What is a flat organizational structure?

A flat, or horizontal, organizational structure is short, wide and lean. It’s considered more business-casual and gives employees more of a voice in their position and overall business decision-making. This is the kind of structure seen in smaller businesses and start-ups because they have few employees. Though it’s an attractive option, it has drawbacks too.

Advantages of a flat structure

• Reduced organizational costs: Excess management in organizations costs companies trillions a year, and with about 24 million managers in the workforce, there are questions about whether all of them are necessary. Flat organizations cut out the middle management layer, which reduces overhead costs.
• Less micromanagement: Managers who scrutinize and chime in on many aspects of the work of their direct reports cause inefficiency and stifle creativity. Flat structures give employees more autonomy to do their jobs without managers constantly asking for details.
• More direct communication: Managers talking to other managers who talk to other assistants of other managers can lead to muddy miscommunication. Flat organizations peel back the bureaucracy and streamline communication, lessening confusion.
• Better collaboration: Having department and unit silos doesn’t help the overall goal because it stifles the flow of new ideas. With a flat business structure, collaboration is easier, and the ability of different teams to brainstorm improves creativity.

Drawbacks of a flat structure

• May lead to higher turnover: It’s normal for employees to aspire to higher levels where they get more responsibility and more benefits. In a flat organization, that kind of expectation is put away. Eventually, some employees leave because they see no way to advance their careers.
• Not all leaders can handle it: Leaders who have no problem being challenged by colleagues and subordinates are key to making flat companies work. They need to look at their goals from all angles and have the resources in place to strategically deal with growth and morale at every stage.
• Power struggles: Without defined roles, power struggles can erode the culture. The company head needs to be regularly visible and sharp at detecting this kind of issue and guiding everyone through it.

What is a hierarchical structure?

Also known as tall or vertical structures, the hierarchical structure is the more traditional pyramidal shape many businesses use. The pinnacle is the head of the company, and everything flows down from that top through the chain of command, known as executives and managers.

Advantages of hierarchical business

• Defined authority: The management levels are clear in a hierarchical organization. Employees know who to report to and what each manager is in charge of, creating a sense of comfort. Additionally, it helps managers work more efficiently and with authority.
• Clearer career path: Employees can better visualize their career path and advancement prospects. If they can see the targets they need to hit to move up the ladder, they become more motivated.
• Stronger focus: There is a stronger level of teamwork that comes with having a management hierarchy. Everyone is focused on accomplishing the common goal, and there’s a sense of camaraderie among teams.

Drawbacks of hierarchical business

• Bureaucracy: The hierarchical structure has different layers to work through. Because of this, it’s not as agile as it needs to be. Communication and decision-making take longer, leading to frustration.
• Team silos: A little competition is good for motivation, but when it comes to hierarchies, it can become more about isolation and less about cooperation. Silos and the narrow thinking they engender take away from productivity and creativity that can help a company move forward.
• Less empowering: Employees can become hyperaware of the corporate food chain, which can breed a mentality of “us against them.” This leads to lower-level employees feeling as if the managers have all the power while they have none.

Deciding between the two

Flat organizations can work for companies with fewer employees and can create a start-up-like culture, which can be attractive. These are the types of organizations that focus on creativity or have high-powered workers who need the freedom to act. This kind of decentralized structure is a good fit.

As companies expand, this structure becomes a challenge to implement and needs rethinking. An organization that’s run with a hierarchy has an established routine and traditional expectations, but it can become clunky and slow-moving if not managed. It’s hard for larger businesses to change to a flat organization, although some may choose to implement a hybrid of these structures to compensate.

While the size of the company is a key factor, the leadership can make or break the structure. Leaders who have a clear, holistic focus and plan for the organization will steer the business in the best organizational direction.

Organizational structures FAQs

What are the different types of organizational structures?

Along with flat and hierarchical, there are at least three other types of organizational structures:

• Functional combines employees with similar functions, such as finance or marketing.
• Divisional is more about grouping by product or team based on the division of labor and customer need.
• Matrix is a combination of function and divisional, making it more complex.

What’s an example of a flat structure?

Google is a matrix structure that’s a flat hierarchy because it supports growth and competitiveness while maintaining a start-up mentality. It has few levels of middle management, and all employees have the chance to lead projects.

How do you change your organizational structure?

Changing a business’s organizational structure means getting all employees involved in the process and thoroughly communicating reasons and plan progress. It’s a good idea to roll out the changes one department or unit at a time and incorporate subsequent lessons to make the process smoother going forward.