A circular organizational structure is a hierarchy drawn as rings instead of a pyramid: senior leaders sit at the centre, middle managers in the next ring and front-line staff in the outer rings. The levels still exist, but leaders are pictured at the heart of the company rather than at the top, and the visionradiates outward to every ring while information is meant to flow freely between them. The idea is often associated with Ricardo Semler’s Semco in Brazil and with circle-based systems such as holacracy.
The executive team sits in the inner ring and sets direction and values, rather than issuing step-by-step orders.
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Rings instead of rungs
Each ring is a level of responsibility, and departments sit side by side around the circle as parts of one whole rather than separate silos.
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Open lines across the circle
Anyone can reach the centre or a neighbouring team directly, through open-door habits and shared communication tools.
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Hiring and training for collaboration
Because coordination relies on people talking to each other, these firms stress communication skills and give training to every ring, not only to managers.
Where you see it today
Fewer rings at big companies
In September 2024 Amazon CEO Andy Jassy asked each senior-team organisation to raise the ratio of individual contributors to managers by at least 15% by the end of the first quarter of 2025, saying fewer managers would remove layers and push decisions closer to the front line (Jassy, 2024).
AI agents redraw the org chart
Microsoft’s 2025 Work Trend Index, based on a survey of 31,000 workers in 31 countries, argued that the org chart may give way to a Work Chart: teams that form around goals rather than functions, with AI agents in them and every employee acting as an agent boss (Microsoft, 2025).
Circles in practice: holacracy
Zappos was the largest company so far to adopt holacracy, which gives decision power to fluid teams called circles and to roles rather than individuals. Researchers who studied it found the gains and the strains of self-management are both real (Bernstein et al., 2016).
The Semco precedent
Ricardo Semler described a Brazilian manufacturer of 800 employees where most staff set their own hours, all could see the company books and most voted on important decisions (Semler, 1989). It remains the classic reference for leaders who want the centre to serve the rings.
Circular structure and related designs
Pyramid (hierarchical)
Where authority sitsAt the top, passed down level by level
Main riskSlow, filtered information
Circular
Where authority sitsAt the centre, radiating out to every ring
Main riskA new picture on an old hierarchy
Flat
Where authority sitsFew or no management layers
Main riskOverloaded leaders, hidden power
Holacracy
Where authority sitsIn roles and self-governing circles
Main riskHeavy process and rule-making
Lattice
Where authority sitsShifts to whoever leads each project
Main riskUnclear accountability
How to use it
Draw your current org chart as rings and check how many hops a front-line request needs to reach a decision-maker.
Give the centre a clear job: set direction and values, then remove obstacles; do not route every decision through it.
Open shared channels where any ring can ask leaders questions in public and get answers in public.
Write down decision rights for each ring, so openness does not turn into confusion about who decides.
When you add AI agents to teams, decide which ring owns each agent's output and who reviews it.
The Business Engineer lens
AI agents lower the cost of passing information between teams, which weakens the main reason for many management layers. The Business Engineer view is that structures built around a centre with direct lines to every ring will adapt faster than tall pyramids, provided decision rights are written down.
It is a hierarchy drawn as concentric rings, with senior leaders at the centre and front-line staff in the outer rings, designed to encourage communication across levels.
Is a circular structure the same as a flat structure?
No. A circular structure keeps its levels and changes how they relate; a flat structure removes most management layers.
What are the advantages of a circular structure?
It encourages open communication, makes leaders more reachable and treats departments as parts of one whole rather than separate silos.
What are the disadvantages?
Without clear decision rights it can confuse people about who decides, and if behaviour does not change it is only a new drawing of the old pyramid.
The complete explainer, cleaned up and reformatted for mobile.
A circular organizational structure is a form of hierarchical structure where senior-level employees occupy the inner rings of a circle and lower-level employees the outer rings. Unlike a traditional hierarchical structure where directives are sent down a linear chain of command, leaders in a circular structure are not considered to sit at the top of the organization.
Circular Hierarchy
DescriptionInvolves a flat, circular hierarchy with no clear top-down command structure, fostering collaboration and decentralized decision-making.
ExampleZappos, an online shoe and clothing retailer, embraced a circular structure known as a “holacracy” to promote employee autonomy and self-management.
Distributed Decision-Making
DescriptionDecision-making authority is distributed across the organization, allowing employees at all levels to make decisions related to their roles.
ExampleSpotify, a music streaming service, practices distributed decision-making, where cross-functional teams have autonomy to make decisions without top-down approval.
Fluid Roles
DescriptionEmployees have flexible roles, and they can take on different responsibilities based on their skills and interests, leading to a dynamic work environment.
ExampleGoogle, within its “20% time” policy, allows employees to spend a portion of their workweek on projects of their choice, encouraging fluid roles and innovation.
Collaborative Culture
DescriptionPromotes a collaborative and transparent culture where open communication and idea-sharing are encouraged, often using digital tools and platforms.
ExampleGitHub, a web-based platform for software developers, fosters a collaborative culture by allowing developers worldwide to collaborate on open-source projects.
Adaptive and Agile
DescriptionEmphasizes adaptability and agility to respond quickly to changing market conditions, customer needs, and emerging opportunities.
ExampleNetflix, a streaming service, utilizes a circular structure to enable cross-functional teams to adapt and pivot quickly to changing user demands.
Decentralized Leadership
DescriptionLeadership roles are decentralized, and there’s no single CEO or top leader; instead, leadership emerges based on expertise and contributions.
ExampleValve Corporation, a video game developer, employs a flat structure with no designated leaders; employees select projects to work on based on their interests.
Feedback-Driven
DescriptionRegular feedback loops and mechanisms for employee input are integrated to drive continuous improvement and innovation.
ExampleAtlassian, a software company, incorporates feedback-driven practices and encourages employees to share ideas through various channels.
Transparency and Information Sharing
DescriptionPromotes transparency through open access to information and sharing of company data with all employees, fostering trust and alignment.
ExampleBuffer practices radical transparency, sharing company financials, salaries, and strategic decisions with its entire workforce.
Customer-Centric
DescriptionFocuses on delivering value to customers through empowered and customer-facing teams, aligning the organization’s efforts with customer needs.
ExampleAmazon, a global e-commerce and tech giant, empowers customer-centric teams to drive innovation and improve the customer experience.
Employee Empowerment
DescriptionEmpowers employees to take ownership of their work and contribute to the organization’s success, resulting in a sense of ownership and responsibility.
ExampleWikipedia, a collaborative online encyclopedia, relies on a circular structure where volunteers worldwide contribute and take ownership of content creation and editing.
Understanding circular organizational structures
Instead, they radiate their vision outward from the center of the circle in all directions to every level of management.
Since the circular organizational structure is rather similar in functionality to a traditional hierarchy, the main difference lies in the psychological effect that the former has on the company.
Instead of an authoritarian leaders who shout orders from the top of a pyramid, the circular structure with each level clustered around the leader fosters a sense of inclusivity, collaboration, creativity, and accessibility.
To that end, the circular structure strives to promote the free flow of information between the various parts of the company.
It does not consider different departments or divisions to be semi-autonomous entities, instead seeing them as part of the same whole.
How the circular structure is embodied in practice
Creating a diagram of a circular organizational structure is the easy part. Embodying the style is more difficult, so here are a few best practices:
Develop onboarding, training, and development programs
New employees should be onboarded with a program that outlines the organization’s values and vision so that the purpose behind their role can be understood.
Training and development should also be available throughout the company without being restricted to particular departments or those with a certain skill set or number of years of service.
To create a culture of collaboration and continuous improvement, employee education should be offered regularly from internal and external sources.
Hire based on skills
The circular structure considers that employees should be recruited for their emotional intelligence and soft skills such as attitude, communication, and teamwork.
These individuals make superb leaders of collaborative, self-managing teams and if required, training can be provided to address a lack of any technical skills.
Establish an open-door policy
Open-door policies promote the free flow of information around the organization and enable employees to go directly to the source for clarification.
To support this critical component of a circular organizational structure, enterprise social network software such as Salesforce Chatter, Zoho Cliq, or Google Workspace can be used.
These platforms allow teams to assemble in one place and make communication, collaboration, and connection easier and more personalized.
It is important that businesses do not restrict these platforms to work-related content only. Granted, certain rules should be in place to ensure conversations remain appropriate and productive.
But since the circular structure also considers camaraderie to be important, why not create a channel where employees can chew the fat and discuss fun or interesting topics?
Case Studies
Semco Partners: Semco, a Brazilian company, is known for its unique organizational structure. Ricardo Semler, who led the company, introduced a circular structure where employees have significant autonomy and decision-making power. Workers are encouraged to form their own teams and define their roles. This fosters collaboration, and the company has thrived on innovation.
Morning Star: Morning Star, a California-based tomato processing company, operates with a circular structure. They have adopted a “Colleague Principles” system, where each employee is considered a colleague and is responsible for managing their own tasks and interactions. This self-management approach has resulted in high employee engagement and efficiency.
Buurtzorg: A Dutch healthcare organization, Buurtzorg, has implemented a circular structure in the healthcare sector. Nurses are organized into small, self-managed teams responsible for their patients. This approach has reduced bureaucracy and administrative overhead, allowing nurses to focus on patient care.
Valve Corporation: Valve, a prominent video game developer, employs a flat organizational structure. There are no formal hierarchies or managers. Instead, employees choose their projects and work in self-organized teams. This structure promotes innovation and creativity in game development.
W. L. Gore & Associates: Known for products like Gore-Tex, this company utilizes a lattice organizational structure. There are no traditional bosses or supervisors. Instead, employees collaborate and lead by influence. This approach encourages open communication and idea-sharing across the organization.
Bridgewater Associates: A hedge fund management firm, Bridgewater, operates with a circular structure that promotes radical transparency. Employees are encouraged to provide feedback and challenge decisions. This approach allows the company to make data-driven decisions and adapt quickly to changing market conditions.
Patagonia: Patagonia, an outdoor clothing and gear company, is committed to sustainability and environmental responsibility. The circular structure at Patagonia promotes a shared sense of purpose among employees, aligning with the company’s environmental mission. Employees are encouraged to take part in environmental initiatives.
Haier Group: Haier, a Chinese multinational, uses a unique organizational model called the “Rendanheyi” model. It emphasizes the creation of small self-managing teams that operate like independent micro-enterprises. This structure encourages innovation and customer-centricity.
Spotify: Spotify, the music streaming giant, employs a “Squad” model within a circular structure. Squads are small, cross-functional teams responsible for specific aspects of the product. This setup allows for agility, innovation, and quick response to user needs.
Berkshire Hathaway: Warren Buffett’s conglomerate, Berkshire Hathaway, operates with a decentralized structure. Subsidiary companies are given significant autonomy to manage their operations independently. This approach allows for flexibility and localized decision-making.
HCL Technologies: HCL, an IT services company based in India, implemented a “Value Portal” organizational structure. It involves a decentralized approach where employees have the freedom to make decisions without going through a hierarchical chain. This structure promotes innovation and rapid problem-solving.
Pixar Animation Studios: Known for its creativity and innovation in animated films, Pixar employs a collaborative and circular structure. Teams of artists, writers, and animators work closely on projects, fostering creativity and idea sharing across departments.
Valve Corporation: Valve, a video game developer, is often cited for its unique flat organizational structure. There are no traditional managers or job titles. Employees select projects to work on and join self-organized teams. This approach encourages autonomy and creativity.
Morning Star: Morning Star, a tomato processing company, operates with a circular structure based on “Colleague Principles.” Employees have significant autonomy and are responsible for their roles, fostering a sense of ownership and collaboration.
Wikipedia: Wikipedia, the online encyclopedia, functions with a decentralized and collaborative structure. Editors and contributors from around the world collaborate to create and edit content. Wikipedia’s success is driven by its community-based approach and open editing system.
Eileen Fisher: The fashion company Eileen Fisher embraces a circular structure focused on sustainability. The organization encourages employees to contribute to environmental initiatives, aligning with its commitment to eco-friendly practices.
Buurtzorg: This Dutch healthcare organization operates with a circular structure in the nursing sector. Small, self-managed teams of nurses provide patient care. This approach minimizes bureaucracy and empowers nurses to make decisions about patient needs.
The Morning Star Company: Another example from the food industry, The Morning Star Company, applies self-management principles in its tomato processing operations. Employees have the authority to manage their roles and work collaboratively to achieve company goals.
Spotify: Spotify, the music streaming service, follows an agile and circular structure. Squads, tribes, and guilds are organized to encourage collaboration among cross-functional teams, resulting in rapid product development.
Haier Group: Haier, a Chinese multinational, adopts the “Rendanheyi” organizational model. It involves small, self-managing teams that operate as independent micro-enterprises. This structure promotes innovation and customer-focused decision-making.
Zappos: The online shoe and clothing retailer, Zappos, embraces a decentralized and self-management approach. Employees have the freedom to make decisions and collaborate across departments, fostering a culture of customer service excellence.
HolacracyOne: HolacracyOne is an organization that promotes the holacracy management system. Holacracy replaces traditional management hierarchies with self-organizing circles and roles. This circular structure aims to increase agility and responsiveness.
Buffer: Buffer, a social media management company, practices a transparent and decentralized structure. The company values open communication and allows employees to work remotely. This approach encourages autonomy and flexibility.
Key takeaways
A circular organizational structure is a form of hierarchical structure where senior-level employees occupy the inner rings of a circle and lower-level employees the outer rings.
The main difference between a circular organizational structure and others lies in the psychological effect that a circle has on employee purpose, collaboration, creativity, and accessibility to senior-level staff.
To embody aspects of the circular organizational structure, the company should establish an open-door policy of communication, hire based on soft skills with less emphasis on technical prowess, and establish routine employee training and development.
Key Highlights
Circular Organizational Structure Defined:
Senior-level employees occupy the inner rings of a circular arrangement, while lower-level employees are in the outer rings.
Vision radiates outward from the center, fostering inclusivity, collaboration, creativity, and accessibility.
Psychological Effect and Collaboration:
The circular structure promotes a sense of inclusivity and collaboration, contrasting with traditional hierarchical structures.
Leaders are not positioned at the top, but their vision reaches all levels.
Flow of Information:
Emphasizes free flow of information throughout the organization.
Departments and divisions are seen as part of a unified whole, not semi-autonomous entities.
Practical Implementation:
Onboarding and Training: New employees should understand the organization’s values and vision. Training should be available to all, fostering collaboration and improvement.
Hiring for Skills: Emphasis on emotional intelligence and soft skills. Technical skills can be trained if necessary.
Open-Door Policy: Encourages direct communication. Enterprise social network platforms aid collaboration and connection.
Balancing Work and Camaraderie: Platforms can include both work-related discussions and fun topics to build camaraderie.
Collaboration and Inclusivity:
Circular structure fosters collaboration, open communication, and a sense of belonging among employees.
Continuous Learning and Development:
Regular training opportunities support growth, development, and alignment with the circular structure’s values.
Adaptive Leadership Approach:
Leadership is distributed across the organization, with vision radiating from the center, promoting accessibility and engagement.
Cultural Impact:
The circular structure’s psychological impact helps create a culture of openness, mutual respect, and collective contribution.
Zappos
DescriptionZappos, an online shoe and clothing retailer, adopted a circular organizational structure known as holacracy in 2013. Under holacracy, Zappos eliminated traditional management roles and hierarchies, instead organizing employees into self-governing circles focused on specific functions or projects. This approach aims to foster agility, innovation, and employee empowerment by decentralizing decision-making and promoting individual autonomy.
ImplicationsCircular organizational structures like holacracy promote employee autonomy and empowerment, which can lead to increased innovation, engagement, and adaptability. Copywriters may highlight Zappos’ innovative approach to organizational design as a reflection of its commitment to employee empowerment and customer-centricity, appealing to customers and prospective employees who value autonomy and creativity.
Buurtzorg
DescriptionBuurtzorg, a Dutch home care organization, operates with a circular organizational structure characterized by self-managed teams of nurses. Each team is responsible for organizing and delivering care to a specific neighborhood or community. By decentralizing decision-making and empowering frontline workers, Buurtzorg aims to improve patient outcomes, reduce administrative overhead, and enhance employee satisfaction.
ImplicationsCircular organizational structures like those implemented by Buurtzorg can lead to more responsive and effective service delivery, as decisions are made closer to the point of care. Copywriters may emphasize Buurtzorg’s patient-centered approach and innovative organizational model to attract clients and talent who value personalized care, collaboration, and autonomy.
Valve
DescriptionValve Corporation, a video game developer and distributor, is known for a flat structure, which is related to, but different from, a circular one. At Valve, employees have the freedom to choose which projects to work on and are encouraged to collaborate with colleagues across teams. This approach fosters creativity, flexibility, and a sense of ownership among employees, as they have the autonomy to pursue projects they are passionate about.
ImplicationsFlat structures like Valve’s prioritize employee autonomy and collaboration, which can lead to greater innovation and employee satisfaction. Copywriters may highlight Valve’s unique approach to organizational design and its emphasis on creativity and autonomy to attract talent and appeal to customers who value innovation, flexibility, and a collaborative work environment.
Morning Star
DescriptionMorning Star, a California-based tomato processing company, operates with a circular organizational structure based on principles of self-management and peer accountability. Employees at Morning Star have the freedom to make decisions related to their work without traditional managerial oversight. This approach fosters a culture of trust, collaboration, and accountability, as employees are empowered to take ownership of their roles and collaborate with colleagues to achieve shared goals.
ImplicationsCircular organizational structures like Morning Star’s promote a culture of autonomy, accountability, and collaboration, which can lead to higher levels of employee engagement and performance. Copywriters may emphasize Morning Star’s innovative approach to organizational design and its commitment to employee empowerment to attract talent and customers who value autonomy, trust, and collaboration.
Semco
DescriptionSemco, a Brazilian manufacturing and engineering company, implemented a circular organizational structure based on principles of democracy and decentralization. Under this model, employees have the freedom to set their own schedules, choose their projects, and participate in decision-making processes. Semco’s approach prioritizes trust, transparency, and employee well-being, resulting in high levels of employee satisfaction, innovation, and business success.
ImplicationsCircular organizational structures like Semco’s prioritize employee well-being, autonomy, and democratic decision-making, which can lead to higher levels of engagement and productivity. Copywriters may highlight Semco’s innovative approach to organizational design and its emphasis on trust and transparency to attract talent and customers who value autonomy, flexibility, and a collaborative work culture.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
