How a Flat Organization Chart Builds Trust and Develops Talent | Modis US

How a Flat Organization Chart Builds Trust and Develops Talent

Modis Posted 23 January 2020

If you keep up-to-date with developments in the IT industry, then you may have heard about some successful flat organizations.

For example, you may have read about Tesla or Google experimenting with flat organizational structures to gain a competitive advantage. It makes sense that you want the same benefits for your company:

  • increased transparency
  • more satisfied employees
  • elevated team performance and increased team productivity
  • faster decision making
  • get your product to market faster

Not to mention, a horizontal organizational structure offers some benefits for employees as well. Some reports claim the emphasis on teamwork and collaboration found in flat companies emphasizes freedom and creativity and promotes trust.

If you want to learn more about how a flat organization chart can build trust and develop talent, read on.

What is a flat organization?

If you're looking to define flat organization, you'll find many different definitions but they all share some common characteristics. A flat -- or horizontal -- organization is an organizational structure with decentralized leadership, few or no levels of management, transparency of information, and employees empowered to make decisions.

Many business leaders find the concept of a flat organization appealing. Promises of increased productivity, less bureaucracy , and more engaged employees may lead some to wonder if a flat structure may not be the best organizational structure for their company.

Although the idea of a flat organization is popular, it is far from a new one. As far back as 1950, a study of Sears Roebuck and Company was considered one of the first extensive empirical studies on the effect of flat and tall organization structure (For more timely resources take a look here.).

The buzz around this topic has led many business leaders to examine the benefits of a flat organization for both the company and individual employees.

A flat organizational structure may:

  • attract more talent
  • allow companies to grow more quickly
  • offer less job stress and higher job satisfaction

For example, researchers found that flat structures and hierarchical companies attract different pools of employees. Zitek and Jordan found that people with narcissistic traits had a stronger desire to work in a hierarchical organisation, compared to less narcissistic people.

Let's take a look at some other important differences between tall and flat organizations.

  • Flat organizations have fewer levels of management.
  • Primarily, larger companies opt for a tall structure as it becomes difficult to remain truly flat as you scale.
  • In a tall structure, several layers of management stand between front-line employees and upper management. Because tall organizations usually have fewer employees reporting to each manager, each manager can provide closer supervision.
  • Flat structures tend to empower the employees more by offering them a greater sense of responsibility and autonomy.

7 of the Most Commonly Used Org Chart Structures

Here are seven of the most commonly used organizational chart structures:

  • Hierarchical Structure -- This is probably the most common organizational structure. In a hierarchical organization structure, every employee belongs to a group or team and has one clear supervisor.
  • Matrix Structure -- In this organizational structure, reporting relationships are set up as a grid, or matrix, instead of in the traditional hierarchy. Employees with similar skills are pooled for work assignments. This often results in employees having more than one manager and is sometimes referred to as solid line and dotted line reports.
  • Horizontal/Flat Structure -- As mentioned, in this structure, the organizational chart is “flatter" as many levels of management are removed. Transforming a highly hierarchical organization into a flat one is known as “delayering."
  • Network Structure -- This organizational structure is less hierarchical and more decentralized. The network structure is based on social networks so its structure relies on open communication and reliable partners. Because it has fewer tiers, more control, and bottom flow of decision making the network structure is considered more agile than other structures.
  • Divisional Structure -- In a divisional structure, each organizational function has its own division related to either products or geography. Each division has the required resources and functions to support the product line and geography.
  • Line Organizational Structure -- In this organizational structure authority flows from top to bottom. There are no specialized and supportive services in these organizations.Each department head has control over their department.
  • Team-based Organizational Structure -- Teams working towards a shared goal while working on individual tasks is the defining feature of this organizational structure. These companies are less hierarchical and have flexible structures that promote problem-solving, decision-making and teamwork.

org chart
8 Real-Life Examples of Brands That Have a Flat Organizational Structure

Here are a few examples of successful organizations with a flat structure:

  • Gumroad -- This startup -- which allows millions of customers to sell their own digital creations --has a flat management structure. In fact, all 20 of the company's employees report to the CEO.
  • SquareSpace -- This New York City-based startup boasts of having a "flat, open and creative" culture as well as other attractive benefits and perks. SquareSpace claims this structure contributes to creating confident employees and improving morale.
  • Valve Corp -- This video game development company is often mentioned when discussing flat organizations because it has been “boss free" since 1996. Valve has gone “all in" on the flat concept embracing ideas like having employee pay determined by their peers, focusing on projects instead of promotions, and allowing all 300 employees to choose their own seating arrangements.
  • W.L. Gore -- Flat organizational structures aren't only for new startups. This company, founded in 1958, most commonly known as the maker of Gore-Tex, uses a “lattice" management structure to allow 10,000 employees to work without bosses.
  • 37signals -- This Chicago software company uses a horizontal structure to avoid the toxic relationships between labor and management that often accompany a tall organizational structure.
  • Nike -- This global brand uses a matrix structure, with several divisions separated into subsidiaries all reporting to Nike's global headquarters. Employees work on teams and teams are formed based on product and report to separate product managers.
  • Zappos -- Often cited as a poster child for Holacracy, this online shoe and clothes retailer abolished job titles in 2013 and uses self-organizing task groups to get work done.
  • Buffer -- The startup behind many popular social media management tools, Buffer moved to a flat management structure after their founder learned how Zappos was operating at a conference and reading Reinventing Organizations by Frédéric Laloux.

And the Verdict on Flat Organizations Is...

Is a flat organizational structure right for your company? As you've probably guessed from looking at these examples, the answer depends on many factors. A flat organizational structure has advantages and disadvantages.

If you need help figuring it out, the Modis team can help.

Contact us today.

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