Getting Ship Shape with a Flat Organizational Structure

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Valforma Technology Services

Homepage: http://valforma.com Email: [email protected]

Getting Ship Shape with a Flat

Organizational Structure

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Abstract

The debate about tall versus flat organizational structures continues unabated in the industry. Tall organizations help employees grow at more regular intervals as they climb a seemingly long career ladder. But many mature organizations, including some of the biggest and oldest corporates in the world, such as General Electric, Ford, and Xerox, have successfully adopted, and profited from, a flatter organizational structure.

In this white paper, we discuss the limitations of a traditional organizational structure and make a case for adopting a flatter hierarchy for sustained growth. We also highlight the downsides of using improper techniques and implementation approach to achieve a flatter hierarchy. We then acquaint you with the Valforma way of organizational structuring that has enabled numerous companies to become lean and more productive while also ensuring employee satisfaction and engagement.

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How Tall Organizational

Structures Fail to Rise Up

Tall organizational structures have been around in the corporate world for several centuries. During the late ‘70s and early ‘80s, it was not uncommon to have corporate hierarchies that had as many as 15 to 20 layers. In fact, such deep pyramids continue to exist in several organizations even today. The advantage of a tall organization chart is that employees get a sense of having a good career path ahead of them. The structure gives them faster career progression as they move from one title to another in quick succession. However, over a period of time, the pyramid turns into a diamond, with the top layers getting more heavily loaded with generalist managers. This eventually becomes counterproductive to organizations as elucidated below:

Drawback of Traditional Hierarchies

Growth without Value Addition

In a hierarchical structure, employees are often promoted within a fixed span of time to keep them motivated with a semblance of continuous growth. In such cases, the employee may be conferred a new title without any significant change in job description. For example, an

growth does not offer any value addition either to the employee or to the organization.

No Accountability and Responsibility

When an employee is promoted without allowing him time to develop his abilities, there is a possibility of mismatch between the role that he has been promoted to and the skill set he possesses. This leads to the “passing the buck” phenomenon where employees do not take accountability for the work that they are responsible for. A supervisor can blame his immediate senior for any problems that are not redressed, and blame his subordinate for any work not done appropriately. This concept, known as “management shield”, is the bane of a traditional hierarchy.

Slower Decision Making

A tall structure, particularly in the absence of clear authority, means that numerous people are involved in the day-‐to-‐day operations. This decelerates the decision-‐making process, making it impersonal and ineffective. Consider for example, your sales executive who needs to make an urgent decision based on a sudden market development. Since the authority rests with the center head, who is several levels above her immediate manager, her request has to pass

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Communication Distortion

Tall hierarchies often tend to turn highly bureaucratic. The passage of communication through each pyramidal layer of a tall organizational structure is akin to playing the game of Chinese Whispers. A decision announced by the top management has to journey a long way to reach the employee who must implement it. This might result in the communication getting distorted based on the interpretation of each intervening layer. Similarly, a good idea or feedback from the grassroots, that has to travel all the way up through multiple levels, may be ineffective by the time it reaches the executive team.

Organization Structure

Optimization

Given the various limitations of a traditional hierarchical structure, “delayering” – removing all

superfluous layers and developing a flat organization structure – as a strategy for optimizing the organization structure, is rapidly gaining ground. Delayering the organization chart to create a leaner, flatter organization has several benefits:

Faster Decision Making; Quicker

Communication

A flat organizational structure, means lesser managers with broader spans of control; this gives managers the authority to take a decisions quickly and effectively. A shorter pyramid also improves two-‐way flow of information.

Meaningful

Horizontal

Growth;

Substantive Vertical Growth

In a flat organization, people spend longer at each horizontal level. This gives them adequate time to master their work at each level. This eventually grooms people better for vertical

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movements and ensures that only seasoned specialists, who are capable of taking full accountability for their decisions, are promoted into the managerial ranks.

Getting It Right: The

Valforma Way

One would assume that, with such obvious benefits, delayering would be a popular concept. But if not planned well or implemented with care, delayering can lead to the notion of people being demoted into lower ranks. This could lead to wide-‐spread demotivation among employees and

completely negate the potential upside of the organization restructuring.

While delayering must be attempted with great care and caution, it is also important to note that delayering is just one of the strategies for optimizing a corporate organizational structure. At Valforma, we help you identify the organizational restructuring strategy that best suits your company based on an extensive diagnostic study, gap analysis, and industry benchmarking exercise. Talk to our consultants, and together we can help you transform your company into a lean and responsive organization.

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About Valforma

Valforma is transforming the way organizations think about creating value, unlocking their true potential, and adopting change that will put them firmly on the path to success in the future. Through our suite of complementary services ranging from management consulting, human capital management, technical architecture, solution development, and outsourcing-‐as-‐a-‐service, we empower our customers to

strategize, drive, and realize transformational change. Valforma is founded and led by a multi-‐disciplinary team of professionals with over 100 man-‐years of experience to their credit. We’re here to deliver Value and drive Transformation. Find out more about us at www.valforma.com.

Getting Ship Shape with a Flat Organizational Structure