While we can all definitely agree that the world is round, the corporate world is looking a lot flatter these days. But is flattening out the organization always the right move? And what happens to human resources when the organization starts losing layers and spreading out?
We’re all familiar with the traditional org chart: a towering pyramid with the CEO perched at the very top like the cherry on a corporate sundae. But over the last two decades, the pyramid has increasingly come to look like a gentle slope, as the strict hierarchy of the corporate ladder is replaced by a more complex arrangement of interrelated and self-determining roles.
Flat comes in many flavors
When it comes to the flattening of organizational structures, there are a range of gradients. In some cases, a company might decide to eliminate a redundant or poorly performing layer of management. In others, the entire concept of hierarchy might be abolished. An article on Valve Corporation, an American video-game developer, revealed that employees don’t have bosses and set their salaries collectively. Valve’s employee handbook is subtitled, “A fearless adventure in knowing what to do when no one’s there telling you what to do.” Similarly, Morning Star, the world’s largest tomato processor and one of the most famous examples of a flat organization, assigns no job titles and lets every employee decide for themselves what to do, how to do it, what targets to set, and how much budget to spend.
The benefits of de-layering
Flattening or ‘de-layering’ the organization is gaining popularity with businesses of every type. According to The Flattened Firm – Not as Advertised, a study by Julie Wulf, firm hierarchies changed dramatically during the 80s, 90s, and early 2000s. The number of COOs decreased by around 20 percent between 1986 and 1998, and the number of positions between division heads and CEOs declined by about 25 percent during a similar time period.
There are many reasons for the rising popularity of the deflating organization. Wulf’s study mentions customer and market responsiveness and improved accountability and morale as two of the perceived benefits of going flat. An article in Fast Company cited an HBR study of Morning Star that showed the company’s commitment to self-management created excitement and joy among employees who were able to use their talents to the fullest and connect their output to the success of their colleagues and the organization.
Flat organizations are also seen as more innovative, because anyone can come up with and pursue a great idea, and because the rich lattice of interconnections supports greater collaboration and cross-pollination.
And they’re appealing to the increasingly important Millennial contingent. Employees between the ages of 18 and 35 are predicted to make up between 50 to 75 percent of the workforce by 2020, so no organization can afford to ignore their workplace preferences. A recent Forbes article emphasized Millennial workers’ demand for more direct access to senior management, less bureaucracy, and a culture that rewards ideas and results, wherever they come from.
When flat… falls flat
While the appeal of a flattened hierarchy is undeniable, it isn’t a silver bullet. Google famously eliminated managers from their engineering teams in 2002, because the role wasn’t perceived to add any value. Within a few months, employees were pleaded to have them brought back. What are some examples? Zappos got a lot of early positive attention for adopting a holacracy—a system of self-organizing teams and distributed decision-making—but when the dust settled, it appeared that the experiment may not be successful: a recent article in The Atlantic reported a “Zappos exodus” of employees who are unhappy with the new organizational model. more recently, specific type of distribute but cracks have started to show recently, with a huge number of people leaving the company.
Impact of flat structures on HR
Love it or hate it, flat organizations of one type or another are here to stay. So how can HR professionals prepare to support it? Much will depend on the type of de-layering your organization chooses to adopt, but most are unlikely to consider the type of radical practiced at companies such as Valve and Morning Star. Usually, the transition involves eliminating elements of the middle-management layer and devolving autonomy and responsibility to lower organizational levels. In these cases, there are two key elements to consider:
Ensure culture catches up to structure. You can disassemble the org chart, but employees won’t start making the most of the opportunity until you’ve dismantled the culture of hierarchy that’s guided their behaviors for so long. The transition will require a sustained effort at re-orientation to train people to think differently and see their role in a new way. The adoption of key competencies such as ‘initiative,’ ‘risk taking,’ and ‘decision making’ for every job at every level can help to support this type of permanent behavioral change.
Plan to increase executive support. It’s counterintuitive, but flattening the hierarchy can create more work and broader responsibilities for the people at the top. According Wulf, when organizations go flat, CEOs assume direct responsibility for a wider range of business functions, and people at the the highest levels in administrative functions–including finance, law and human resources—were more likely to join the C-Suite. Plan to allocate resource to supporting top-level management and ensuring they have the leadership competencies—including ‘inspiring others’ and ‘nurturing innovation’—that will help them manage their new role and get the best performance out of de-hierarchized employees.
Visit the Morning Star Self-Management Institute to learn more about the self-management principles that support flat organizations.
Learn more about transformational leadership competencies that can help your leaders empower and inspire employees.
Download HRSG’s competency-based guide to transformational leadership.