Why a flat organizational structure is more suitable for businesses with few employees?

The start of the new year continues to bring changes to the business landscape. Although organizational structures have long been an important consideration for managers, the flat organizational structure has emerged as a development that can help reimagine a family business’s strategic direction.

If employee productivity and motivation are poor or if there is a lack of planning and coordination from leadership, it may be time to reorganize the family business to a more effective structure.

What Is an Organizational Structure?

The organizational structure of a business defines the roles of its employees in order to meet its business objectives. It also determines communication methods, organizational policies, and the delineation of authority and corresponding responsibility. In addition to supporting the business, the structure should help its employees accomplish their personal and professional goals.

What Is a Flat Organizational Structure?

A flat organizational structure removes levels of management, has relatively few reporting levels, and has decentralized control, giving individual employees more involvement in the organization.

Lower operational costs is one major advantage to a flat structure. A typical flat organizational structure consists of employees and executive-level managers, where employees are the decision makers of the organization and they are given significant authority with little to no supervision. This leaner model eliminates the need for, and saves a family business the expense of, hiring mid- to low-level managers.

Along with saving the family business money, cutting out management can improve communication among employees. Executives and employees can directly communicate with one another without having to go through intermediaries. This can make communication more efficient and effective by promoting speed and clarity.

Lastly, a flat structure can heighten employee motivation and job satisfaction. Employees have an elevated level of responsibility and the authority to implement their ideas in the organization without any hindrances from management. Empowered to use their entire skill set, employees are allowed to exercise creativity to meet the family business’s desired objectives. This can ultimately boost productivity and drive employees to see the business succeed.

Things to Consider

While there are advantages to a flat organization structure, there are potential issues to be aware of. Watching the ratio of employees to executives is important. If the proportion becomes too large, executives can have less control and support when making management level decisions.

Lack of employee retention and growth can also be an issue for a flat organization. Most employees are familiar with an organizational structure that rewards them with advancement within the business. With fewer organizational levels in a flat organization, employees remain at certain levels for longer periods of time or perhaps indefinitely. An employee may view this as stagnation which would cause the employee to look for outside management positions.

A flat organization can also overwhelm executives and decrease their efficiency. With less mid-to low-level management, executives in a flat organization are often burdened with mid-to low-level issues such as interpersonal conflicts between employees, hiring and firing employees and other details better left to managers. With no structure to deal with these internal issues, big picture issues may be neglected or deferred.

Deciding What Is Best

While a flat organizational structure may not be a good fit for every business, it may help motivate employees in a business where employee productivity and motivation are low and help provide a new direction. The advantages and disadvantages should be weighed before making any change in structure, and the business should periodically review whether the structure is still effective.

What is a Flat Organizational Structure?

A flat organizational structure means that an organization has few (if any) levels of management between the workforce and the highest-level managers. The absence of middle managers places more authority, such as decision-making functions, at the worker level.

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How does a Flat Organization Structure Work?

A company's organizational structure concerns the authority, control, and reporting structure for employees. For example, in a hierarchical structure, workers report to a front-line manager. These front-line managers report to middle managers. These managers report to top-level managers. This structure generally creates a pyramid to represent authority, control, and communication. 

In a flat organizational structure, there are few levels of management. Thus workers will report directly to higher-level managers. This means that the role of middle-managers is shared between the workers and the higher-level managers. It generally means greater autonomy and authority for the worker. It can also be more efficient for the organization to not have various levels of bureaucracy. This structure can serve to motivate employees who are more autonomous. 

The flat structure generally employs collaborative work teams as a method of employee oversight. 

For many organizations, the flat organizational structure is not optimal. This is particularly true for larger organizations. The flat structure can cause a lack of clarity on who is responsible and accountable for specific activities. 

It can also be difficult for outsiders to determine who is the appropriate point of contact for any communication. Without managers who have final decision-making authority, employees may conflict on specific decisions. Competitive individuals may attempt to establish greater power or more authority than their peers.

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