A flat organizational structure is defined by few management layers that have a broader span of authority. When correctly used, it can lead to faster decisions, happier employees and satisfied customers, but when implemented the wrong way, it can cause job confusion and low levels of customer loyalty. Basically, this business model is most practical in small companies and in smaller departments of large organizations because the fewer number of management layers makes running a large corporation nearly impossible. Here are the pros and cons of flat organizational structure:
List of Pros of Flat Organizational Structure
1. It allows for a faster decision-making process.
One big advantage of having a flat organization is that there will be less decision-making hoops. Because only a few people have to be consulted about a decision, the management can provide rapid response to any concern or issue. Basically, there is a direct communication line between the leader of the company and the people on the front line.
2. It does not require extensive supervision and dominance.
It is of common belief that a business owner or manager must be able to manage and monitor everything that is happening inside his organization, including the employees. However, some studies show otherwise, stating that the less time organizational leaders have to multi-task and micromanage their employees, the more productive the employees can be as they get a higher sense of responsibility.
3. It is cost-efficient.
The fewer layers between the executive and his staff mean that there is also fewer wages to pay, fringe benefits to provide and so on. Expenses related to salary would also be reduced, which enables the company to save more money and provide better pay for its employees.
List of Cons of Flat Organizational Structure
1. It can cause work relationships to struggle.
When a business leader has too many people to manage on a daily basis, he might find it difficult to connect with his employees on a personal level, which is essential in maintaining trust and improving the employees’ baseline of responsibility and accountability. It can also have a significant impact on the issue of morale and respect of the organization in terms of authority.
2. It poses the risk of management to easily lose control.
As this system is ideal for small businesses and startups where the number of workers is still manageable, it could pose a problem to the entire organization when the managers-employees ratio becomes too out of proportion. This risks the management to easily lose control over employees, not to mention that there would be fewer individuals to back them up on their decisions or actions.
3. It has the potential to hinder growth.
Because change is often difficult to adapt and poses a lot of uncertainties, management would opt to decide against new opportunities to try and maintain the organizational structure, which will limit long-term growth.
Like other organizational structures, a flat organization certainly also has its share of pros and cons. Whether it is for your business or not, it basically depends on its type and size. Thus, you should carefully consider the lists above before you adopt this model in your own venture.