Management is the most cost-consuming activity of any organization. Every individual engaged in management, starting from team leaders, to department heads, and vice presidents, all are supervising other people’s work. It’s not that managers aren’t hardworking; they put in a lot of efforts in their work, they are not the problem. The root of the problem is the management model that is followed by loads of organizations. A majority of organizations around the globe follow hierarchical organizational structure. The hierarchical structure is also referred as “tall systems” where there are many layers of people between top management and workers. Why not try out flat organizational structure instead?
First, in a hierarchical organizational structure, suggestions and decisions have to be communicated through various layers of vice presidents and managers between top management and employees. The managers will supervise the employees, and as the company becomes bigger, it will require managers to supervise other managers. Suppose each manager’s salary is approximately three times the average salary of employees. Direct management cost will be 33 percent of total payroll, which is very expensive. While in a flat organizational structure, there might be a single layer of managers between top management and the employees. It is easier for employees to present their views and suggestions to the top management in a flat structure.
Second, the typical hierarchical structure will increase the risk of taking disastrous decisions. Sooner or later, anyone can be the reason of a royal screw-up if you give monarch-like authority to someone. The strongest managers are sometimes not aware of the forefront realities. And often, a decision made considering the normal scenarios may not work for real or worst case scenarios. As the authority of the person gets bigger, the number of people challenging the decision becomes lesser.
Third, any decision has to pass through multiple approval layers when multitiered management structure is involved. These layers may result in slower responses to decision making. More often, managers seem to make the decision-making process slower instead of speeding it up. Biased managers are yet another hindrance to decision making. A single person can manipulate or kill a new idea in a hierarchy, due to his/her biased interests.
Lastly, there’s the cost of domination. The hierarchical structure steadily disempowers the first-level employees. Employees need approval for each and every expenditure they make to get the right tools for work. Such tall structure narrows the authority of individuals and shrinks the scope of faster development.
There are certain assumptions related to the structure of organizations being hierarchical by default.
- Hierarchy is necessary to succeed. People prefer to fail in a conventional manner rather than to succeed unconventionally.
- People who take decisions are of higher status than those who implement the decisions.
- Organizations that don’t follow the normal hierarchy structure have more probability to fail.
Many companies prove that these assumptions are totally mistaken. Second Chance, a group that helps reduce homelessness has been very successful using the flat organizational structure. But, what if this structure works only for not-for-profit organizations? That’s not the case. Have a look at the list of companies that are really successful even after having flat structure.
More than 20% of the world’s websites use WordPress Platform making it one of the top internet companies. And still, WordPress’ parent company Automattic uses a flat structure. It only employs a few hundred individuals, who can work remotely. GitHub is another example of companies using flat organizational structure.
A popular gaming company, Valve, which makes Half-Life, Portal and many more games is famous for not having bosses at all. And 37Signals has a similar structure as Automattic. They create software that enables distributed collaboration like Basecamp and Ruby on Rails. Flat structure can also run a huge manufacturing firm with thousands of employees. Take an example of W.L. Gore; it is one of the most successful firms around the globe. They manage more than 10,000 employees with only three levels in their organizational structure. Firstly, there is a democratically elected CEO, then a few functional heads, and then are rest of the employees. Its CEO Terry Kelly states that, “It is better to rely on a broad base of people and leaders with common values and who feel personal ownership for the overall growth of the organization. These individuals will work much better than any single dominant leader. ”
It’s not that there’s no manager, it’s just that everyone is a manager.
Let’s take a closer look at Morning Star’s management structure. Morning Star is world’s major tomato processor, each year processing 25% to 30% of the tomatoes in the United States. The company was started by Chris Rufer in 1970, who is still its President. Morning Star’s mission is to create a company where all the members will be self-managing professionals, communicating and coordinating their activities with their colleagues, customers, suppliers, and other industry participants.
At the core of Morning Star’s unconventional yet effective management model is the simple idea of freedom. Rufer says, “If people are given enough freedom, they will be drawn to what they actually like contrasting to being pushed to what they have to like. So, they will individually do better as they do what they like.” Employees at Morning Star firmly believe that “If people tell you what to do, you are a machine.”
How does being self-managing professional benefit an employee? Here’s how.
To define roles broadly is the key to initiatives at Morning Star. Individuals get the authority to act, and get recognition whenever they help others. Morning Star is driven by reputational capital. Whenever an individual has some advice to improve another part of the organization, it will increase his reputational capital.
Morning Star’s management model encourages employees to expand their skills. An individual working at the packaging unit might also have knowledge about microbiology. Everyone takes responsibility for the quality of their work. There’s no boss to take the blame in case something goes wrong.
Rufer says, “The self-management model enhances flexibility and speed.” When people are free to act, they will come up with changes that need to be done to the organization at some regular intervals. They can sense those changes to better serve their mission and can act accordingly.
When you fragment the pyramid structure, much of the poison is drained out of the organization. In flat organization structure, there are no bosses to please or no opponents to drag down. As there is no competition for promotion, the backstabbing part is eliminated. All your energy is diverted to your work, which results in delivering the best outcome.
The decision makers at the top might not have a clear idea about the forefront situations. All the data and analysis can never beat the judgement of first-hand experience. As the doers and thinkers are same, the judgement gap is fulfilled. Decisions thus made are more timely and wiser.
Many colleagues at Morning Star have previously worked for the competitors, but the reverse rarely happens. Even majority of temporary workers are loyal. During summers, when tomatoes come off the vine, Morning Star employs 800 seasonal employees for the processing plants. Out of these employees, 90% return every year. The company also trains them in self-management which results in higher employee engagement even in the temporary employees.
People usually prefer the familiar and do not accept the change until they can envision it. And it will take time, energy and passion for already established hierarchical structures to accept the flat ones. But the example of Morning Star clearly conveys that management is not the task of a handful people but responsibility of all.
However, as the work easily gets distributed due to digital technologies, and we enter a social era, the flat organizational structure will become more common. There are strong reasons for treating people with respect and providing self-sufficiency in business.
It’s time to redefine management. And to start with, why can’t everyone be a chief?