flat-organizational-structure

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.

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.

Key takeaways:

  • A flat organizational structure describes any business with a lack of middle management between employees and executives.
  • A flat organizational structure is perhaps best exemplified in gaming company Valve. Title-less employees are given the autonomy to 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.

Read Next: Organizational Structure.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"