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The Advantages of Flat Organizational Structure

You may be familiar with tall organizational structures that feature numerous layers of management, cascading from the executive level all the way down to front-line management. Flat organizational structures feature fewer layers of management. As a rule of thumb, managers in flat organizational structures oversee a larger number of employees than in more hierarchical structures. In flat organizational structures, employees are more empowered, operated with a greater degree of managerial independence and are expected to take responsibility for a range of traditionally managerial decisions in their daily routines.

You may be familiar with tall organizational structures that feature numerous layers of management, cascading from the executive level all the way down to front-line management. Flat organizational structures feature fewer layers of management. As a rule of thumb, managers in flat organizational structures oversee a larger number of employees than in more hierarchical structures. In flat organizational structures, employees are more empowered, operated with a greater degree of managerial independence and are expected to take responsibility for a range of traditionally managerial decisions in their daily routines.

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A flat organizational structure can yield several advantages, including costs savings, rapid adaptability, and an innovative workforce.

Organizational Cost Savings

Since flat organizational structures feature fewer layers of management, flat organizations can incur smaller expenses on salaries. Savings can be substantial, since manager-level staff generally command high-end salaries as well as expensive benefits and job perks. In addition, flat organizations often avoid granting salary raises and promotions simply based on length of service. Instead, organizations with a flat managerial structure tend to focus their career development efforts on top performers. Granting promotions based on performance makes more sense cost-wise, since the higher-salary expense will be directly tied to greater productivity.

Savings can accrue from non-traditional use of external resources as well. Companies with flat organizational structures can outsource non-vital business functions to further reduce expenses. Outsourcing tax preparation, recruiting activities and IT functions, for example, can allow companies to operate in a lean fashion by eliminating entire departments from their payrolls.

A manufacturing company with a flat organization, for instance, would keep its production operations in-house, but may opt to outsource activities from human resources to accounting. Taking advantage of staffing agencies for temporary office help is another technique to keep a company lean and flat.

Adaptability of Flat Organizations

Employees and work groups in flat organizations tend to be more adaptable in changing or unique circumstances, due to their smaller hierarchies and lack of bureaucracy.

When front-line employees are empowered to handle customer complaints without management approval, for example, complaint resolution can progress more efficiently, boosting customer satisfaction. Work groups assigned to unique projects, for example, can often craft their own unique operational processes in flat organizations, without seeking the approval of upper management.

The adaptability of a flat organization can be especially important when the unexpected arises. A company emergency, like a site explosion, a chemical spill or a weather-related flooding event, can be deftly handled by personnel who are already empowered to take quick action without having to seek approvals through numerous layers of management.

Collaboration is Encouraged

Open communication and collaboration are encouraged in companies with flat organizational structures. Since more employees are on a level playing field, more responsibility is placed upon each individual, creating a situation where innovative, collaborative self-starters excel and passive followers lag behind. As an added bonus, organizations with a flat structure can attract the type of employees who are encouraged by a work structure that requires self-motivation and teamwork.

Innovation and Creativity are Enhanced

Ideas come from a wider range of sources in a flat organizational structure than in companies with many layers of management. By giving everyone in a company an equal voice in submitting new ideas and feedback on operational processes, products, services, business models and company policies, companies can discover new ideas that may lead to competitive success.

Flat Line Management Techniques

Flat management structures in organizations have fewer levels of supervisors with individual managers taking on a greater amount of responsibility and control. Some organizations use multiple layers of management with top executives exerting the greatest control over the company's operations. The flat line management technique offers a flexible and efficient environment for businesses.

Flat management structures in organizations have fewer levels of supervisors with individual managers taking on a greater amount of responsibility and control. Some organizations use multiple layers of management with top executives exerting the greatest control over the company's operations. The flat line management technique offers a flexible and efficient environment for businesses.

Flexibility

The flat line management structure offers less bureaucracy than a traditional organization hierarchy. Lower-level managers have a greater amount of decision-making authority, which enables the company to make changes quickly. This can allow the organization to respond to customer demands and changes efficiently. In a flat organization, workers have a greater ability to make decisions on the job, which can improve the efficiency of the company.

Management and Employee Interaction

Managers and employees have a direct connection in the flat organization. Without extra layers of management, workers can communicate with the decision-makers at the highest level. Managers participate in the operations and work of the organization, and employees take a greater part in making decisions, which creates a better environment for communication. The empowerment employees experience in a flat organizational structure also motivates workers. A flat organization operates with a team approach -- every member of the company participates in the work and decisions. A motivated workforce benefits the company with lower employee turnover and higher productivity.

Cost Benefits

The elimination of layers of middle managers can result in a cost saving for the organization. A traditional organizational hierarchy has multiple layers of managers who generally earn higher salaries than workers do. The elimination of layers saves the company in payroll and benefit costs of middle managers. Improvements in efficiency and productivity also reduces expenses in the organization. A business with satisfied and motivated workers may experience a lower rate of employee turnover, which saves the organization the cost of recruiting and training new workers.

Disadvantages

There are some drawbacks to flat line management technique. For example, this approach may be difficult to implement in a larger organization. In addition, as each manager in a flat organization takes on greater responsibilities, workers may report to more than one boss. This can result in poorly defined roles. In an organization that allows workers to have a greater ability to make decisions, inexperienced decision-makers may make poor choices for the company.

Importance of Organizational Design ChoicesBy David Ingram

Organizational design serves as the foundation on which all company operations are built, including such vital factors as the grouping of employees within different departments and the formal managerial hierarchies within a company. Savvy early stage organizational design choices can create a foundation for success, allowing an organization to develop a strong company culture, grow in response to increasing demand and adapt to changes in the marketplace.

Organizational design influences the leadership structure of a company, setting forth reporting relationships and lines of authority reaching from the executive level to the front line. It is important to have a clear map of managerial responsibility and accountability to keep the company running smoothly. Without clear lines of authority, employees in different areas of the company can become misguided or confused, while others find themselves with an unnecessarily high level of supervision. The ideal leadership structure depends on the industry a company is in and the personalities of business owners.

Company Culture

The leadership structure put in place by organizational-design choices can have a direct and lasting effect on company culture. The grouping of employees in various departments and the managerial hierarchy influences the way employees interact with each other on the job. Organizational design can influence the degree to which front-line employees are allowed to solve complex problems on their own rather than involving a manager, for example. An organization designed to make extensive use of telecommuters will result in a company in which workplace relationships are often formed and strengthened solely through online interactions, as another example.

Future Growth

Organizational design choices made in the early stages of a business can either help or hinder growth plans. Organizational designs built to easily accommodate new managers and employees at different levels of the organization can add new positions without making significant structural changes. A company using freelancing telecommuters, for example, can add large numbers of freelancers with a small increase in the number of managers. A company that locates all employees in a small office, on the other hand, must acquire new office space or expand their current office to take on new employees.

Adaptability

Organizational design choices can develop distinct competitive advantages. Savvy business owners continually monitor changes in their industries and markets, looking for opportunities to adapt and develop new competitive advantages. Companies with taller organizational structures and complicated bureaucracies can find it difficult to adapt to changing market conditions, such as a growing use of lean business models or outsourcing in the industry. Companies with less complex organizational structures can find it easier to shift employees around, rework managerial hierarchies and redesign job descriptions for existing employees, all of which can increase efficiency or productivity in response to outside pressures.

Centralized Vs. Decentralized Organizational Design

Centralized organizational structures focus management authority and decision-making in a single executive team, with information flowing from top managers to various business units. Decentralized organizational structures, on the other hand, look more like multiple smaller representations of a single structure, featuring management redundancies and more close-knit chains of command. Understanding the difference between these two fundamentally different design philosophies can help you create an effective structure for your business.

Comparison of Management Structures

In a centralized design, each manager has authority over a wider range of employees, departments and business functions. Management styles can become autocratic in centralized structures, as managers find themselves with less time to interact with individual subordinates.

In decentralized designs, each manager is responsible for fewer employees and job functions, and numerous managers may share the same job titles and responsibilities in different areas of the business. Decentralized structures allow managers to make decisions on a smaller scale, which can be ideal for situations in which individual teams must adapt to unique workplace conditions, such as in direct sales.

Decisions and Information Flows

In centralized organizational structures, decisions are made at the top and communicated down through the layers. Middle and lower level managers do make decisions; however, they usually are limited to determining how to implement the orders handed down to them.

Decentralized structures are the exact opposite. Lower level managers and even front-line employees have the ability to make strategic decisions for themselves and their work groups, and information on their decisions is reported to higher levels of management.

Applications of Centralized Structures

Small businesses often operate in a centralized manner simply because of the smaller size of their workforces. In the beginning, a small business owner may be the only manager in the entire company, with all other employees reporting directly to the owner. Organizational designs can change as small companies grow, however.

A trucking company is an example of a company with a centralized organizational design. Trucking company managers make all operational decisions, sending information to individual drivers through dispatchers. Even self-employed owner-operators take direction from dispatchers to determine where to go each day.

Applications of Decentralized Structures

Franchise organizations provide an ideal example of a decentralized structure. Franchise companies control most product development and marketing decisions at the top, but they give franchise owners a great deal of independence in running their individual stores. Franchise owners make staffing decisions, decisions on hours of operation and compensation decisions completely on their own, for example.

Companies with a wide geographical reach also can benefit from a decentralized structure. Large multinational companies, for example, often include redundant executive positions for each region or country, rather than allowing a single executive team to make decisions across all divisions.

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