Organizational alignment can help with the execution of strategy. A well-designed organization typically aims for a lean structure that can reflect the strategy closely. The lean organizational design builds on few management layers, i.e. a small number of levels between the CEO and the frontline of the company. Intuitively, a flat organization makes sense. But two questions invariably come up: “What are the advantages of few layers of management?” And, “Is a flat organization always desirable?”
FIVE ADVANTAGES OF A FLAT ORGANIZATION
Five reasons explain why few management layers are good for a company
- Closer customer touch: the CEO can focus on customers and their behavior more closely and respond more quickly to changing market needs.
- Greater visibility of operations: a flatter structure allows better visibility into how operations are working and which employees are performing better and contributing more than others. Greater visibility makes for improved checks and balances on performance.
- Improved communication: fewer points of information transmission and reception in the system reduce distortions of communication. As a result, communication is more direct faster and more reliable.
- Faster decision-making: a flatter organization means the need to consult with fewer people at fewer levels before making a decision, i.e. less bureaucracy.
- Lower Cost: Fewer management levels means fewer employees, which means less expense in payroll and office space.
A flat organization requires employees to perform more functions and exercise greater value judgment. These requirements present a few implications:
- First, the need for the individual to perform more functions drives the development of greater general knowledge versus specialized expertise.
- Second, greater value judgment transfers control to the individual and away from the company.
- And third, fewer levels of management make for a more decentralized organization.
Given the above, it follows that a flat organizational design may not be appropriate for businesses that need a high degree of control, highly specialized expertise, or a centralized structure. Therefore, adopting a flat organizational design across companies is not a done deal.
However, for those companies where a flat organizational design is applicable, it is highly recommended even though obstacles can arise during the implementation. Namely these are:
- The potential unwillingness by employees to take on decision-making
- The reluctance of some employees to accept more work responsibility, and
- More demands placed on lateral communication given the decentralized nature of operations.
In sum, a flat organization is preferable to a tall organization whenever possible. A structure that is lean and dynamic allows the company to follow strategy more closely and greatly improves the odds of successful strategy execution.