6. Flat Structures
There is not a precise definition of what a flat structure is. Several authors describe it in different ways, but the concept of a flat structure can be summarised as “an organisation structure with few or no levels of management between management and staff level employees. The flat organisation supervises employees less while promoting their increased involvement in the decision-making process”. (Meehan, 2016). Some common characteristics that can be observed are reliability on a decentralised approach to management (Klenke, 2007), everyone is seen as equal (Morgan, 2015) and teams are often the fundamental building blocks in these designs (Meisel & Fearon, 1999).
Flat companies are built to adapt. They decentralise authority, share information, diffuse, distribute competency and require a high degree of employee involvement in decision-making (Klenke, 2007). “The flat terminology is not about grouping or structure, it is how the decisions flow inside the company, which is more peer-to-peer and less top-down” (Shah, 2015). Some other characteristics that can be related to flat structures, but are not present in all of them, are the absence of job titles, seniority, managers or executives (Morgan, 2015). Additionally, research has shown that reducing hierarchy can lead to more satisfied employees and speedier decision making (Zitek and Jordan, 2016).
Empowerment can be defined as the distribution or sharing of responsibility throughout the organisation (Thibodeaux, 1994). Since flat structures distribute authority (Klenke, 2007) it is possible to say that flat structures empower employees. Organisations can choose several methods to facilitate employee empowerment by sharing information about organisational performance: basing rewards on organisational performance, sharing knowledge that enables employees to understand and contribute to organisational performance, and encouraging employees to participate in decisions that influence organisational direction and performance. (Thibodeaux, 1994).
Like any other organisational model, a company with a flat design also faces some challenges. Since companies often adopt a flat system without a defined structure, the lack of structure can make accountability and reliability an issue for the business (Morgan, 2015). On the other hand, according to Freeman (n.d.), it is impossible to have a structureless company. “Any group of people of whatever nature that comes together for any length of time for any purpose will inevitably structure itself in some fashion”. This means that the challenges related to not having a formal structure can be faced at the beginning of the process, but sooner or later the company will naturally define a structure.
Understanding the models that have already been implemented by other companies, or even defining your own structure — with everyone in the company helping to build it — can support the need to define a company’s’ structure. “It’s not about choosing the most popular, trendiest flat organisation to adopt; it’s about finding the one that works best for your organisation.” (Giang, 2015).
In some cases, flat-structured organisations use ‘loose’ employee job descriptions. Often the implications of this are that it is not always clear to those inside and outside the organisation and its supply chain and customer base where the responsibility, and with which employee(s) for a said action or service, actually lies (Giang, 2015). This can be a problem faced by flat structures, especially in the earlier stages of the process and during implementation. Since the majority of the companies are founded and based on a hierarchical system, understanding how to work with flat structures is naturally challenging. Clear and transparent communication methods can support the insecurities of stakeholders, aiding to forge a strong relationship with them. Furthermore Voegelgesang & Lester (2009) find that organisations perceived by outsiders to be transparent benefit from increased investment and are more valued by stakeholders (Vogelgesang & Lester, 2009).
According to Zitek and Jordan (2016), flat structures and hierarchical companies attract different pools of employees, according to psychological singularities. “Our research shows that people with narcissistic traits had a stronger desire to work in a hierarchical organisation, compared to less narcissistic people. Why? They believed they would perform well and thus rise to the top”. Additionally Zitek and Jordan’s (2016) research shows that “narcissists like hierarchical organisations because they think they will rise to high ranks and reap status and power. Narcissists are less interested in hierarchies where there is little opportunity for upward mobility”.
Case Study
Ricardo Semler is a Brazilian business owner who identified hierarchical structure as the main reason why his company (Semco) almost went bankrupt in 1980. It was at that point he decided to radically transform the way Semco was managing people. The current pyramid structure was removed, and a more circular structure was adopted. He aimed to reduce management to only three levels — one corporate level and two operating levels (Semler, 1989).
According to Semler (1989), the circle management model consisted of three concentric circles. A central and small circle contained five people who integrated the company’s movements –‘the counsellors’ — and they would be the managers in a hierarchical structure. The second circle was larger and contained the heads of the eight divisions — ‘partners’. The third and largest circle held all other employees — ‘the associates’. They were responsible for the research, design, sales, and manufacturing work.
Semco restructured itself founded on three fundamental values from which thirty management programs were based on. The values were democracy, profit sharing, and information. Those values worked in a circle, with each value being dependent on the other two. If one is eliminated, the others would be meaningless. The corporate structure, employee freedoms, union relations and factory size limitations were all products of Semco’s employees commitment to these principles. (Semler, 1989).
Initiatives such as transparency on earnings and freedom to propose salaries and days off were some of the advantages of working as a Semco employee (Semler, 2014). After implementing changes on the organisational structure, the Semco that had been close to financial disaster in 1980 was one of Brazil’s fastest-growing companies eight years later, with a profit margin of 10% on sales of $37 million (Semler, 1989).
Leadership in flat structures
Self-managed teams have a reduced need for hierarchical command and control leadership (Morgeson, 2005). However, the reduced need for hierarchical command does not imply that flat structures completely discount leadership. According to Baker (2015) and Semler (1989), when a flat structure does not consider a formal leader “other hierarchies emerge which introduce new power dynamics and can undermine the equality afforded in this context” (Baker, 2015).
Characteristics like a team member’s personality type, skill set and communication style can define an emerging hierarchy. Since these hierarchies are often not acknowledged by all company employees, it is much more difficult to address the emergence of a new hierarchy as it remains implicit (Baker, 2015). Furthermore, if more than one team member emerges for a leadership role, this process of leader emergence can create a competitive team environment with potentially negative consequences.
According to Markova & Perry (2014) “Competition among members may result in resentment toward individual ideas, further disrupting the participative nature of self-managed teams. Leader emergence will be negatively related to group cohesion”. On the other hand, Semler (1989) believes that an emerging leader in a group can be more beneficial than imposing a leader. According to him, “we form the groups, but they find their own leaders. That’s not a lack of structure, that’s just a lack of structure imposed from above” (Semler, 1989).
In flat structures with the presence of leaders, it is important to emphasise that their role is different when compared to hierarchical structures. Instead of being responsible for the big decisions, according to Nayar (2016) leaders should inspire self-propelling teams to forge ahead with real-time collaboration, letting the team make their own decisions. Additionally Nayar (2016) quotes Kevin Martin’s point of view of how leadership should be “Organizations must look at leaders through a different lens. Business skills and acumen…are now table stakes. It’s the ability to influence and drive collaboration across cultures, boundaries, and borders that has the greater variability on global leadership effectiveness.”
For Meisel & Fearon (1999) leadership should not only share a vision, but also integrate the work of self-directed individuals and self-managed teams into a successful completion of the entire effort. Leaders should act supporting the self-managed individuals and on the team’s maintenance. They are responsible for maintaining and helping set the company’s culture and values. Another important role is advising teams and sharing how other teams have solved similar problems. “Mostly, the coach’s role is to ask the insightful questions that help teams find their own solutions. It is it’s role to reveal unhelpful behaviours that the team is showing and raise the flag and suggest that a team pause to deal with a serious problem” (Laloux, 2014).
According to Laloux (2014), some principles that can be highlighted when coaching are:
- Struggle — one of the key steps for learnings. Going through difficult moments help teams to build resilience and deep sense of community. The role of the coach in this case is to support the team in solving the problem and later help them reflect on how they have grown in the process.
- The coach’s role is to let teams make their own choices, even if they believe they know a better solution.
- The best way to support the team is by asking questions that mirror the coach’s picture of the problem.
- Observing the team’s strengths and capabilities, the coach should project trust that the team has all it takes to solve the problem it faces.
During a transitional process from a hierarchical system to a flat structure, more responsibilities are often given to people ‘lower down’ in the company. A problem that can arise in this scenario is middle managers feeling a loss of power which can lead them to clamping down on others(Giang, 2015). However, it is important to have in mind that even though authority is widely distributed in a flat structure, it does not mean that managers have become extinct. In fact, a flat structure asks for a transformation in leadership and management styles (Barrueto, 2015).
Lego is an example of a company that despite operating a flat structure increased the number of people at top management level. The change in the structure considered leaders acting with different roles compared to traditional structures and a whole new company design. “Lego, for example, has reduced the number of middle managers and empowered its employees to take on more responsibilities, but it has also expanded its top management by bringing in functional specialists and moving senior managers much closer to operations“ (Barrueto, 2015).
Flat structures should be seen as an opportunity for leaders to develop their people and empower them to make important decisions. The leaders should act as a coach to their teams and must coach their teams into becoming leaders themselves (Barrueto, 2015). For a successful implementation, leaders need to ensure that everyone understands the business model and develop a strategic mindset. (Barrueto, 2015).
According to Ancona (Giang, 2015), there are some conditions needed for leading in a flat organisation. The first condition is to radically increase transparency. “Everyone in your company, especially those in lower levels of the firm, needs to know exactly why decisions are being made because they’re the ones going out into the world and advocating your cause. They need to know what’s happening in the marketplace and social culture, and how their organisation connects to all of this. For this to happen, transparency needs to be something that happens throughout the company” (Giang, 2015)
The second condition cited is to teach people to think with a strategic mindset. Having a transparent environment in the company allows all to understand the business model and to have a more strategic mindset. In order to do that, Ancona suggests coaching the team with questions. “For example, asking questions like “What are you thinking?” or “How will you get through this barrier” will push people to develop their own thought process and think differently about solutions.” (Giang, 2015)
The last condition to lead in a flat organisation is to have more ‘connectors’. In order to have innovative and entrepreneurial people working in a company, it is important to give them access to resources in different roles and areas around the company. (Giang, 2015) “There needs to be easy connectivity because that innovation and that collaborative environment requires people doing what we call creative collisions. This is where new ideas come from, because people are able to wander from one place to another, purposely meeting and speaking to people across the organisation” (Giang, 2015).
Leadership Ethics
Regardless of the company structure, leaders should lead by example and make clear to the team all the behaviours that are not acceptable. The values of a company, such as respect, should be included in the company’s culture and leaders need to make sure it is being incorporated. “Transformational leaders set examples to be emulated by their followers. When leaders are more morally mature, those they lead display higher moral reasoning” (Bass & Steidlmeier, 1999). Ethical leaders not only have a tremendous impact on how people in their organizations behave but also what they achieve. (Brooks, 2013)
Leaders have a critical role in promoting an effective ethics culture. This is because their ethical attitudes can influence employees behaviours (Watts, 2008). “As the major responsibility of top managers is to communicate organisational values to employees to shape their behaviour, the ethical decision and traits of the leader are key in promoting ethical decisions in organisations. Employees are less likely to witness unethical decision making and are more likely to seek help when faced with ethical situations in organisations where senior managers exhibit ethical leadership” (Watts, 2008).
Ataya (2016) suggests some recommendations of how managers can program ethics into their leadership style: ethics should not be seen as just following laws and regulations, leaders should care about people before profits, democratize decision making, clearly communicate what is acceptable behavior (and what is not) and have a clear code of conduct.
Ethics at work should not be seen as following laws and regulations. According to Brooks (2013) Leaders must actively engage with ethical issues that matter. They need to recognize how ethics influences consumers’ reasons to buy from their company and demonstrate a commitment to go beyond mere compliance with laws and regulations. “They [leaders] must prove that they are committed to ethical issues, including human rights, social justice and sustainability” (Brooks, 2013). Additionally, Bass & Steidlmeier (1999) indicates that “ethical norms and behavioral ideals should not be imposed but freely embraced. Motivation should not be reduced to coercion but grow out of authentic inner commitment. Questioning and creativity should be encouraged. Followers should not be mere means to self-satisfying ends for the leader but should be treated as ends in themselves.”
When leading a self-managed team, leaders also need to enable the full potential of others (Llopis, 2016). This is because collaboration and knowledge transfer are key for an effective self-managed team. “Business evolution requires leaders to continually identify, enable and leverage the full potential of their teams, partnerships, and client relationships. They must take ownership and be courageous enough to see beyond the obvious to avoid complacency” (Llopis, 2016).
Since in a flat structure leaders act like coaches, it is their responsibility to coach people to act ethically. When the group is developed enough to be self-managed, members should be able to apply the ethical knowledge that was gained without seeking for leader’s help. The ethics at work must be present on the day-to-day business and should not be seen as reference manual. “Every activity, whether it is a training program, a client meeting or an important top management strategy session, should include conversations about ethics”. (Brooks, 2013)
Building trust and open communication in a self-managed team is not only vital for a better team dynamic but also to spread ethical values within the company. “Cultivate a respectful environment in which people can speak up about ethics and share the responsibility for living it. Build trust, demand open communication and share the ownership of organizational values” (Brooks, 2013).
Trust and Collaboration
According to Msanjila & Afsarmanesh (2011), trust plays a key role in facilitating collaboration within collaborative networks. “Trust can be defined as a reciprocal belief in the other parties’ intentions and behavior, and social psychological research has shown that trust-based relations between team members may have a positive influence on the efficiency and performance of teams” (Jarle Gressgård, 2011). Jarle Gressgård (2011) also argues that high associability is an important aspect for strong team bounds.
The same way that trust elevates team performance, collaboration showed to be fundamental in increasing team productivity. Since teams are seen as building blocks in flat structures (Meisel & Fearon, 1999), collaboration is an essential in order to create a high performance team. “Within firms structured around team-based organisation, inter-team collaboration has been recognized as a critical performance driver” (Cha, Kim, Lee & Bachrach, 2015). Collaboration also positively affects the perceptions of well-being of members in support groups. High quality relationships among group members create a sense of belonging and support (Markova & Perry, 2014).
A challenge that can be faced in flat organisations is that “groups of people tend to support and work with each other but oftentimes prefer to stay to themselves, this of course can cause challenges for communication and collaboration” (Morgan, 2015). According to Zhang, Chen, Mo, & Yoon (2012), “today’s peer-to-peer networks suffer from the problem of free-riders, who consume resources in the network without contributing anything in return. Originally it was hoped that users would be altruistic, from each according to his abilities, to each according to his needs. In practice, however, altruism breaks down as networks grow larger and include more diverse users. This leads to a ‘‘tragedy of the commons’’, where individual players’ self interest causes the system to collapse”.
Zhang, Chen, Mo, & Yoon (2012) and Zárraga & Bonache (2005) suggest that incorporating incentives or reward schemes can encourage cooperative behaviour and reduce “free-riders”. The Team leader can also be an extremely powerful mechanism of influence for knowledge transfer (Zárraga & Bonache, 2005). “Their function is to serve as a model to the collaborators, and so they should be prepared to share information openly, put themselves in the other’s’ shoes, provide constructive feedback and show all those attitudes and behaviours associated with a climate of ‘high care’” (Zárraga & Bonache, 2005)
The consequence of achieving a cohesive teams is less job stress and higher job satisfaction. Members become more interactive and learn from the input of each other. The information exchange allows the team to enact decision-making strategies beneficial to individual learning and allows more intense collaboration among the group. Group cohesion can also facilitate participation in the team, individual learning, and positive relations. All these positive results, together, can enhance the wellbeing of individual team members (Markova & Perry, 2014).
Diversity
Successful self-managed teams benefit from the variety of individual talent that is available in every organisation (Thibodeaux, 1994). Since flat structures are formed by self-managed teams, diversity is essential when forming teams. Diverse membership helps to promote role adoption and to facilitate innovation in problem solving, especially in tasks characterized by uncertainty (Thibodeaux, 1994)
The idea of hiring people that “fit the culture” can be a bad decision. This method of hiring individuals can often lead to a company with no diversity. This lack of diversity creates a few problems. A study leaded by Kellogg School of Management found that diverse teams are better problem-solvers and decision-makers (Finley, 2014). Having a group with no diversity in this case can be related with a less productive team. The cultural diversity can also increase the degree of innovation and creativity in problem solving, and also promote the development of new and radical solutions. (Jarle Gressgård, 2011)
The effectiveness of an organisation depends on socialization among team members. It helps to determine employee loyalty, commitment, productivity and turnover. When organisations implement socialization processes that value diversity, the idea is perpetuated that change is good and that people are creative and capable of change (Thibodeaux, 1994). Individual differences such as intelligence, dominance, extraversion, drive, creativity, openness to experience and emotional stability have been shown to be related to leadership emergence as well (Barnett, & Weidenfeller, 2016).
Creating the company culture
Creating a company culture is not only important for team wellbeing but also because it drives more productivity (Shin, Kim, Choi, & Lee, 2016) and attracts, retains and engages the modern workforce (Besner, 2016). But what is a company culture? “Culture is consistent, observable patterns of behavior in organisations. Aristotle said, “We are what we repeatedly do.” This view elevates repeated behavior or habits as the core of culture and deemphasizes what people feel, think or believe. […] Culture is about “the story” in which people in the organisation are embedded, and the values and rituals that reinforce that narrative” (Watkins, 2016).
According to Giang (2015) when moving to a flatter organisational structure, it is important to analyse the culture that is already in place. If the company is a hierarchical based model, probably the company’s culture is not completely aligned with a flat structure culture. “When you have a structure that’s more collaborative and a culture that’s hierarchical, you get into trouble because you think you have to do what the boss says instead of work and organize on your own as the structure would kind of indicate.” (Giang, 2015)
A flat structure company constituted by several self-managed teams can face some challenges related to the organisational culture. When teams within the same company work on their own management culture instead of working on the same organisational culture, problems like integrating the company’s culture can arise (Ernst, 2016). That is why it is important for group leaders to align the group’s management values with the company’s culture.
