Over lunch in Chicago in 2019, a networking contact bemoaned to me her company’s recent reorganization. The technology firm’s flat structure was modeled on online retailer Zappos.com Inc.’s workplace experiment “holacracy,” a form of self-management in which no one holds a manager title and instead there are groups of largely self-managed teams.
 
That executive, along with others I talked to in the past decade, shared one downside of a flat organization: Ideas are heard, but it’s rare for them to come to fruition because everyone is pursuing conflicting priorities.

That legitimate concern is why many leaders see no reason to abandon traditional corporate structures in favor of egalitarian, self-directed ones, and why early adopters of holacracy, such as social-media company Twitter Inc., online publishing platform Medium and even Zappos itself, have backed away from it.

Hierarchies have worked for hundreds of years, and, in many respects, they still work today. A hierarchical organization structure provides employees with an obvious career path and allows them to set goals to advance to more senior positions, said Stephany Foster, senior vice president and head of human resources at molecular diagnostics company Qiagen NV, which employs more than 5,900 people in 35 locations worldwide.

If an organization is too flat, it can backfire in many ways.

A tiered management structure offers employees visibility on who the leaders are and the opportunities for them to advance in their careers. In a flatter organization, “there may also be little room to specialize in a certain area, which may cause people to stretch themselves too thin and burn out,” Ms. Foster said.

Critical information may not flow as well in a flatter organization, especially in manufacturing floors and nonoffice-based workplaces. 

“In a high-hazard, shift environment, for instance, we need managers with visibility into employee well-being, who are ‘eyes-on,’ said Susan Kelliher, chief people officer at chemical company Chemours Co., the DuPont spinoff with 6,400 employees. “Managers create an environment of holistic safety,” she said.

Startups, for instance, are known for their holacratic structures, and seemingly thrive on the unbridled freedom and creativity found in this type of environment. But as Wharton Professor Saerom “Ronnie” Lee found in his recent research, trouble arises when it comes time to actually bring a product to market. Many startups then find they lack the necessary management discipline to succeed.

The distribution of decision rights and duties allows things to be accomplished at the right level, Ms. Kelliher said.
 
Most HR professionals believe there’s a happy medium between an over-lean organization and a bloated one: Here’s how to get there.

• Know what you’re trying to achieve. What is the strategy for growing the business and what type of organization structure will best support that? For example, if you are investing in automation, perhaps you need to boost the hiring of human supervisors. At Chemours, leaders are trained in organizational design and effectiveness (using the STAR Model) and annually re-evaluate how well their current structure is working.              
• Understand the culture in which you’re operating. Certain types of workforces may be more “layer-intensive” than others. Ms. Kelliher shared that Chemours’s current employee base is tenured and highly experienced. “Many people in the plants have been there for 15 years. These individuals can have a ‘lighter touch’ management structure because they know their jobs so well,” she said.
• Don’t be rigid. Communicate to your employees that they have a say in the matter. Despite a hierarchical structure, Qiagen launched an internal initiative that offers employees more autonomy and helps them with career progression. It “gives people the power to suggest improvements and break down old habits, as well as take ownership for the part they play in our success,” Ms. Foster said.
• Eliminate the 1:1s. Ms. Kelliher suggested that leaders strive to remove viscosity in their structures. This often involves removing situations where you have one manager supervising a single direct report. “Generally, you want to have as few layers as possible so people get care and attention, and information can seamlessly go back and forth,” she said.

Next week: Carolyn McGourty Supple looks at whether the rise of independent work is a desire for more autonomy. Stay tuned and keep reading!

In his recent study, “The Myth of the Flat Startup: Reconsidering the Organizational Structure of Startups,” Wharton management Professor Saerom “Ronnie” Lee says startup companies with flat organizational structures often fail.

Mr. Lee found that the most successful businesses that begin with a flat structure usually start creating levels of management when they reach about 20 to 30 employees. At that size, good managers step in to determine priorities, delineate duties and keep order. The bottom line? You can have a brilliant team with a brilliant idea. You still need a hierarchy of sorts, and sooner than you think.

Mr. Lee acknowledges that it can be difficult for startup founders, for instance, to balance creative innovation and commercial viability. They often realize one at the expense of the other because it’s tough to achieve both simultaneously.

In the study, Mr. Lee found that the tradeoff between the two desired outcomes can be mitigated by adopting the right organizational structure in the early days of the business. That is why founders need to think about their people as much as their product from the outset.

In an interesting twist on this research, as reported in the Knowledge at Wharton journal, Mr. Lee and his co-authors conducted another experiment in a forthcoming study with 8,000 job candidates to assess whether startups that advertised a flat structure in job postings attracted more women. Contrary to the common belief that women prefer egalitarian organizations, the researchers found that advertising a flat structure decreased women’s representation in the applicant pool by 25%.

Access the full report.

“More businesses die from indigestion than starvation.”

That’s what Hewlett-Packard co-founder David Packard warned in 1995 about the danger of company leaders who add too much to their workplaces and subtract too little.

His words ring even more true now than they did 27 years ago, with too many leaders programmed and rewarded for more, more, more. It isn’t that addition is inherently bad. But when leaders are undisciplined about piling on staff, gizmos, software, meetings, rules, training and management fads, organizations become too complicated, their people get overwhelmed and exhausted, and their resources are spread so thin that all their work suffers.

For so many companies, the opposite—less, less, less—is the key to success. Subtraction clears our minds and gives us time to focus on what really counts. It sets the stage for creative work, giving us the space to fail, fret, discuss, argue about and experiment with seemingly crazy ideas—the ideas that can transform a company, and make employees happier and more productive.

None of this should be a mystery to companies. They simply need to measure the time and resources wasted on needless complexity. In 2015, Deloitte, a large professional-services firm, tallied the number of hours the firm was spending on performance management, including completing forms, holding meetings and creating ratings. The organization found that the process consumed close to two million hours each year—time that the firm’s leaders thought may be better spent talking to people about performance and careers, and shifting from a focus on the past to a focus on the future.

• It’s Not Just Changing Jobs—Boomeranging Back to Your Old Company Could Get You the Biggest Pay Raise (CNBC)
• To Get People Back in the Office, Make It Social (Harvard Business Review)
• Four Egotistical Behaviors That Lead to Poor Leadership (SmartBrief)
• Should More Employers Call Time on Degrees? (TLNT)                     
• Moving From Program Effectiveness to Organizational Implications (Chief Learning Officer)          
• Middle Managers Feel Trapped in the Return-to-Office War (Fortune)

Alexandra Levit is a business and workplace author and speaker. Chitra Vemuri curated and edited this newsletter.

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