A flat management structure can empower staff during rapid growth

A flat management structure, popular in Scandinavian countries, gets rid of traditional hierarchies and aims to empower employees instead. This kind of structure is becoming increasingly attractive to UK businesses, too – but it does come with potential drawbacks and might not suit every organisation.

There are different interpretations of how a flat management structure actually works. In most cases, the structure is not actually flat. It’s certainly flatter, but very few businesses – if any – would allow new hires to make CEO-level decisions.

In reality, when businesses adopt a flatter management structure, it often equates to the creation of small teams within a business.

By giving individuals in these teams more autonomy and removing old reporting lines, advocates believe these teams can make decisions faster. In successful flat management structures, employees and senior management work closely together. This means – as Elon Musk claims of Tesla – anyone can talk to and question anyone within the organisation.

There’s also the opportunity to save on middle management salaries and improve employee engagement since staff can feel they’re playing a bigger role in the success of the business.

Try a flat management structure after expansion

“I tend to call our new system a non-hierarchical structure,” said Rebecca Lewis Smith, MD of digital marketing company Fountain.

She helped to create and implement structural changes in the business last October. “We organise ourselves into pods and there’s no hierarchical management in that.”

To some employees, a change of this nature can be baffling – there are people, after all, who enjoy having a mid-level boss just above them. As Lewis Smith said: “One of the first things that happened when we introduced the new structure was that people would try to identify who would have been their manager; they were trying to translate it in their minds to something more familiar.”

Lewis Smith decided to implement a flat management structure after a rapid expansion in 2017, when the team ballooned from 12 people to 39. One of her biggest sources of inspiration, she said, was a book called “Reinventing Organisations” by Frederic Laloux.

“We realised that our old-fashioned pyramid structure was breaking,” said Lewis Smith. “There were bottlenecks all over the place. My co-director and I said we needed to hire a level of middle management just to manage the existing team, but that didn’t sit right with us.”

Implementing a brand new structure removed the need for middle management. It also helped the workforce to rekindle the “family” feeling at the company.

“One of my favourite things about our new structure is that it gives ownership, accountability and responsibility to people,” said Lewis Smith.

“Every single team member is behaving like the adults they are, rather than being infantilised by a hierarchical system. We never have a situation where a line manager blames the person being managed and the person being managed blames a line manager. That has been completely and utterly eradicated.”

The challenges of performance management

There’s an assumption that adopting a flat management structure will lead to staff questioning senior management more. For Lewis Smith, this now happens every day – though she admits that not everyone was an instant convert.

“That’s part of how we run,” she said. “But we still have to challenge members of the team to question us more. We try to tell them that if they know better, they should be coming to us.”

A possible downside of the structure, said Lewis Smith, is that performance management in non-hierarchical structures can be challenging. With middle management removed from the equation, senior management are right in the thick of it.

“Now, when something happens and someone needs to be given difficult feedback, it suddenly comes back to me,” she said.

But the benefits have been worth it.

“People are collaborating; they’re not passing the buck when things go wrong. We have a 100 per cent staff retention rate and everyone’s pulling in the same direction,” said Lewis Smith.

“I thought it would take six months to get people working in this new way, but it definitely didn’t take that long.”

Organise your company into mini-businesses

Any business planning to adopt a flat management structure should expect teething troubles. For Carl Reader, director of chartered accountants d&t, communicating how it all works to employees wasn’t easy.

“We can draw it all out on a chart, but we’ve actually found that team members need six months of experience to get it,” he said.

“They only truly understand the changes when they’ve been through them – when they’ve tried to go through the old reporting lines and been told that no, that’s not how it works now.”

Reader changed the structure of his business after it had grown from a small team to around 60 staff.

“We ran a staff engagement survey. In previous years, when we were smaller, we’d had absolutely amazing engagement levels. After our business grew, engagement slipped to the levels of an average business, which wasn’t acceptable to us,” he said.

Like Lewis Smith, Reader was greatly inspired by Laloux’s “Reinventing Organisations” book and decided to arrange the business into pods.

“Effectively, we built mini businesses within our business,” he said. “Each pod is a team of six with a pod leader, and that way they can pull together as mini businesses in their own right.”

How pods and pod leaders work in a flat structure

While d&t is a multi-million-pound business, each pod has a much smaller turnover. This makes the affairs of each pod seem more manageable.

In terms of management, the pod leader takes ultimate responsibility. Previously, d&t had an accounts junior reporting to an accounts senior, who would report to a relationship manager and so on. With a flat management structure, that entire chain has been broken. Everything is dealt with within the pod.

If a pod leader needs to report upwards, they go straight to senior management. According to Reader, the new system has cut six or seven chains of hierarchy down to two.

“We’d become so bureaucratic and focused on systems and processes. The human touch had been lost,” said Reader.

“My gut feeling is that this is changing. We have an engagement pulse survey and we’re seeing some positive trends. But until we do a full survey, we can’t say it’s definitely worked yet.”

Ultimately, Reader thinks the new structure will most benefit the staff. He expects them to become more engaged, and to enjoy feeling like members of a team again.

There are other advantages, too. Clients will benefit from the new structure, thanks to a tweak in the way they are managed – it’s now easier for someone to pick up a client’s affairs when a colleague is absent. Reader also envisions community benefits, because of fundraising events the teams are taking part in.

As for serious concerns, there’s nothing about the flat management structure that worries Reader.

“If I were an outsider looking in, I might wonder what’s stopping these mini-businesses within our organisation from going off and setting up on their own. I suppose the answer is that we have to make d&t such a good business to work in that this isn’t an option at all.”

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