When a company utilizes a flat organizational structure, there are fewer, if any, levels of middle management included within the chain of command. The hierarchy still begins with the company’s C-Suite, but there isn’t a “buffer layer” between them and the front-line staff.
The advantage of this horizontal organizational structure is that it allows decisions to be made faster. Instead of the C-Suite needing their middle managers to collect information assets from the front-line staff and then reporting it to them, they can obtain the information directly. Faster decisions create highly satisfied customers and often improves employee morale.
The disadvantage of using the flat organizational structure is that it can create role confusion within highly structured teams. When there is confusion within the employee base, that often translates to confusion within the customer base. Confused customers become unhappy customers and that can change their brand loyalty.
Here are some of the additional flat organization structure advantages and disadvantages to think about.
What Are the Advantages of a Flat Organizational Structure?
1. The cost structure of a business is improved.
One of the greatest costs to the annual budget for a business is labor. By eliminating multiple layers of middle management, a flat organizational structure can quickly save hundreds of thousands, if not millions, of dollars for certain businesses. Although large companies can struggle to implement this structure because of the dynamics of size, SMBs who implement a flat organizational structure effectively can see tremendous savings.
2. It is a structure that improves employee morale.
Without middle management expertise, the flat organizational structure requires the front-line staff to be experts in their job responsibilities. Because there is a focus on hiring the best people possible for each position, less turnover typically occurs. Fewer bosses means fewer conflicts and that makes for happier employees as well. That improves employee morale.
3. There is less miscommunication.
Because this organizational structure is based on direct contact, there are fewer opportunities to misinterpret feedback or ideas. Instead of relying on an intercessory, the C-Suite gathers information directly from the source and this can limit the amount of miscommunication that can occur at the workplace. At the same time, the front-line staff receives direct communication from the C-Suite, allowing each worker to make clear adjustments to their responsibilities when necessary.
4. There is less dominance in the workplace.
The flat organizational structure naturally increases the levels of independence that workers experience in their job every day. There are fewer eyes looking over their shoulders or criticizing their ideas, which allows each worker to focus on what they do best instead of focusing their efforts to please a supervisor who controls the feedback that goes into their personnel file.
5. It can improve employee retention.
Highly-skilled workers often struggled in structured hierarchy environments because their creativity is often limited. In a flat organizational structure, their creativity is encouraged. For many workers, career satisfaction isn’t just about the size of the paycheck. It also involves a chance to pursue their passions and this business structure can make that happen.
What Are the Disadvantages of a Flat Organizational Structure?
1. Bad decisions can be made under the guise of expertise.
Because the flat organizational structure is essentially a “bottom up” type of hierarchy, there is tremendous reliance on the expertise of the front-line staff. If someone does not have the level of expertise that their job requirements demand of them, the C-Suite could make decisions based on false expertise. That can lead a business down the wrong path very quickly.
2. It can lead to a lot of wasted time.
Employees in this type of structure do benefit from being able to approach the C-Suite with their ideas. There is also a lot of time spent talking with others to ensure that an idea isn’t being duplicated before it is presented. Although access is a benefit, because there are not continuous lines of communication between varying departments or teams, a lot of time can be wasted when trying to be innovative.
3. This structure can limit productivity.
The flat organizational structure assumes that each worker is going to give their best effort every day. It lacks close supervision in many instances, which means workers can get away with not working at all on some days. That is especially true for workers who might be in a satellite office. Although there are monitoring programs that can track productivity or worker presence, that isn’t always the same as having a manager be responsible for team productivity.
4. It isn’t scalable.
This structure works well for small organizations, but what happens if a company experiences high levels of growth over a short period? This structure isn’t scalable, so fast growth in an SMB or startup can cause the C-Suite to lose control over their workplace. That can lead to poor decision-making experiences, unproductive behaviors, and other negative workplace experiences.
5. There is a lack of work-life balance.
Many people who work within a flat organizational structure find themselves always connected to their work. There is a certain “responsibility” that comes when the C-Suite sends out an email asking for a job to be completed or feedback to be offered. That makes it difficult for some workers to turn away from their professional duties when enjoying personal time, which affects their work-life balance.
6. It can encourage power struggles.
Because there is a lack of management definition in most flat organizational structures, a power vacuum is created when the C-Suite is not present. In an SMB, the C-Suite might involve just one person. If that person leaves, the employees bicker amongst themselves about who should be in charge when a replacement is not named. That bickering leads to confusion, which leads to resentment, and that leads to a lack of productivity.
7. It can hinder employee retention.
Highly-skilled workers also like having opportunities to advance upward through the chain of command. Because middle management positions are naturally limited in this business structure, there are fewer advancement options. An employee who needs something fresh or new to do may find few options available to them, which encourages them to seek out a new job instead of staying put.
8. There can be a lack of responsibility definition.
Instead of having a defined role, many companies that incorporate a flat organizational structure tend to ask people to do a little bit of everything. That makes it difficult to stay focused on a specific task for many workers. For the average person, up to 15 minutes of lost productivity can happen whenever a task is switched. That lessens their effectiveness and ultimately is costly to the employer.
These flat organizational structure advantages and disadvantages show us that when it is implemented with a clear plan, it can be successful. Every structure has certain challenges that must be met, but when these negatives are proactively approached, their impact to the business and each worker can be effectively minimized.