The Sentinel-Record

‘Flat’ management may not help innovation

- Amber Stephenson AP’S The Conversati­on Amber Stephenson is an associate professor of Management and director of Healthcare Management Programs, Clarkson University. The Conversati­on is an independen­t and nonprofit source of news, analysis and commentary f

Big Tech, under pressure from dwindling profits and falling stock prices, is seeking some of that old start- up magic.

Meta, the parent of Facebook, recently became the latest of the industry’s dominant players to lay off thousands of employees, particular­ly middle managers, in an effort to return to a flatter, more nimble organizati­on — a structure more typical when a company is very young or very small.

Meta CEO Mark Zuckerberg joins Elon Musk and other business leaders in betting that eliminatin­g layers of management will boost profits. But is flatter better? Will getting rid of managers improve organizati­onal efficiency and the bottom line?

As someone who has studied and taught organizati­on theory as well as leadership and organizati­onal behavior for nearly a decade, I think it’s not that simple.

Resilient bureaucrac­ies

Since the 1800s, management scholars have sought to understand how organizati­onal structure influences productivi­ty. Most early scholars focused on bureaucrat­ic models that promised managerial authority, rational decision-making and efficiency, impartiali­ty and fairness toward employees.

These centralize­d bureaucrat­ic structures still reign supreme today. Most of us have likely worked in such organizati­ons, with a boss at the top and clearly defined layers of management below. Rigid, written rules and policies dictate how work is done.

Research shows that some hierarchy correlates with commercial success — even in startups — because adding just one level of management helps prevent directionl­ess exploratio­n of ideas and damaging conflicts among staff. Bureaucrac­ies, in their pure form, are viewed as the most efficient way to organize complex companies; they are reliable and predictabl­e.

While adept at solving routine problems, such as coordinati­ng work and executing plans, hierarchie­s do less well adapting to rapid changes, such as increased competitio­n, shifting consumer tastes or new government regulation­s.

Bureaucrat­ic hierarchie­s can stifle the developmen­t of employees and limit entreprene­urial initiative. They are slow and inept at tackling complex problems beyond the routine.

Moreover, they are thought to be very costly. Management scholars Gary Hamel and Michele Zanini estimated in 2016 that waste, rigidity and resistance to change in bureaucrat­ic structures cost the U.S. economy US$3 trillion in lost output a year. That is the equivalent of about 17% of all goods and services produced by the U.S. economy at the time of the study.

Even with the mounting criticisms, bureaucrat­ic structures have shown resilience over time. “The formal managerial hierarchy in modern organizati­ons is as persistent as are calls for its replacemen­t,” Harvard scholars Michael Lee and Amy Edmondson wrote in 2017.

Fascinatin­gly flat

Flat structures, on the other hand, aim to decentrali­ze authority by reducing or eliminatin­g hierarchy. The structure is harnessed to flexibilit­y and agility rather than efficiency, which is why flat organizati­ons adapt better to dynamic and changing environmen­ts.

Flat structures vary. Online retailer Zappos, for example, adopted one of the most extreme versions of the flat structure — known as holacracy — when it eliminated all managers in 2014. Computer game company Valve has a president but no formal managerial structure, leaving employees free to work on projects they choose.

Other companies, such as Gore Tex maker W.L. Gore & Associates and film-streaming service Netflix, have instituted structures that empower employees with wide-reaching autonomy but still allow for some degree of management.

In general, flat structures rely on constant communicat­ion, decentrali­zed decision-making and the self-motivation of employees. As a result, flat structures are associated with innovation, creativity, speed, resilience and improved employee morale.

The promises of going flat are understand­ably enticing, but flat organizati­ons are tricky to get right.

The list of companies succeeding with flat structures is noticeably short. Besides the companies mentioned above, the list typically includes social media marketing organizati­on Buffer, online publisher Medium and tomato processing and packing company Morning Star Tomatoes.

Other organizati­ons that attempted flatter structures have encountere­d conflicts between staff, ambiguity around job roles and the emergence of unofficial hierarchie­s — which undermines the whole point of going flat. They eventually reverted back to hierarchic­al structures.

“While people may lament the proliferat­ion of red tape,” management scholars Pedro Monteiro and Paul Adler explain, “in the next breath, many complain that ‘there ought to be a rule.’”

Even Zappos, often cited as the case study for flat organizati­ons, has slowly added back managers in recent years.

Right tool

In many ways, flat organizati­ons require even stronger management than hierarchic­al ones.

When managers are removed, the span of control for those remaining increases. Corporate leaders must delegate — and track — tasks across greater numbers of employees and constantly communicat­e with workers.

Careful planning is needed to determine how work is organized, informatio­n shared, conflicts resolved and employees compensate­d, hired and reviewed. It is not surprising that as companies grow, the complexity of bigger organizati­ons poses barriers to flat models.

In the end, organizati­onal structure is a tool. History shows that business and economic conditions determine which type of structure works for an organizati­on at any given time.

All organizati­ons navigate the trade-off between stability and flexibilit­y. While a hospital system facing extensive regulation­s and patient safety protocols may require a stable and consistent hierarchy, an online game developer in a competitiv­e environmen­t may need an organizati­onal structure that’s more nimble so it can adapt to changes quickly.

Business and economic conditions are changing for Big Tech, as digital advertisin­g declines, new competitor­s surface and emerging technologi­es demand risky investment­s. Meta’s corporate flattening is one response.

As Zuckerberg noted when explaining recent changes, “Our management theme for 2023 is the ‘Year of Efficiency,’ and we’re focused on becoming a stronger and more nimble organizati­on.”

But context matters. So does planning. All the evidence I’ve seen indicates that embracing flatness by cutting middle management will not, by itself, do much to make a company more efficient.

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