to  agree goals, objectives and timescales with the managers but the managers are clear that are responsible for achieving them and within the clear parameters set. Each department or group acts as if its manager was the chief executive officer of that group. The manager’s answer is the final word, and he or she does not have to retreat to the mother ship for ratification, affirmation or permission.  This is where the flat structure can become a little difficult, in many organisations there is a “long standing” manager whom often has the ear of the business owner / CEO,  this person can assume the authority of the business owner / CEO, interfering in other areas of the business and in truth a hierarchy is present in all but name!

A business owner or  CEO of a flat organisation will need to  expect that managers will make errors in judgment and will support them when this happens. This is critical since every decision will not be correct or the best. As long as enough of the decisions are appropriate, then the business owner / CEO should cultivate decision-making by supporting managers.

Managers should be encouraged to occasionally take risks and experiment, and maybe they will succeed, bringing additional profits into the company. They should be supported in their efforts and encouraged to try again if they fail, even if they fail more often than they succeed, as long as they reach their objectives and projections.

A truely flat organisation is one which each manager is repsponsible for their own departmental business plan and supporting budget, and they have the authority to implement it.

So, here at IMentor, we are often asked what the CEO / Business owner would be doing if he or she is no longer responsible for the operation and is running a flat organization with the managers controlling and operating the delivery? Our answer is that  CEO’s real job is to Plan, train, and review:

Plan. Chart the future course and goals. Plan for capital investments, growth and development.
Train. Make certain your managers are constantly learning new skills and acquiring additional capabilities. Provide training opportunities and make them mandatory.
Review. Always monitor the results and the key indicators so you have a pulse on your progress and success. If faltering, you’re there as soon as possible to help make corrections. You’re supporting your managers’ efforts, not ignoring a performance issue but not doing their job for them. Inspect your managers’ work, often and deeply.

 

benefits, flat, organisational, structure Posted in: Leadership, Productivity