An organization that doesn't have the typical hierarchy comprised, from bottom to top, of staff employees, team leads, front-line supervisors, managers and company executives usually is described as a flat organization. A flat organization – sometimes referred to as a horizontal organization – has few, if any, layers of supervision and management between staff and the company's top executives. While reporting directly to the company president has its advantages, there are also several disadvantages to this type of organizational structure.
TL;DR (Too Long; Didn't Read)
Staff may be left wondering who's in charge and what their promotion prospects are in a flat organizational hierarchy.
How Does a Flat Organization Work?
In a flat organization, the payroll clerk might report directly to the chief financial officer instead of reporting to a human resources compensation and benefits manager. Or, the shipping clerk might report directly to the chief operations officer, rather than being supervised by the purchasing or transportation manager. It might seem reasonable that small companies, with the expertise and resources of qualified staff, are more inclined to become flat organizations. For example, Zappos, one of the largest online shoe retailers, broke from tradition and eliminated its hierarchical structure in favor of a streamlined culture. This was a departure from what is known as a highly structured work environment by getting rid of bosses and job titles in favor of empowered employees under a "holocracy," a term that appears to be the antithesis of a hierarchy. While there are advantages to empowering staff, there clearly are disadvantages to operating in a flat organization.
Who's in Charge?
A flat organization typically limits the amount of leadership available to employees because the ratio of employees to executives is higher than the employee-to-supervisor ratio. Because of sheer numbers, employees may not receive the type of one-on-one mentoring and guidance they would normally receive if they reported to a front-line supervisor or to a manager who has fewer direct reports. Employees who don't receive personal attention from a supervisor or manager can feel less confident about their performance or skill sets if that pat on the back is infrequent, or informal on-the-job training is lacking.
Where's the Coaching and Correction?
Poor job performance can go unnoticed or unaddressed in a flat organization, simply because the executive doesn't have direct knowledge of that employee's work habits or the time to observe employees working. This can be detrimental to the company's bottom line and even affect employee morale when other workers witness how little attention is being paid to poor job performance or when executives aren't witness to inappropriate workplace behavior. Poor performance can be particularly damaging to a company's reputation, especially if it leads to faulty products or inadequate service delivery. These are just a few examples of how a company can suffer when executives don't have the time to provide job coaching or disciplinary action to employees in a flat organization.
When Will I be Promoted?
A staff employee in a flat organization has limited upward mobility or career progression, unless she becomes a partner or a financial investor in the company. The typical career progression for an employee includes promotion to supervisor, manager and finally, executive. But in a flat organization, there exists no supervisory or management role to signify the company's reward for high-potential employees whose performance exceeds company expectations. In turn, employees who are unhappy with the lack of upward mobility may seek opportunities elsewhere, which presents additional issues for flat organizations: turnover costs, job dissatisfaction among employees and low morale. All of these factors can be costly in the end because they adversely affect productivity, employee satisfaction and overall business success.