Getting Ship Shape with a Flat Organizational Structure Valforma Technology Services Homepage: http://valforma.com Email: info@valforma.com Whitepaper Getting Ship Shape with a Flat Organization Structure 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. Whitepaper Getting Ship Shape with a Flat Organization Structure Contents Abstract .............................................................................................................................................. 2 Contents ............................................................................................................................................. 3 How Tall Organizational Structures Fail to Rise Up ............................................................................ 4 Drawback of Traditional Hierarchies ....................................................................................................... 4 Growth without Value Addition .................................................................................................... 4 No Accountability and Responsibility ........................................................................................... 4 Slower Decision Making .................................................................................................................. 4 Communication Distortion ............................................................................................................. 5 Organization Structure Optimization .................................................................................................. 5 Faster Decision Making; Quicker Communication ............................................................................... 5 Meaningful Horizontal Growth; Substantive Vertical Growth .......................................................... 5 Getting It Right: The Valforma Way .................................................................................................... 6 About Valforma ................................................................................................................................ 7 Whitepaper Getting Ship Shape with a Flat Organization Structure How Tall Organizational growth does not offer any value addition either Structures Fail to Rise Up to the employee or to the organization. Tall organizational structures have been around No Accountability and Responsibility in the corporate world for several centuries. When an employee is promoted without allowing During the late ‘70s and early ‘80s, it was not him time to develop his abilities, there is a uncommon to have corporate hierarchies that possibility of mismatch between the role that he had as many as 15 to 20 layers. In fact, such deep has been promoted to and the skill set he pyramids several possesses. This leads to the “passing the buck” organizations even today. The advantage of a tall phenomenon where employees do not take organization chart is that employees get a sense accountability for the work that they are of having a good career path ahead of them. The responsible for. A supervisor can blame his structure gives them faster career progression as immediate senior for any problems that are not they move from one title to another in quick redressed, and blame his subordinate for any succession. However, over a period of time, the work not done appropriately. This concept, pyramid turns into a diamond, with the top layers known as “management shield”, is the bane of a getting more heavily loaded with generalist traditional hierarchy. managers. Slower Decision Making continue This to exist eventually in becomes counterproductive to organizations as elucidated A tall structure, particularly in the absence of below: clear authority, means that numerous people are Drawback of Traditional Hierarchies involved in the day-­‐to-­‐day operations. This decelerates the decision-­‐making process, making Growth without Value Addition it impersonal and ineffective. Consider for In a hierarchical structure, employees are often example, your sales executive who needs to make promoted within a fixed span of time to keep an urgent decision based on a sudden market them motivated with a semblance of continuous development. Since the authority rests with the growth. In such cases, the employee may be center head, who is several levels above her conferred a new title without any significant immediate manager, her request has to pass change in job description. For example, an through various layers. By the time the decision employee being promoted from Tech Lead to trickles down, the opportunity may well be lost. Principal Tech Lead may not see any significant change in his actual job description. Such vertical Whitepaper Getting Ship Shape with a Flat Organization Structure Communication Distortion superfluous layers and developing a flat Tall hierarchies often tend to turn highly organization structure – as a strategy for bureaucratic. The passage of communication optimizing the organization structure, is rapidly through each pyramidal layer of a tall gaining ground. Delayering the organization chart organizational structure is akin to playing the to create a leaner, flatter organization has several game of Chinese Whispers. A decision announced benefits: by the top management has to journey a long way to reach the employee who must implement Faster Decision Making; Quicker it. This might result in the communication getting Communication 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. 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 Organization Structure Horizontal Growth; Substantive Vertical Growth Optimization In a flat organization, people spend longer at Given the various limitations of a traditional time to master their work at each level. This hierarchical structure, “delayering” – removing all eventually grooms people better for vertical each horizontal level. This gives them adequate Whitepaper Getting Ship Shape with a Flat Organization Structure movements and ensures that only seasoned completely negate the potential upside of the specialists, who are capable of taking full organization restructuring. accountability for their decisions, are promoted While delayering must be attempted with great into the managerial ranks. care and caution, it is also important to note that delayering is just one of the strategies for Getting It Right: The optimizing a corporate organizational structure. Valforma Way At Valforma, we help you identify the One would assume that, with such obvious suits your company based on an extensive benefits, delayering would be a popular concept. diagnostic study, gap analysis, and industry But if not planned well or implemented with care, benchmarking exercise. Talk to our consultants, delayering can lead to the notion of people being and together we can help you transform your demoted into lower ranks. This could lead to company into a lean and responsive organization. organizational restructuring strategy that best wide-­‐spread demotivation among employees and Whitepaper Getting Ship Shape with a Flat Organization Structure 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.