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In Business, ‘Flat’ Structures Rarely Work

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In Business, ‘Flat’ Structures Rarely Work

Is There a Solution?

The New York Times,

5 min read
2 take-aways
Audio & text

What's inside?

Flat business structures promise agility, but startups need normal systems and controls to avoid problems.

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8

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Recommendation

Some strategists think a flat-structured company – especially a nonhierarchial tech startup – can be profitably more agile, but that’s a myth, says a study reported by Charlie Brinkhurst-Cuff in The New York Times. Companies that lack necessary systems and controls may expend resources aimlessly, lack diversity, or cross legal lines. The Theranos scandal — culminating in guilty verdicts for its founders — illustrates what can go wrong in such firms. More organizations now prioritize honoring their revenue goals, principles, and social beliefs while incorporating accountability. The merging of these ideas is leading companies to employ a strategy that one leader calls a “dynamic hierarchy.”

Summary

Start-ups seeking to gain market share quickly might opt for a flat structure, but growth can bring serious, if not criminal, issues.

The startup US biotech company Ag Biome rejected a hierarchical organizational chart and instituted a flat business structure in hopes of achieving more agile, “democratic decision-making.” Suma, a workers’ cooperative wholesaler, and Valve, a video game company, also function under a flat business structure.

Companies often choose a flat structure because they believe it will support their values, political beliefs, or financial goals. However, a 2021 study by Wharton School professor Saerom (Ronnie) Lee found that start-ups should avoid a flat structure. Without the usual controls and accountability systems, companies — especially new ones with less experienced leaders — ...

About the Author

Journalist, book editor, and podcast host Charlie Brinkhurst-Cuff is the former senior staff editor for narrative projects at The New York Times.

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