Flat Hierarchies In Startups: Here Are The Downsides You May Not Realise

In the early days of a startup, adopting a flat organisational structure sounds appealing. With only a small team of workers, there is little need for a corporate hierarchy. This keeps the team agile, with the skill and speed to function efficiently. 

According to Forbes, a flat structure has little to no management levels between staff and management. This creates a shorter chain of command and allows employees to work autonomously. 

Eliminating management layers improve coordination and communication, as compared to a multi-tiered management structure that has a slower pace of decision-making. There are also greater cost savings, with a reduction of overheads.

With these benefits of a flat organisational structure, it might seem like a smart move for your business to adopt it, as did companies such as Github, Buffer and Medium. But adopting a flat structure also has its own disadvantages, here are some that you should know of. 

Lack Of Role Clarity 

In flatter organisations, job responsibilities tend to be more flexible and less defined. That helps in getting more accomplished with lesser manpower. But a poorly defined job description also spells for ambiguity in the workplace. It is not clear who is in charge and who does what – communication gets messy and decision-making is less transparent. Who has the final say on decisions? Most importantly, who is ultimately responsible if something goes wrong, or if results are not achieved?

Read Also: Here’s Why Small Businesses In Singapore Need To Care About Employee Retention

Invisible Hierarchies

Any group of people that comes together eventually gravitate towards a certain structure. Even if you choose to run the business without a hierarchy, an implicit structure will eventually arise, with or without your input.

Certain employees are able to gain more authority with their seniority, expertise, charisma or simply with a louder voice. It can lead to a culture of preferentialism that dampens productivity and employee morale. If you have employees whose opinion carries heavier weight than others in your team, it may be time to do a review of how the flat structure is working out for your startup.

Workers who are more soft-spoken may naturally feel less motivated to share ideas. On the other hand, louder employees may be able to assume more authority but not this may not necessarily come with greater accountability. 

High Span Of Control

With a flat structure, you can expect most employees reporting to the boss directly. Even if you choose to have a ‘bossless workplace’, it is common to have employees running to you for answers on more complex issues because you are after all, still the boss.

Span of control refers to the number of employees that report to a single manager. As the team grows, you should be wary of your span of control increasing. When Google experimented with a flat hierarchy in 2002, co-founder Larry Page had too many people going to him with questions about expense reports and interpersonal conflicts. So much so that they called quits on being flat.

Too many direct reports can impede your ability of running the business. It leaves you bogged down with minor decisions, slowing you down, along with your business.

Less Prospects For Promotion

With fewer management layers, it also means fewer promotion opportunities. In a flat hierarchy, employees might feel that there is limited room for career advancement. 

If your startup adopts a flat structure, you may have to compensate for the lack of advancement opportunities in other ways. Otherwise, your workers may feel less motivated as there is nothing for them to work towards in the short-term. This may even drive your employees to look for opportunities elsewhere.

For starters, you can create a career development plan for your employees. Mark out goals to help the individual improve, help them pursue their passions and empower them to own their projects. You could start by implementing mentoring programs or sending employees to training workshops to pick up new skills. 

Making Your Organisational Structure Adaptable

With the buzz of modern views of work, it can be tempting to adopt ‘sexy’ ideas such as flat hierarchies. But as you adopt a flat structure, you should be ready to adapt to changes as your business grows. 

Take a leaf out of companies like Buffer, Github and Medium. A flat organisational structure has worked well for these companies, but its usefulness was outlived. 

For Medium, going flat was a structure that was in line with the company’s trajectory and kept them nimble. But it became difficult to coordinate efforts at scale. And so Medium, as with Buffer and Github, gave up on the initial hierarchy and made necessary adjustments according to their business needs.

Whichever organisational structure you choose, adaptability is key. As your startup scales, it is only sensible that some things evolved, especially the organisational structure. 

Read Also: Why Cash In Bank (And Not Profit) Is The Number One Priority That Business Owners Need To Care About

Power your business with Digital Business Banking Solutions

OCBC Velocity helps you view all your accounts details, comes integrated with E-Invoicing and cash management capabilities as well as access to our award-winning trade financing solutions. Use OCBC Velocity, your business in your hand.

Join The DollarsAndSense Business Community

For more content that helps entrepreneurs, freelancers, and self-employed individuals and learn to build better businesses, join the DollarsAndSense Business Community on Facebook.

You May Also Like