For the past few decades, the business press and management consultants have pushed for large organizations to flatten their structure. Recent research, however, may be taking some of the wind out of their sails. Flattening usually refers taking two actions to change organizational structure – removing layers of middle management while widening the span of control for the managers that are left. Proponents for flattening have pointed not just to the reduced costs from removing these layers; many also cite the benefits of pushing decisions downward and allowing for a quicker responsiveness and greater morale.
Julie Wolf, a professor of strategy at Harvard Business School, has recently finished an extensive study that argues that many companies that flatten their hierarchies aren’t collecting the promised benefits. In some cases, flattening is having the opposite effect. Wolf collected a data set from 300 large U.S. firms that spanned roughly 15 years. She examined job descriptions, reporting relationships, and compensation systems and then conducted exploratory interviews with senior level executives. She found that when most firms flatten their hierarchies, decision-making power moves upward instead of downward, away from the front-line employees who interact with customers. In addition, rather than decentralizing the structure of the organization, flattening usually results in a drastic centralization.
Wolf’s research implies that flattening alone is an insufficient strategy for reducing costs or decentralizing decision making. As friend and fellow business blogger Michael Roberto puts it, “Simply moving boxes and arrows on the organizational chart often does not lead to higher performance.” In addition to a change in organizational design, a change in organizational culture is necessary. Senior leadership needs to demonstrate its commitment to reduce the emphasis on hierarchical status and increase the emphasis on shared decision-making. Unless the culture is one that values and trusts its front-line employees, flattening the firm will simply result in power hoarding – pushing decision-making power upward, inward, and away from those with a specific knowledge about customers, markets and the like. Perhaps this is why the flattened firms the business press champion are also the ones that were flat from the beginning. Without a flat culture, a flattened firm will simply fall flat.
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David Burkus is the editor of LDRLB. He writes, speaks, and serves on the faculty of management at Oral Roberts University’s College of Business. |
Great post, David! You nailed reasons why flattened organizations fail, and the keys to making them work. Of those, I would highlight TRUST as “numero uno” for success. There are times when “shared decision making” may or may not help (e.g., cases where speed matters), but trust is essential, underpinning success against any of the business needs (market intelligence, speed, innovation/creativity, growing talent, etc.).
As a consultant to top teams, I can say that it is absolutely critical that as a senior team or Board contemplating flattening their organization must: (1) Define clear expectations for how the new structure will perform (e.g., governance and decision rights); and (2) Benefit from a CEO or outside facilitator who can help keep the team honest through the design & implementation so that the structure and governance serves the agreed principles first and foremost–not aggregation of power or just a new route for arriving at the same old place (slow, siloed, etc.).
Todd, you are totally right about trust. Flattening should be a signal for trust, but if the trust isn’t there then flattening will only call attention to its lack. Thanks so much for the comment.
“In addition to a change in organizational design, a change in organizational structure is necessary.”
Do you mean “structure”, or “culture”?
Good article.
I probably do mean culture. Thanks for the catch.