Is a Flat Structure Right for Your SME?

Is a Flat Structure Right for Your SME?

Management hierarchies often grow organically as businesses expand. But could a flat structure serve your business better?

By Jyoti Patel

A flat structure or flat organisation refers to when a company has no or few management roles within it. The general aim is to bring autonomy to employees by removing unnecessary hierarchies or bureaucratic processes that slow down workflow.

This way of working has gained popularity amongst small businesses in recent years. It's therefore a viable consideration for SME owners who are restructuring their business or hiring more employees for growth and expansion.

What sorts of companies benefit from flat structures?

Flat structures seem to be most popular amongst small businesses that are tech- or project-focused, along with organisations that follow an Agile framework. This is because flat management structures encourage open methods of communication and make employees feel more accountable for their work, which lends itself very well to such businesses. 

However, it's also important to recognize that a flat management structure may not necessarily work for every business. Many entrepreneurs will argue that delegating authority is vital to business growth and expansion, and that a tiered structure can help to filter out unnecessary noise from reaching top-level management. For this reason, some believe that flat organisations aren’t scalable. 

Even so, there are several well-known companies that operate globally, such as Nike and Tesla, that have found ways to make partially-flat structures work for them. With this in mind, we've outlined some of the benefits and potential pitfalls of flat-structured organisations below. 

Pros and cons of flat-structured organisations

There are a number of benefits to flat structures for both business owners and employees:

1. Cost-saving: Flat structures result in employees with fewer management responsibilities, which means business owners can keep employee salaries lower.

2. Increased efficiency: Flat-structured organisations also lead to employees taking more responsibility for their work. As a result, they have more autonomy over both their workloads and the way the business runs overall. This can result in quicker decisions being made due to the shorter chain of command, which means work can be turned over faster.

3. Highly skilled workforce: For business owners, this way of working can often mean you’re focused on employing members of staff who are highly skilled in their area of expertise, as opposed to hiring those with overarching management experience that slot into a hierarchical structure. This can result in a workforce made up of individuals who are focused on achieving success, and who are able to collaborate without the need for bureaucratic processes.  

4. Innovating & rewarding: For both business owners and employees, the above can also result in an innovative and rewarding workplace. By removing the need to wait weeks for decisions to be signed off and unnecessary processes to be fulfilled before work can get started, you can create an open and collaborative culture where innovation thrives.

However, flat organisational structures may not work for every business type. Here are some considerations to be aware of:

1. Ambition may be stifled: If business owners aren’t diligent with the recruitment process, flat-structured workforces can attract unambitious employees who may view the lack of management as an opportunity to slack. To counter this, it’s important to be transparent about employee responsibilities during the recruitment process and ensure expectations are set.

2. Lack of progression: Since there is no visible hierarchy within the company, some employees may feel this equates to a lack of opportunity for career progression. These candidates may not feel as though flat-structured companies are right for them. As such, it’s crucial to clearly advertise opportunities for progression and growth, such as annual pay reviews or promotion prospects.

3. Conflicting priorities: Occasionally, having a number of ambitious individuals working on the same project can result in conflicting opinions and priorities. This can be difficult to resolve when there is no obvious leader or manager. It's therefore very important to set clear objectives for each project or initiative the company embarks upon. This will mean teams have something tangible to refer to when deciding which route to take in the face of adversity. 

4. Informal hierarchies may form: Flat structures can also lead to an unspoken bias towards employees who have served the longest taking charge. This, coupled with the fact that employees who are more outgoing may drown out others, means that there is a danger of informal or unspoken levels of management being formed. If this isn’t monitored, introverted or new employees with valid ideas may feel overpowered or drowned out by louder voices. 

How to implement a flat structure in your business

If you’re thinking of implementing a flat structure in your growing business, start by ensuring there are watertight policies in place outlining how employees work, and who they can go to if they have a problem or if they need help. Then, set clear criteria during the recruitment process to attract a highly skilled workforce who you can trust to deliver excellent results. This means you'll have a hardworking team who are armed with the tools needed to navigate any potential issues which may arise from a flat structure.

It's also worth noting that many companies run on semi-flat structures, where middle management and bureaucratic layers are removed but there are still team leaders in the loose sense of the word who employees can go to in the absence of a more formal manager. This may be a better fit for your organisation. As such, it's vital to recognize what works best for your business and your employees before establishing a structure that will be conducive to their success.