Why a Hierarchal Business Structure Is Falling Out of Fashion

As people we’re used to hierarchy, comfortable with it even. Social hierarchies have existed consistently throughout history from ancient Egypt to Japan. Past the industrial revolution the number of existing hierarchies has only increased as more and more businesses pop up every year with top-down management. However, times may be changing. The tech industry, which has long been a catalyst for workplace change and thought, has been switching up their business structure. As small tech start ups usually begin with a flat dynamic structure, many businesses feel the urge to keep it even when scaling upward.  Valve, Buffer and Zappos are all examples of modern corporations embracing flatter structures.


Flatter organisations are coming in hot, is it time to ditch senior titles? Not quite. Just because flatter structures work well for some businesses, doesn’t mean it will work well for all of them. It’s also not a black and white issue. Your business doesn’t have to have a flat business structure, but maybe it could be ‘flatter’. Somewhere between the completely flat non-hierarchal structure and the mainstream pyramid.


What are the benefits to a flatter organisation?

Let’s start off by discussing what the hype is all about.


Rebecca Lewis Smith, the CEO of Fountain Partnership, talks about her concerns with hierarchal structures in a Raconteur interview. “The most talented people in a company will often leave because someone else is occupying the position above them on the ladder”. She nods to the ways in which hierarchal business structures can both underutilise and undervalue lower-level employees. Contrarily, flatter organisations give employees an opportunity to shine. ‘Lower’ level employees are provided with more responsibility and a louder voice.


Additionally, she says she dislikes “the idea of holding one person accountable for someone else’s work”. Referring to such a situation as “infantilising”. Lewis Smith would prefer that the people who make the mistakes, are held accountable, rather than their manager.


Joris Janssen, co-founder of health tech start-up Luscii is of a similar perspective. As Luscii scaled upwards Janssen found the need to flatten the organisation. Now, he says that he’s seeing increased efficiency around the workplace. “We need to hold very few meetings, as each role description clarifies what is expected”. This line of thinking is one of the major reasons that people are moving to flatten their organisations. With middle management removed companies see reduced costs as internal communication becomes simpler. There is also the riddance of unnecessary bureaucratic procedures, which can hinder productivity.


Janssen also mentions that his company has seen increased loyalty as employees become more involved.

Business Structure


What are the benefits to a hierarchal organisation?

Just because flat organisations are the great new thing, doesn’t make hierarchy’s anything to scoff at.


As we’ve mentioned before in our CiVS insights, providing employees with growth opportunities plays a major role in employee satisfaction. Yet, in a flat organisation, how can one move upward? Traditional hierarchal structures pave a clear way in which employees can ‘climb the ladder’. Employees benefit from a clear career path in which expectations are set out.


Hierarchal organisations also have the ability to provide better oversight. Management roles were created for a reason and getting rid of them can have some unfortunate effects. That’s not to say it can’t be done, but with flatter organisations you risk missing a level of oversight. Hierarchal organisations on the other hand risk wasteful oversight. However, taking managers out of the game all together may be too much of a 180.


Another benefit to hierarchal structures, is that there is the potential for increased specialisation. This can provide productivity gains to your workplace. In flatter structures, employees may feel that they have to be a ‘Jack of all trades’. This leads them to focus on areas outside their expertise, potentially wasting time.

Business Structure


What steps can I take to make my organisation flatter?

Now we’ve seen the benefits to flatter organisations, but also its downfalls. The benefits look great, but we don’t want all the extra baggage that comes with flattening out. Is there a way to meet in the middle? Thankfully flattening organisations isn’t all or nothing. Companies can step towards a flatter structure while still maintaining a level of management they are comfortable with. We’ve put steps to flatten your organisations structure below.


1. Start by minimising the layers

What we want to do here is trim back on middle management. Moving to an organisation where bosses power and enable their employees, but not micromanage them. Under this level of management, managers should be able to take spans as big as 1:30 according to McKinsey.


2. Invest in teams

Much of the move to flatter corporations has been accompanied with an increased focus on teams. Michael Dubakov, founder of Targetprocess in an interview with InfoQ had this to say:


“Organizations should distribute managers’ responsibilities among cross-functional teams and boards to become flatter and increase their overall agility.”


Dubakov says that organising with a team-focus will aid in problem solving. It will increase agility and the overall speed at which the company performs. These teams are commonly structured to work directly under executives. There is still also the opportunity for management through ‘team leaders’ but the structure is less rigid. Team leaders may change on a per project basis and will hold less responsibility than a traditional manager.


3. Ensure equal access to information

When we talked about company culture last year, we discussed the importance of Hubspots transparency. Hubspot is committed to treating employees equally which included entrusting every member of the company with the same resources. Equal access to resources helps all members of a company to make smart informed decisions. In a traditional hierarchal structure, a lot is kept behind closed doors. More senior employees will also commonly have access to better equipment or spaces in order to do their work more efficiently. When moving to a flatter organisation it’s important that each employee is provided these same benefits. As responsibility is spread thin across employees, companies must ensure that every employee has the right tools to work efficiently.


4. Focus on clarity

Stripping back on management will most likely be met with immediate confusion. It’s important that employees are aware of what’s happening and why, when flattening out. It’s also key that they are fully aware of what is expected of them. In order to act in a self-sufficient manner, they must know what they are aiming to achieve. Setting out clear roles, responsibilities and decision rights will aid this transition.

Business Structure


Is your company’s structure right for you?

When it comes to organisational structure, which ones better isn’t black and white. Unfortunately, there are no hard solutions. The hierarchy of a company will depend on a range of characteristics. The size of the company, the industry, and the overall attitude of employees.


At the same time, switching structures requires a big undertaking. That’s why we recommend using an employee survey to help form a decision. An employee survey can help to check whether a change in structure is both wanted and necessary. It can also help attain additional information to gain insight onto how the changes should occur. Maybe structural changes are more relevant in some areas of the company, while others are fine as they are. Some projects may suit flatter structures better, while for others hierarchal may be best.


If you’re thinking about shifting structures — save yourself some trouble, run a survey first. A CiVS survey comes with 13 different question types, and a comprehensive report. Making sure that your company captures any and all valuable insights. If you’re looking to learn more, email us at info@civs.com.au or call (08) 6314 0580.