Flat Organizational Structure In A Nutshell

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.

Structure Type	Type of Structure	Structure Details	Advantages	Drawbacks
Functional Structure	Bureaucratic	Organized by functions or departments (e.g., marketing, finance, and production). Advantages include specialization and efficiency within functions, but it may hinder cross-functional collaboration.	– Specialization and efficiency within functions. – Clear lines of authority.	– Limited cross-functional collaboration. – May hinder innovation and adaptability.
Divisional Structure	Divisional	Organized by divisions or business units, each with its own resources and functions. It allows for autonomy but may result in duplication of resources.	– Autonomy for divisions. – Tailored approach to diverse markets.	– Potential duplication of resources. – May hinder coordination between divisions.
Matrix Structure	Dual Reporting	Combines elements of functional and divisional structures. Employees report to both functional and project or product managers. Offers flexibility but can lead to complex reporting relationships.	– Flexibility to work on multiple projects or products. – Efficient resource utilization.	– Complex reporting relationships. – Potential for conflicts and role ambiguity.
Network Structure	Collaborative	Collaborative and flexible, emphasizing partnerships and alliances with external organizations. Accesses external resources and expertise but can be complex to manage relationships.	– Access to external resources and expertise. – Efficient knowledge sharing.	– Complex management of external relationships. – Dependency on external partners.
Hybrid Structure	Combination	Combines different organizational structures to meet specific needs. Offers flexibility and efficiency but can be complex to manage.	– Flexibility to adapt to different areas of the organization.	– Complexity in managing different structural components. – Conflicts between elements.
Holacracy Structure	Self-Management	Decentralized and focused on self-management. Replaces traditional hierarchies with self-managed teams or circles. Enhances employee empowerment and autonomy but requires a cultural shift.	– Enhanced employee empowerment and autonomy. – Faster decision-making at the team level.	– Cultural shift and commitment to self-management principles required. – Role ambiguity possible. – Not suitable for all organizations.
Team-Based Structure	Collaborative	Emphasizes self-managed teams responsible for specific tasks or projects. Enhances teamwork and collaboration but requires skilled team leadership.	– Enhanced collaboration and teamwork. – Empowerment of team members.	– Requires skilled team leadership. – Potential for team conflicts. – May not suit all organizational functions.
Circular Structure	Circularity	Organized around circular, self-managing teams known as “circles.” Promotes empowerment and adaptability at the circle level but requires a shift in organizational culture.	– Empowerment of circle members. – Flexibility and adaptability at the circle level. – Enhanced communication and collaboration.	– Requires a shift in organizational culture and mindset. – Potential challenges in managing inter-circle relationships. – May not fit all contexts.
Flat Structure	Reduced Hierarchy	Reduces the number of hierarchical levels. Enhances communication and decision-making speed but may lack clear career advancement paths.	– Enhanced communication and decision-making speed.	– May lack clear career advancement paths. – Potential for limited hierarchy-related specialization.
Tall Structure	Multiple Hierarchy Levels	Has multiple hierarchical levels. Provides clear career paths but can result in slow decision-making and communication.	– Provides clear career paths. – Specialization and expertise at different levels.	– May result in slow decision-making and communication. – Potential for bureaucracy.
Centralized Structure	Concentrated Authority	Concentrates decision-making authority at the top of the hierarchy. Ensures consistency and control but may hinder adaptability.	– Ensures consistency and control. – Clear lines of authority.	– May hinder adaptability and innovation. – Potential for bureaucracy.
Decentralized Structure	Distributed Authority	Distributes decision-making authority across the organization. Enhances adaptability and innovation but requires strong communication and coordination.	– Enhances adaptability and innovation. – Empowers employees at various levels.	– Requires strong communication and coordination. – Potential for confusion without clear guidelines.
Virtual or Networked Structure	Technology-Driven	Employs technology to connect employees across locations. Reduces the need for physical offices but may challenge traditional management practices.	– Reduces the need for physical offices. – Enables remote work and collaboration.	– May challenge traditional management practices. – Requires effective use of technology.
Boundaryless Structure	Elimination of Boundaries	Eliminates traditional boundaries within and outside the organization. Promotes innovation and collaboration but requires a culture of trust and transparency.	– Promotes innovation and collaboration. – Encourages a culture of trust and transparency.	– Requires a significant cultural shift. – May face resistance to boundary elimination.
Lean Structure	Streamlined and Efficient	Emphasizes efficiency and cost reduction by eliminating unnecessary layers and processes. Increases efficiency but may strain resources.	– Increases efficiency and cost-effectiveness. – Streamlines processes.	– May strain resources in the pursuit of efficiency. – Potential for overemphasis on cost reduction at the expense of other factors.
Mechanistic Structure	Rigid Hierarchy	Characterized by a rigid hierarchy and strict control. Ensures clear lines of authority but may hinder adaptability.	– Ensures clear lines of authority. – Efficient decision-making within established processes.	– May hinder adaptability and innovation. – Potential for bureaucracy and slow decision-making.
Organic Structure	Flexible and Decentralized	Flexible and adaptable, with decentralized decision-making. Encourages innovation but may lead to ambiguity in roles and responsibilities.	– Encourages innovation and adaptability. – Empowers employees to make decisions.	– May lead to ambiguity in roles and responsibilities. – Requires strong communication and coordination.
M-Form (Multidivisional) Structure	Divisional and Autonomous	Divides the organization into semi-autonomous divisions or subsidiaries, each with its own leadership. Suitable for complex organizations but may require effective corporate-level coordination.	– Provides autonomy to divisions or subsidiaries. – Tailored approach to diverse markets. – Specialization within divisions.	– Requires effective corporate-level coordination. – May lead to variations in strategies and practices across divisions.

Understanding a flat organizational structure

A flat organizational structure has significantly fewer management layers than a traditional, hierarchical structure.

The structure is characterized by large teams reporting to a single manager. This scenario reduces the capacity for control over task execution and subsequent micromanagement.

In some businesses, there is a complete absence of middle management with frontline employees reporting directly to executives.

This creates a collaborative and interconnected work environment well suited to start-ups or any organization wishing to adopt a more modern management approach.

Gaming company Valve is perhaps the most extreme example of a flat organizational structure. Valve employees do not hold titles and they are not issued with directives by middle or upper management.

Instead, the company has adopted a visible, collaborative approach. Every employee can see what projects are being worked on and join the team of any project that takes their fancy.

Valve employees can also start their own projects provided they can secure funding and build a competent team.

Strengths and weaknesses of a flat organizational structure

Companies such as Valve are the exception rather than the rule.

With that in mind, let’s take a look at the strengths and weaknesses of the flat structure to get an idea of where it may be best suited.

Strengths

Lower operating costs

When employees are given more freedom to make decisions, there is little need for mid-level management.

This saves the business a significant amount of money on wages that can be directed elsewhere.

Improved communication

In a hierarchical structure, information moves slowly up the chain as it works its way through various levels of management.

In a flatter structure, communication does not need to go through several intermediaries and becomes more efficient as a result.

The quality of communication also increases because there is less potential for facts to be distorted or misinterpreted.

Increased employee motivation and satisfaction

Autonomous employees tend to be more motivated to produce desirable results for the company.

This increases morale and productivity while also decreasing employee turnover.

Weaknesses

Unsuitable for large organizations

The flat structure is most suited to start-ups and smaller businesses with a manageable number of employees.

In larger organizations, the ratio of employees to managers can become disproportionate.

Management may be unaware of unmotivated or poorly behaving employees.

They may also lack the required support to effect important decisions.

Hinders employee retention

While some employees will be content to work under a flat structure indefinitely, others will want to climb the corporate ladder.

Given that there is little scope for promotion, aspiring employees may seek work elsewhere.

Creates power struggles

When employees do not have the overarching presence of a superior, power struggles can develop.

This creates confusion and disharmony and also causes a loss of productivity.

Flat organizational structure examples

For the remainder of this article, we’ll take a look at some companies employing the flat structure.

Buurtzorg

Buurtzorg is a Dutch healthcare organization founded in 2006 by Jos de Blok.

The company was created because de Blok felt that the ability to deliver proper healthcare was hindered by excessive bureaucracy and little employee autonomy.

Buurtzorg now employs over 15,000 nurses in 950 teams to deliver at-home care across the Netherlands with a customer-centric focus.

Each team is self-managing, with each member of the team sharing decision-making responsibility and deciding how the work is organized.

Reaktor

Reaktor is a Finnish tech company with a core focus on the design and development of digital products and services.

Reaktor consists of autonomous teams which the company claims helps it attract the most talented individuals and provides an environment conducive to personal growth, excellence, mutual respect, and shared responsibility.

The company is comprised of 95% seniors and 5% juniors, but there is no association between seniority and competence. “Anyone can claim responsibility and leadership, provided they have the means to do it”, according to Reaktor Creative Director Hannu Oksa.

Gumroad

Gumroad is an online marketplace for self-publishers of books, memberships, courses, and other products. It was founded in 2011 by Sahil Lavingia and Sachin Khanna.

Lavingia believes that the people who define decisions in a company are more important than the people who make the decisions.

He uses the flat organizational structure to convey the importance of a unified purpose and access to similar toolsets.

One-on-one communication via email is also discouraged in favor of public communication mediums such as Asana and HipChat.

The Morning Star Company

The Morning Star Company is an American agribusiness and food processing company that started life as a trucking firm in 1970.

The company is the largest producer of commercial tomato products and is part of an industry in California that produces around 96% of the total U.S. output or one-third of global output.

However, The Morning Star Company is better known for its flat organizational structure.

There are absolutely no managers of any kind, with employees instead reporting to each other based on a colleague letter of understanding (CLOU) that they create.

Each CLOU outlines a personal commercial mission (PCM) which details how an individual will contribute to the company via activities, KPIs, and an estimated time commitment.

Zappos

Shoe company Zappos did away with its hierarchical structure in 2014 and replaced it with a holacracy.

The brainchild of then-CEO Tony Hsieh, the flatter holacracy organized the company’s 1500 employees into around 400 different circles.

Within these circles, employees could have multiple roles and since there were no managers or job titles, personal accountability and company-wide transparency increased.

Hsieh noted at one point that the flatter structure of holacracy enabled productivity to increase as Zappos expanded – indeed, the reverse is often true in companies with a hierarchical structure and many layers of management. It also made Zappos more resilient and flexible.

In a Yahoo! Finance article dated January 2020, however, reports claimed the company had phased out some aspects of its flat structure.

Zappos executive John Bunch explained that holacracy had made the company too internally focused, with some managerial positions reinstated to ensure employees remained focused on the customer.

W. L. Gore & Associates, also known as WL Gore, is best known as the manufacturer of waterproof Gore-Tex fabrics.

On the company’s website, it describes a flatter organizational structure in the context of its fundamental beliefs and use of the term “Associates” to denote employees:

“We believe in the individual and each Associate’s potential to help Gore grow and succeed. We also believe in the power of small teams, and through Gore’s lattice structure, Associates can communicate freely to assemble talents and diverse perspectives to quickly make good decisions and produce quality work that helps us deliver on our promises to our customers.”

Under this lattice structure, Gore’s multi-disciplined teams are self-managing with no clearly defined communication channels and management or leadership positions.

Associates are also afforded the autonomy to grow their knowledge, skill, and scope of responsibility.

WL Gore then explains that all Associates have a vested interest in the company’s success.

This means they share in Gore’s risks and rewards and are incentivized to stay committed to the company’s long-term success.

Basecamp

Web application company Basecamp is another that embodies a flat organizational structure.

For founder Jason Fried, Basecamp’s core focus is more on getting things done and less on what titles people possess or what they wear to work.

Unlike some of its competitors, every decision made within the company’s walls is about maintaining simplicity and a calm environment.

What’s more, small but flexible teams work on projects based on employee interests for a six-week period.

There is no project manager as such, with the product designer serving as team leader and also working closely with the programmers on all tasks.

Over the aforementioned six-week period, hours are not tracked and it is up to the team to decide how the work is organized.

Project updates and related communications are centralized in one tool so that any employee can view project progress.

Key takeaways:

A flat organizational structure describes any business with a lack of middle management between employees and executives. The structure is often associated with gaming company Valve, where autonomous employees without titles work on any project of their choosing. Provided they can secure the funding and manpower, they can also start their own projects.
A flat organizational structure lowers wage costs significantly, allowing many start-ups and smaller companies to remain viable. Larger businesses will find the flat structure unsuitable as the ratio of employees to managers becomes untenable.
Examples of companies with such a structure include Danish healthcare organization Buurtzorg and Finnish tech company Reaktor, where no correlation is made between seniority and competence.
Online marketplace Gumroad is another company that enjoys the benefits of a flat organizational structure. Tomato producer The Morning Star Company is devoid of management staff with employees accountable to each other with a personal contract that defines a personal mission, action plan, and key performance indicators.

Key Highlights of a Flat Organizational Structure:

Reduced Management Layers: In a flat organizational structure, there are fewer management layers compared to traditional hierarchical structures.
Direct Communication: This structure encourages direct communication between employees and executives, leading to faster and more efficient information flow.
Collaborative Environment: It creates a collaborative and interconnected work environment, particularly suited for startups and modern management approaches.
Valve Example: Gaming company Valve is an extreme example, where employees have autonomy, no titles, and can work on projects of their choice.
Strengths:
- Lower Operating Costs: Fewer management positions result in cost savings.
- Improved Communication: Communication is more efficient due to fewer intermediaries.
- Increased Employee Motivation: Autonomous employees are more motivated, leading to higher morale and productivity.
Weaknesses:
- Unsuitable for Large Organizations: Flat structure may become impractical in larger organizations.
- Employee Retention: Limited promotion opportunities may lead to turnover.
- Power Struggles: Absence of clear hierarchy can lead to power struggles and confusion.
Examples of Companies with Flat Structures:
- Buurtzorg: Dutch healthcare organization with self-managing teams of nurses.
- Reaktor: Finnish tech company with autonomous teams emphasizing personal growth and shared responsibility.
- Gumroad: Online marketplace with a focus on unified purpose and communication.
- The Morning Star Company: Agribusiness with no managers; employees report to each other based on personal contracts.
- Zappos: Transitioned to a holacracy, distributing decision-making power throughout the organization.
- W. L. Gore & Associates: Known for Gore-Tex fabrics, it operates with small self-managing teams.
- Basecamp: Web application company emphasizing simplicity, flexibility, and team-based decisions.
Key Takeaways:
- Flat structure reduces middle management, enhancing communication and collaboration.
- Examples like Valve, Buurtzorg, Reaktor, and others showcase successful implementations.
- Flat structure has strengths in cost reduction, improved communication, and employee motivation.
- However, it may not be suitable for larger organizations and can lead to retention and power struggles.

Case Study	Strategy	Outcome
Valve Corporation	Flat Organization: Operates with no formal hierarchy, allowing employees to choose their projects and collaborate freely.	Encouraged creativity, rapid innovation, and high employee satisfaction, leading to successful game development and platform growth.
Gore & Associates	Flat Organization: Structured with a minimal hierarchy, promoting self-managed teams and open communication.	Increased innovation, employee engagement, and agility, driving strong market performance and product development.
Zappos	Flat Organization: Adopted Holacracy, a system of self-management with distributed authority among small teams.	Enhanced employee empowerment, innovation, and customer satisfaction, driving strong brand loyalty and sales growth.
Morning Star	Flat Organization: Operates with a self-management model where employees set their own roles and responsibilities.	Improved operational efficiency, employee engagement, and innovation, becoming a leader in the food processing industry.
Spotify	Flat Organization: Uses a squad model where small, cross-functional teams operate independently but align with broader company goals.	Enhanced agility, innovation, and product development, driving strong user growth and market leadership.
Buurtzorg	Flat Organization: Implemented a model where small, self-managing teams of nurses operate independently.	Improved patient care, employee satisfaction, and operational efficiency, becoming a model for decentralized healthcare delivery.
GitHub	Flat Organization: Operates with a minimal hierarchy, promoting autonomy and collaboration among employees.	Increased innovation, employee satisfaction, and product development, driving growth and market leadership in software development.
Medium	Flat Organization: Adopted Holacracy to foster a self-managing and collaborative work environment.	Improved organizational flexibility, employee engagement, and innovation, driving platform growth and content quality.
Semco	Flat Organization: Operates with small, self-managing teams and a highly decentralized structure.	Enhanced innovation, employee satisfaction, and adaptability, driving growth and resilience in diverse markets.
Netflix	Flat Organization: Promotes a culture of freedom and responsibility with minimal hierarchy.	Enhanced innovation, speed to market, and employee satisfaction, driving strong growth in subscribers and market presence.
Treehouse	Flat Organization: Uses a flat structure to promote autonomy and collaboration among employees.	Increased employee satisfaction, innovation, and agility, driving growth and leadership in online education.
W.L. Gore & Associates	Flat Organization: Operates with small, autonomous teams that work on specific projects.	Increased innovation, employee engagement, and product development, driving market leadership in advanced materials.
Basecamp	Flat Organization: Promotes a flat structure with minimal hierarchy, fostering autonomy and collaboration.	Enhanced innovation, employee satisfaction, and product development, driving growth and leadership in project management software.
Valve Corporation	Flat Organization: Operates with no formal hierarchy, allowing employees to choose their projects and collaborate freely.	Encouraged creativity, rapid innovation, and high employee satisfaction, leading to successful game development and platform growth.
Riot Games	Flat Organization: Promotes a flat structure with minimal hierarchy, fostering autonomy and collaboration.	Enhanced innovation, employee satisfaction, and game development, driving success in the gaming industry.
IDEO	Flat Organization: Uses a project-based flat structure to promote creativity and collaboration.	Increased innovation, employee engagement, and client satisfaction, driving growth and leadership in design consulting.
Buffer	Flat Organization: Operates with a transparent and minimal hierarchy, promoting autonomy and collaboration.	Enhanced employee satisfaction, innovation, and operational efficiency, driving growth and leadership in social media management.
Haier	Flat Organization: Implemented a microenterprise structure where small autonomous teams operate independently.	Increased innovation, agility, and market responsiveness, driving strong growth and competitive advantage.
Patagonia	Flat Organization: Integrated sustainability into all aspects of the business with a focus on collaborative decision-making.	Enhanced brand loyalty, increased customer satisfaction, and achieved strong growth by aligning business practices with environmental values.
FAVI	Flat Organization: Adopted a flat structure with self-managed teams responsible for their own production units.	Increased productivity, quality, and employee engagement, driving competitiveness in the automotive industry.