Daily Bulletin


The Conversation

  • Written by Massimo Garbuio, Senior Lecturer, University of Sydney
The appeal of the 'flat' organisation -- why some firms are getting rid of middle managers

The trend of “flat” organisations is catching on at some of the world’s biggest companies. It’s easy to see the appeal when you think of a utopia where everyone in an organisation has a say and can act autonomously.

Elon Musk, CEO and product architect of Tesla, says in the communication policy to his staff within Tesla:

Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company.

In a flat organisation, fewer management layers are actively involved in decision-making. People who have the relevant information make the relevant decisions, which reduces the hierarchical overload.

You can imagine this working in small and medium size organisations. But for larger companies, an enormous amount of investment is required for the transformation, which often makes a flat structure often unrealistic and unimaginable.

Read more: The agile working style started in tech but it could work for banks

At online retailer Zappos, CEO Tony Hsieh has pushed flat to a whole new level, adopting holacracy principles. These are customisable self-management practices, where roles are defined around work, authority is distributed and the organisation in regularly updated in small iterations.

To take this a step further, Gary Hamel, a well known scholar and consultant, advocated for firing all managers, as he claims they are the least efficient part of an organisation.

Why so appealing?

As organisations strive to respond quickly to new challenges and opportunities, flatter organisations shorten the chain of command, increasing communication between employees and management.

Not only that, but researchers Raaj Sah and Joseph Stieglitz argued that hierarchic style organisations produce problems like the rejection of good projects without reason. The greater the number of organisational decision making layers, the greater the probability that a good project will be rejected that would have otherwise had a positive impact on the company’s growth.

And it’s not just lower level employees disheartened by the traditional hierarchic corporation. In our research, we spoke to the vice president for corporate development of a large American company, operating in the energy sector. He told us:

I worry that I might not get a chance to see some projects …as they go through a “filter” and and I can’t make a choice because I don’t get to see …them all. There is a natural tendency to only show ideas that have a higher likelihood of getting funding.

This point is reinforced by research that finds in situations where there are many levels in an organisation relative to the total number of employees, information gets distorted when it passes through hierarchical levels. These structures encourage employees to bypass superiors or simply use them as messengers.

Cutting through organisational layers also improves the speed of decision making and the time it takes to get a product to market. A study of over 300 executives from around the world, found that the greater the number of organisational layers, the slower the organisation reached customers with new products and services.

Beyond human relations in the office, flatter organisations are often cheaper to run and more dynamic. These benefits are similar to what organisations would achieve through outsourcing, where companies avoid investing in resources.

By keeping the number of management layers minimal, a flat organisational structure helps cut down the overhead costs of management.

Not everyone can be flatter

Organisational structures do have challenges. Individual managers can resist moving to a flat structure because they fear losing their job.

Flatter structure might also lead to a lower sense of accountability as each employee has more than one boss. If the communication between employees and the management is not well managed, it could potentially overwhelm executives.

Another challenge is the significant time, resources, and investment required for a large organisation to transform to a flatter structure.

Read more: Business Briefing: are our standards dropping in the workplace?

In reality, the push to become flat is much like the focus on agility. Agility is the ability to quickly reconfigure strategy, structure, processes, people and technology for the most benefit. One of the key elements is a flat organisation.

According to a recent McKinsey Global Survey, two-thirds of respondents indicated that their companies have already begun agile transformations. Examples include Google, Netflix, Spotify, the Dutch banking group ING and, more recently, ANZ.

Interestingly, this study shows that only 4% of all respondents say their companies have fully implemented agile transformations by creating a flat structure.

The bottom line is that different industries have different dynamics and different degrees of disruption – and so may need different organisational structures to operate efficiently.

Authors: Massimo Garbuio, Senior Lecturer, University of Sydney

Read more http://theconversation.com/the-appeal-of-the-flat-organisation-why-some-firms-are-getting-rid-of-middle-managers-88942

Writers Wanted

Radicalism mixed with openness: how Desmond Tutu used his gifts to help end Apartheid

arrow_forward

Pfizer doses to be spaced out in NSW crisis, but state fails to get change in vaccination program

arrow_forward

Alternative Hobbies for Gamers

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Scott Morrison's interview with Ray Hadley, 2GB

RAY HADLEY: Prime Minister, good morning to you.   PRIME MINISTER: G’day, Ray.   HADLEY: Gee, you’ve had a week.   PRIME MINISTER: Well, there's been a lot of weeks like this. This time last...

Scott Morrison - avatar Scott Morrison

Ray Hadley's interview with Scott Morrison

RAY HADLEY: I'm going to go straight to the Prime Minister, Scott Morrison is on the line right now. Prime Minister, good morning to you.    PRIME MINISTER: Good morning, Ray.   HADLEY: Just d...

Ray Hadley - avatar Ray Hadley

Defence and Veterans suicide Royal Commission

Today the Government has formally established a Royal Commission into Defence and Veteran Suicide following approval by the Governor-General.   Prime Minister Scott Morrison said the Royal Commi...

Scott Morrison - avatar Scott Morrison

Business News

Record year of growth for Tweed based business The Electrical Co

While many businesses struggled to stay afloat during the COVID-19 affected 2021 financial year, Tweed Heads based The Electrical Co. completed more than 50,000 smart meter installations across Aust...

a contributor - avatar a contributor

The Most Common Reasons why Employees End Up Leaving a Company

It is important for businesses to make sure they find the right people for their open positions. That is why a lot of companies are relying on professional outplacement services. A lot of companie...

NewsServices.com - avatar NewsServices.com

The little Aussie face sock startup is riding the personalized gift game

In a world where everybody has different desires, interests, and goals, what can be better than giving them things that meet their individual requirements. Personalized gifts have taken on the mar...

NewsServices.com - avatar NewsServices.com