At D8 in 2010, Steve Jobs stated that Apple was the "largest startup in the world." This referred to the tech giant's break away from a vertical management structure to the collaborative team-based network that we now know as a flat hierarchy. With around 50,000 employees at the time, Jobs was proving that "flat" was not only successful, it was scalable.
Digital transformation (DX) accelerated this shift by uncovering organizational pitfalls that conventional management struggled to address, like slow adaptability, wide knowledge gaps, and employees' search for greater meaning in their work. Methodologies like scrum, agile, and lean sought to maximize efficiency by facilitating the flat hierarchy's collaborative framework, and entirely new organizational structures, like the holacratic model popularized by Zappos, rose to dethrone vertical hierarchies for good.
Since 2020, DX is proving that the way we think about organizational structure must be as agile as the processes we want to optimize. Technology has enabled better virtual collaboration and data accessibility, which is why digital workplaces can exist at all. Unfortunately, these shifts have also revealed that the "large startup" approach to structuring an organization can overburden middle management layers, exacerbate process ambiguity, slow down large-scale decision-making, increase churn, and damage talent acquisition efforts in a post-COVID world.
Challenge: Burnout among leadership
There's no doubt that managers in the era of remote work face unprecedented challenges in fostering team connection and drive. This is leading many companies to begin forcing employees back to the office; but remote work models are only easy scapegoats. The burden that middle managers are carrying in a flat enterprise is not about where the work gets done, but how the value of that work is measured.
Middle managers are often an organization's most agile leaders—the ones who deliver high value by successfully executing multiple roles. At Zappos, for example, each employee fills 7.4 roles, on average. This means that high-performing workers take on an increasing number of responsibilities and risk burnout in order to advance.
It should be no surprise, then, that churn is skyrocketing among these top performers. A Qualtrics survey of over 13,000 full-time employees showed that, between 2021 and 2022, leaders reported being significantly less likely to stay at their current organization as compared to general team members, with the trend being more pronounced for female leaders. These overworked employees also don't have time to focus on process documentation or mentorship, which increases the need for expensive talent searches with arduous onboarding processes when they eventually exit.
Solution: Prioritize grassroots-level feedback systems
Agility and efficiency have been noted by Deloitte as top factors driving successful businesses, and underpinning these traits is the need for close collaboration, training, and synergies. At the heart of all of these success factors is feedback. Self-assessments and 360° feedback are now essential to stay competitive. Not only can they provide qualitative insights that support new training initiatives and external partnerships, but they can also guide managers toward the most effective ways to streamline work and reduce their burnout without increasing turnover rates.
Feedback-driven solutions for manager burnout
If managers are: | The organization can: |
|---|---|
The only ones who can do certain job functions | Increase L&D to upskill staff |
Trying to fill too many urgent skill gaps | Outsource jobs, forge new partnerships |
Losing track of their team at the individual level | Promote employees, hire replacements |
Working with outdated systems across multiple jobs | Implement business process automation (BPA) software |
Sometimes adding managerial layers and un-flattening the hierarchy is the most effective way to fix an organizational bottleneck, but candid, ongoing conversations at the grassroots level ensure greater adaptability and precision when making those critical choices.
Challenge: Process ambiguity and slow decision-making
Gathering feedback only works if the processes for choosing and implementing those solutions are also agile. Flat hierarchies are uniquely set up to increase collaboration and make decisions easier at the team level. Yet managers at a typical Fortune 500 company are still wasting 530,000 days per year on ineffective decision-making, resulting in opportunity costs of $250 million in annual wages.
Deciding whether to outsource job functions, purchase BPA software, enroll workers in L&D programs, or start a new hiring cycle all involve cross-department communication, and this is where flat hierarchies can get in the way. In a 2021 episode of the Financial Times podcast Working It, Alexis Gonzalez-Black described how, even in organizations that claim to be flat, it is more likely that hierarchies still exist and have just gone undocumented. This invisible power structure can make it difficult to gather org-wide data, build consensus, and act intentionally on those insights.
Solution: Decentralize management, centralize data
While a flat hierarchy's decentralized management structure can empower employees, that potential will be blunted if the data is too dispersed and difficult to convey. With multi-cloud systems facilitated by UDAPs and data literacy training for employees, companies can maintain an employee-first culture with fewer managerial layers, regardless of size or location.
The implementation of these systems needs careful planning. Out of the core management concepts of centralization, formalization, and hierarchy, centralization is perceived among employees as creating the most red tape. This perception means workforce discontent could rise when organizations start looking to build a unified data repository. UDAPs can mitigate that effect by allowing data to be centralized and accessible without disrupting systems and workflows that are already in place.
Challenge: Damaged DEIB and talent acquisition efforts
As company data becomes more transparent and accessible, business leaders must ensure that it supports positive change in diversity, equity, inclusion, and belonging (DEIB). While it's vital that key outcome statistics, like corporate demographics, be communicated to stakeholders, the internal systems that create these outcomes must also be sound. According to the 2022 Qualtrics Employee Experience Trends study, 80% of senior leaders say their actions show they are genuinely committed to greater DEIB, while only 58% of individual contributors say the same. Because of their dependence on cohesion across teams and management layers, organizations with flatter management structures run a greater risk of employee dissatisfaction and churn if they show this disconnect between the numbers and the underlying processes.
The lack of a clear advancement structure can also cause problems attracting and retaining talent. For instance, highlighting a flat hierarchy in a job listing potentially reduces the share of female applicants by 25%. While changing the job ad may increase the number of female applicants, it doesn't change the structure that makes those applicants uneasy about applying in the first place. Having fewer managers can signal to applicants that there are fewer opportunities to take on leadership roles with leadership pay—a potential deal-breaker for any candidates who are historically under-represented in the ranks of leadership. Even if candidates who are concerned about this get through to being hired, the problem will appear later in higher turnover rates if the organization's underlying DEIB issues are not being addressed.
Solution: Find and act on the right DEIB metrics
In the era of DX, standardized, surface-level DEIB strategies will fall flat. It's not enough to simply measure how many women, minorities, or LGBTQ+ people an organization has; these are outcome metrics, and they can mask systemic failings. Process metrics, on the other hand, target where the problem is originating.
The effort that goes into designing org-wide diversity trainings may be better focused on measuring salary distributions across gender and ethnicity, or how quickly people from underrepresented communities move up the career ladder at an organization. With this information in hand, a strong DDDM framework, and the willingness to be transparent about these metrics, employees and mid-level leaders can provide actionable feedback that will help root out systemic DEIB issues and improve both employee retention and talent acquisition.
Systemic solutions for systemic obstacles
As organizations transform, flat hierarchies will require increasing levels of data transparency across departments in order to remain agile. The companies that are the most successful over the next decade will be the ones that rise to this occasion instead of trying to revert to a pre-COVID reality. Creating an effective workplace environment will not be a question of remote vs. in-office operations. Instead, it will require a corporate shift toward 360° feedback facilitated by powerful data analytics tools and flexible, unified repositories that employees at all levels can access with the appropriate permissions. It's true that this transparency may reveal deep-rooted challenges that will have to be addressed in order to retain top talent and remain competitive. But in doing so, enterprises around the world will unlock new opportunities for increased productivity and workforce satisfaction well into the future.
Zoho offers a suite of intelligent enterprise business software, including an award-winning CRM suite, the industry's only comprehensive analytics and BI platform, and a powerful low-code development ecosystem.
