How flat hierarchy almost killed my startup
When we started CareerFoundry five years ago, having a flat hierarchy — or talking about having a flat hierarchy was one of the hottest topics when it came to ‘new world of work’ (and still is).
CareerFoundry had a flat hierarchy for just a year. It was a rollercoaster, mainly downwards. Although now, we are maturing and really finding our rhythm with sales up 100% since we moved away from being flat, and turned profitable for the first time in 2017.
Now that we are in a much better place, it’s the right time to discuss our journey through a flat hierarchy , and how I turned from being positive about flat hierarchies to being completely against them.
Back in 2014, my co-founder and I had just received five million in funding and were on top of the world. We were giddy with excitement.
We had grand plans.
And we wanted to become a global powerhouse in education with everyone on the team.
We wanted to be a hyper growth startup with an unparalleled culture, where everyone could hit goals and make CareerFoundry great. In our heads it was glorious. No one would waste time with politics and BS.
There are countless studies, books and new work Gurus proclaiming the benefit of flat hierarchies.
According to a Harvard Business School study, self-management allows employees “to find joy and excitement utilizing their unique talents and to weave those talents into activities that complement and strengthen fellow colleagues’ activities.”
There are many types of flat hierarchies, from Holacracy to latice, the one we adopted could be called ‘Self-Management’ because we wanted to make quick decisions, and for employees to take responsibility for the business to keep growing fast.
We thought this would encourage employees to be more motivated as they were accountable to the whole team, not just one manager. We were excited about the culture we were building.
But it failed.
We had structured the culture for maximum freedom and ownership, however, what happened was not what we expected. Sickness rates were through the roof, we were not producing work fast enough, promising projects did not deliver results.
So what happened?
- Difficult conversations were avoided
In the absence of managers, the teams are expected to give each other radical, difficult feedback. However, in the friendly team atmosphere inherent in startups, people dreaded providing this difficult, “constructive” feedback that was needed to improve performance.
Popular team members would rule through an unspoken hierarchy and made it hard for other team members to give feedback on poor performance for fear of being ousted by the popular member.
Difficult conversations must be had in order for people to grow and develop. One of the major perceived benefits of the flat hierarchy is that employees manage themselves. Sounds great in a textbook, right? However, in reality no one felt they could speak up against another team members performance.
2. Employees needed much more structure and guidance than we thought
The flat hierarchy had worked well at the beginning when we were small, had more experienced hands running things and didn’t need many processes. The problems became more apparent as we grew in numbers.
The new employees needed more structure and guidance than our self-management style factored in and they struggled in the absence of leadership and processes.
We failed to attract senior members into the company because we had a flat hierarchy and they couldn’t see a career path. Senior members could have supported the guidance and leadership needed. The structure set-up didn’t have the best environment for more junior employees to fulfil their potential.
It is counterintuitive, but in a flat hierarchy you don’t need less, but in fact more structure and stricter rules.
3. People felt overburdened by the responsibility
We thought we had all the boxes ticked with our organizational set up, but it turned out, we had made one large mistake.
We still needed leaders to steer the ship, individuals felt overburdened by the responsibility we had given them. This resulted in often bad execution, as they were hesitant to take risks and drive through difficult strategies.
We did have to learn however, that most employees did not want this ownership thrust on them and felt overstretched by the responsibility put on them when we were surviving month to month and any decision was critical to get right.
4. We let it continue for too long
Myself and my co-founder had a lot of heated discussions over the structure of the company. Where we really let people down is not resolving it quicker and we ultimately frustrated a lot of the team when we were hoping to give them room to shine, they felt frustration instead.
For us to really shake things up it took a lot of discussion and our sales to really hit a low. We should have recognised the signs sooner, such as a lack of energy, creativity and sales dwindling.
As CEO, I should have called time on it sooner.
The Aftermath
We really thought we were giving everyone what they wanted by moving away from a traditional hierarchy, we wanted to do great work, not more paperwork and politics.
It ended up just creating other, even bigger problems. A flat hierarchy still meant a bottle neck at the top of the business. All the decisions rested with the two founders and the business was too immature without processes to be decentralised. The saddest part is that we had to let go of about 20% of our team because this structure had not delivered the plans we had set out to achieve.
This was one of the hardest thing we ever had to do, and we still feel sad about it till this day.
Last year we announced we would give up our flat hierarchy and introduce team leaders.
We promoted several senior team members to become leaders. Everyone felt a collective sigh of relief in the team.
We have added a people manager who has helped the company develop, set up processes and instill a better culture. Actually, adding a people manager has been far more positive for the culture than any other structure, event or initiative we have tried.
Are all flat hierarchies bad?
When I talked about this at the New Work Experience conference, seasoned new work experts laughed, saying they hardly know any companies where a flat hierarchy works.
Our story is based in the context of where the company was in 2016.
Most successful flat hierarchies I’ve heard of are either smaller companies with experienced people, Basecamp is an example of this or much larger companies with the resources to have the correct procedures setup.
I am still proud that we tried (and survived it!) We wanted to achieve greatness and build the best company culture ever, we are building a better culture now.
Hierarchies and frameworks are vital for high growth organizations with junior members of staff.
If you are still sure you want a flat hierarchy, your chances of succeeding are much greater with senior team members or if you have the resources available to create the right processes.
Our people manager has had a great impact on the business, look out for my next post on Instagram https://www.instagram.com/raffaelarein/
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