Issue: Flat Management Flat Management By: Kathleen Murray Pub. Date: October 23, 2017 Access Date: September 25, 2021 DOI: 10.1177/237455680331.n1 Source URL: http://businessresearcher.sagepub.com/sbr-1863-104388-2861221/20171023/flat-management ©2021 SAGE Publishing, Inc. All Rights Reserved. ©2021 SAGE Publishing, Inc. All Rights Reserved. Is less hierarchy an idea whose time has come – and gone? Executive Summary Flat management was supposed to represent the future of enlightened business organization. Proponents touted the concept of reducing layers of management and empowering employees to make decisions as a quick path to making companies more efficient and Millennial- friendly. But a growing chorus of critics is condemning flat management as overhyped and fraught with its own set of problems, including uncertainty about employee roles, difficulties with scale and lack of accountability. Other business scholars say the trend toward less hierarchy is here to stay and caution companies against giving up on it too soon. A few key takeaways: Flat management seems to work best in smaller companies or in discrete units of larger ones. Estimates of organizations using a flat-management system in whole or in part range from a few hundred to almost 1,000 worldwide. Online shoe retailer Zappos, the largest organization to turn to flat management, has stayed with the approach even though some 18 percent of its employees left when it implemented the system. Full Report Zappos’ corporate headquarters in Las Vegas. The shoe retailer has stayed with a flatter management structure despite implementation problems. (James Leynse/Corbis via Getty Images) Bill Hunt initially thought “flat management” sounded like a pretty good deal. No bosses. The ability to set his own work priorities. What was not to like? He found out soon enough. At one organization, Hunt, a Washington-based software engineer, was forced to stay up late drafting human resources plans and codes of conduct about which he knew nothing. At another, he wondered why the people who got stuck with the administrative work formerly done by managers were always women or minorities. In lieu of a formal hierarchy, cliques formed, making it tough for workers who were on the outside and creating what he viewed as a toxic culture. Page 2 of 12 Flat Management SAGE Business Researcher ©2021 SAGE Publishing, Inc. All Rights Reserved. “I have yet to work in [a flat organization] that was effective,” he wrote in June in an article for Medium. “Although tech culture fetishizes rule breaking, disdain for authority and meritocracy … we could all do with a few more rules – and a few more managers.” 1 Hunt is not alone in his skepticism. For a number of years, the key elements of flat management – trimming managerial layers and giving employees more control over decision-making – have become a go-to solution for lagging performance. In an era when the fastest- growing companies pride themselves on being lean, innovative and poised to respond to an increasingly unpredictable global economy, this approach was supposed to make organizations more efficient. It is also Millennial-friendly, in its rejection of hierarchy and its goal of having all employees contributing to an overarching mission. 2 But as many companies struggle to make “flat” work, critics are pushing back over what some of them dismiss as just another management fad. Even executives who embrace the concept in the abstract often tell researchers they doubt its practicality, at least at their company. “We’ve gone pretty far to the hype side,” says Ethan Bernstein, a management professor at Harvard Business School. “It turned out that a flat structure opened up a whole new set of challenges. Some companies have the appetite to address these. Others don’t.” Bernstein is referring to Holacracy, a self-management system used by Zappos, among other companies. The online shoe retailer’s struggles to replace hierarchy with collaboration have been widely chronicled. 3 Despite challenges, which included work time spent debating whether an employee should be allowed to bring her mini-pig to the office, Zappos has stayed with the program, but many companies are rethinking the no-bosses rule. 4 Others are scaling back; limiting self-management to a single department, for example, or reintroducing some hierarchy as a way to regain control. Moving to flatter management, it turns out, is much harder than many bosses imagined it would be. A pair of recent Stanford University studies found that many people actually like hierarchy and the incentive it provides for advancement. 5 Despite today’s cheaper communication technologies, social networking and crowd sourcing, Jeff Pfeffer, a professor of organizational behavior at Stanford, dismisses the idea that corporations are becoming more egalitarian as partly wishful thinking. 6 Other business scholars worry that this view is shortsighted and that companies resistant to change are giving up too soon. “This is a trend that is not going away,” says Joe Carella, assistant dean of executive education at the University of Arizona. “The world is changing at a pace it hasn’t before, and we’re moving at exponential speed. We need to redesign how management works.” Is the answer a flatter management structure? In a recent executive survey, Carella says he found that while 70 percent of respondents admired flat management principles, half of them did not think they could make it happen at their company, primarily because of the capital outlay involved in shifting to a new system. What Is It? A flat organization is one with fewer layers of management. Variants include: Lattice. Used by W.L. Gore & Associates, makers of Gore-Tex fabric, this structure is set up so that everyone in a company is connected to everyone else and can go directly to those they need to get their jobs done. 7 Holacracy, in which power is distributed across the organization in a series of teams or circles. Network-centric, a system in which employees network inside the company with colleagues and outside the company with manufacturers. 8 “Flat management” is often used interchangeably with “self-management,” the term consultants and academics generally prefer. “Just because you have no bureaucracy doesn’t necessarily mean flat,” says Harvard’s Bernstein. “If you put a bunch of people in a room, they will find a way to order.” Bernstein pinpoints the advent of the practice to self-managed teams in British coal mines about 65 years ago. Until then, coal had been mined like an assembly line, with each team performing a single task and having to finish its shift before another team could begin. That is, until miners in South Yorkshire decided to organize their work differently. With minimal supervision, groups of workers interchanged roles and performed multiple tasks, which allowed the mine to function 24 hours a day without miners waiting for a previous shift to finish. Once self-managed teams proved successful, it was only a matter of time, Bernstein said, before people started thinking about self-managed organizations. 9 Holacracy Distributes Power Among Employees Page 3 of 12 Flat Management SAGE Business Researcher ©2021 SAGE Publishing, Inc. All Rights Reserved. Source: Richard Feloni, “Zappos’ CEO says this is the biggest misconception people have about his company’s self-management system,” Business Insider, Feb. 2, 2016, https://tinyurl.com/hyqn44a. The Holacracy organizational style adopted by Zappos differs from traditional hierarchy by spreading power among all employees, instead of distributing authority to different levels of management. Morning Star, a tomato-processing company in California, is a poster child for self-management. It has had no managers since it was founded in the 1970s. Each employee, from plant workers to truck drivers, decides how to do the work and makes all decisions. 10 Self-management works best in smaller companies where it has grown up organically with the business or at those where employees are required to do a lot of repetitive work, says Joyce Wilson-Sanford, former executive vice president at Delhaize Group, which owns supermarket chains including Hannaford and Food Lion. The challenges often come, she says, when an attempt is made to impose it on an existing company that has an established hierarchy. In 1987, Wilson-Sanford helped turn a Hannaford warehouse in Schodack, N.Y., into a self-managed organization. “The time was right,” she says. “It’s a tricky line between self-management and just allowing people to do things.” She had to provide additional training, for example, after concerns over how employees initially wanted to punish their colleagues. “You can’t just put someone in the stocks because he fell asleep at work,” she says. Lately, Wilson-Sanford says she has been getting calls from former colleagues who want to talk about self-management again. Her advice has not changed much in 30 years. The reason many companies fail at switching from a hierarchical to a flatter, more self-governing organization, she says, is not that it is a bad idea, but rather that they do not give it enough time. It takes three to five years to change a company’s culture. Old Is New Again While the flat structure has been around for decades, a number of factors have contributed to its growth in recent years, experts say. Global uncertainty, the pace of technological advances and disruption of industry have left many organizations fighting for their survival. 11 Successful companies such as Google, whose founders famously eschewed bosses, have inspired many imitators. Social media is also democratizing workplaces, and the former command-and-control structure of management is being pushed aside. Collaborative environments where everyone is a leader also appeal to Millennials who have grown up with a team ethos and a desire to have an immediate impact.