Whether you work for a startup, a giant multinational, or something in between, organizational structure is so embedded in the notion of work and business that we hardly notice it. But structure is important. It’s what allows organizations – regardless of size – to run successfully. It informs almost everything about the business, including its culture and values. So it makes sense that organizational structures should evolve and change, just as the nature of business and work itself is rapidly evolving.
Goodbye to the hierarchical structure of old
No doubt you’re already familiar with the traditional hierarchical business structure. You probably work in such a structure, or have done so in the past. It’s essentially a top-down system, where each employee has a defined position on the “ladder,” with very clear roles and responsibilities. Perhaps a pyramid is a better description than a corporate ladder, since the CEO sits at the very top, then each layer below (heads of department, then line managers, then everyone else) gets wider … but less powerful.
This hierarchical approach has worked well for generations. But now, in this age of rapid technological advancement and global workforces, things are beginning to change. More modern approaches have come to the fore, as leaders recognize the need for more agile structures that allow the business to quickly reorganize and respond to change. It is also partly a response to the changing nature of work, with the rise of freelance and remote workers.
These modern organizational structures include:
- Flatter organizations, which have fewer layers than hierarchical companies. While some form of hierarchy still exists, the bulk of the business is organized around flexible communities or teams, which allows for better communication and collaboration across the business.
- Flat organizations, in which everyone is seen as equal. This structure is more typical in startups and small companies, as it can become challenging in large organizations.
- Holacratic organizations, which are often described as “boss-less” organizations because decision making is distributed across the organization. Again, this may be more appropriate for smaller organizations and startups.
Of these structures, the flatter structure is the most widely adopted – in organizations of all sizes – and according to some experts (myself included) is the one that will grow the most.
Key characteristics of flatter organizations
Let’s peek under the hood of a typical flatter organization. Some of the key characteristics include:
- Collaboration. In a flatter organizational structure, departmental boundaries are eliminated, and teams collaborate freely on projects that pursue the organization’s strategic goals and solve its biggest business challenges. (This may even involve pulling in external contractors as and when needed.)
- Teams. Teams are generally smaller. (Amazon refers to this as “two-pizza teams” meaning they can be fed by two pizzas!) When teams need to scale up, they work together and combine resources to achieve larger goals.
- Autonomy. Project teams work to specific requirements and goals, but they have the freedom to decide for themselves the best way to complete the project and deliver those goals. As a result, there is little or no middle management layer required to supervise employees – employees can interact directly with higher-up managers and executives.
- Communication. Because there are fewer departmental boundaries, communication flows fast and free across the organization. Instant messaging apps are frequently used to ensure everyone in the business can communicate with everyone else.
- Flexibility. In the flatter organization, careers are flexible and dynamic. Remote work is common. And employees may even “float” from project to project, and team to team, choosing which projects to work on based on their skills and interests, rather than remain in one defined role.
- Decision making. Employees have more decision-making power, and can proactively decide what needs doing and how, in order to achieve the organization’s goals. For more strategic decisions, managers and executives may collaborate with employees to make decisions, or at least solicit their feedback. Employees feel heard.
- Speed and innovation. Because decisions happen fast, flatter organizations are able to innovate more quickly. Innovation is so important, flatter organizations are often willing to self-cannibalize their most successful products rather than risk standing still and being overtaken by the competition.
Music discovery platform Pandora, one of the largest music streaming services in the US, has transitioned from a traditional structure to a flatter organizational structure – something which the company said would allow for smarter, faster execution. Other companies that have adopted a flatter structure include Whirlpool and Cisco. At Whirlpool, for example, traditional job titles have been eliminated in favor of four job types that all employees – at every level of the company – fit into. And at Cisco, employees enjoy complete flexibility and freedom, meaning they can work whenever, wherever and however they want.
Ultimately, I believe the flatter organizational structure is much better suited to success in the fourth industrial revolution, since it enables faster innovation and greater collaboration. Can your business afford to ignore this major trend?
Read more about these and other future trends in my book, Business Trends in Practice: The 25+ Trends That are Redefining Organizations, which has just been awarded Business Book of the Year 2022.
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