By Mireia Las Heras and José Pérez del Valle
Flat organizations are becoming popular across industries, emphasizing employee autonomy and responsibility. While these models promote transparency and purpose, they also face new challenges. However, proponents of flat structures say their benefits outweigh the hurdles.
Non-hierarchal companies are in right now. More and more organizations are ditching the traditional top-down management and opting for “flat” or “de-centralized” company models. This doesn’t necessarily mean getting rid of bosses altogether – at least not always. It’s a matter of restructuring a company so that each team works as an autonomous committee where responsibility falls on those closest to the task, instead of on a boss that’s far removed from day-to-day activities. Essentially, the idea is that every role is equally important. There’s no hierarchy, hence the name – and employees have more agency over their work.
But because it’s still a somewhat unconventional approach, these companies tend to be met with suspicion and false assumptions: It can’t work because it’s chaotic, there’s no structure, and decisions are impossible to make.
Based on our months-long research on self-managed companies, however, we’ve found that it can work – though not without its challenges.
Many Ways To “Flatten” A Business
Self-managed teams were first seen around 65 years ago in coal mines when the prevailing practice was to separate workers into teams responsible for different tasks – similar to an assembly line.
The trend toward non-hierarchal business models is being seen across industries and the world. In April, pharmaceutical giant Bayer announced it was getting rid of middle managers1 and throwing out its corporate handbook, allowing nearly 100,000 employees to self-manage. Last year, Meta’s CEO Mark Zuckerberg noted in a company-wide email that “flatter is faster.”2
But these models are hardly new. Self-managed teams were first seen around 65 years ago in coal mines when the prevailing practice was to separate workers into teams responsible for different tasks – similar to an assembly line. Miners had to wait for the previous shift to finish their tasks before starting their own. As a response, miners reorganized into multiskilled, autonomous groups with minimal supervision that allowed them to work around the clock without depending on others.
While it happened organically as a way to increase efficiency, today’s flat companies are more likely to adopt this model for political or philosophical reasons. One of the terms that come up often within non-hierarchal organizations is “conscious capitalism,” which refers to the idea that companies should transcend mere profit-making and actively consider the well-being of its stakeholders, employees, the environment and society at large. These organizations recognize the unintended consequences of their business activities and therefore define a purpose beyond their economic benefits in order to create a virtuous cycle of higher purpose.3
Flat companies today are also much more complex than people expect them to be. It’s not a “one size fits all” – rather, each organization tailors its non-hierarchal structure according to its needs. This usually leads to purposeful and organized environments that empower individuals to take ownership of the tasks at hand.
Although each company has its own unique and complex system, most flat organizations can be separated into four prominent models: Democratic organizations, where decisions are made through voting and every employee has a say in shaping the organization’s direction and policies; holacracies, where decision-making authority is divided into autonomous teams instead of individuals; teal organizations, which doesn’t rely on a specific decision-making process but allows teams to self-organize; and sociocracies, which relies on consent-based decision-making within “circle structures”.
Transparency and Autonomy are Key
Without transparency, many flat companies wouldn’t work. It’s crucial to make sure employees make informed decisions – something they’ll have to do more often than in traditional firms because of the autonomous nature of their roles.
One example of the need for transparency is when employees review their salaries. At Basetis, a technology consulting company that transitioned to a teal organization in 2017, every employee’s salary is publicly posted. The idea is to avoid salary inequality – which, according to various research, has also been shown to shrink the gender wage gap.4 Salaries are not struck down by executive leaders – they are the result of a robust discussion between team members who take into consideration various factors, including experience and salaries in similar roles. Basetis also follows the Tinbergen Norm, which sets a 1:5 income ratio limit between the highest-paid employee and the lowest-paid employee. (In traditional companies, the income ratio tends to be between 1:20 and 1:30.)
Without transparency, many flat companies wouldn’t work.
Transparency was the main reason tech company Voxel changed to a sociocracy in 2017. It came about after the realization that, in a traditional hierarchy where only directors made important decisions, critical information stayed behind closed doors. By transitioning to a self-management model, that information was disseminated across the company – a key step in making sure both employees and leaders can make the best possible decisions regarding their work.
And transparency goes hand-in-hand with autonomy. In flat organizations, there is no top-down performance tracking system – managers don’t put pressure on employees to meet targets. Instead, every employee is responsible for their own tasks and goals – which they communicate to their colleagues in order to create a healthy level of group pressure. The belief is that motivation comes from meaningful work and collective success.
At Basetis, employees are required to ask for advice when trying to solve a problem – they are especially encouraged to reach out to those co-workers who may know best about that particular subject matter. However, the final decision is always made by the employee herself.
The company Eboca, which provides vending machines and coffee stations, adopted a philosophy that cedes responsibility to those closest to the task. The holacratic company organizes its employees in “circles” of teams responsible for decision-making and governance over their respective areas, giving employees a say in shaping the rules and guidelines of their work. Maintenance workers, for example, decide how often to check on the various locations where the company has set up machines – not the director of operations. The idea is that maintenance workers are the ones who best understand the machinery, so they should be the ones making those decisions, instead of a director who’s far removed from their daily activities.
Granting substantial control to employees over their work also echoes humanistic values that prioritize skill enhancement and conscious development. This is crucial in creating a clear sense of purpose, which elevates engagement and productivity because it allows employees to align their personal goals with organizational objectives.
New Model, New Challenges
No transition is without its challenges. In the past, flat companies have been accused of lacking diversity and causing power struggles.5 Criticism about the business model has also often focused on the need for centralized authority in quick decision-making processes.
But self-managed companies themselves will admit to their own shortcomings. At Voxel, CTO Manel Ibáñez says the hiring process is more time-consuming and costly than the average company. Because the end goal is to protect Voxel and its employees from hires who don’t fit in, there’s a strong emphasis on ensuring applicants align well with the culture. This means it can take many rounds of interviews before a candidate is deemed trustworthy enough to join the team – after all, trust is key in cultivating autonomous roles. At Basetis, they don’t even bother with job postings – only applications through referrals are accepted.
Basetis leader Marc Castells says the relationship between employees can be more complicated at their organization than in traditional firms. One side effect of having more transparency and room for discussion is that there’s also more conflict. However, the company works hard to mitigate discord and prioritizes constructive and non-violent communication, which can sometimes take time and effort away from day-to-day tasks.
These challenges can be even greater for companies that transition from a traditional model – as opposed to starting a flat company from scratch – which was the case for both Voxel and Basetis. Remnants of the previous model can persist over months or years, despite the effort to take on a new culture. But, across the board, the companies we spoke to believe the challenges of a flat structure are worth the struggle for the common good. To help with these obstacles, some organizations hire consultants or go on unconventional community-building activities like silent retreats.
Many self-managed companies also try to find a middle ground and take on a more hybrid approach: Alternative structures that aren’t completely stripped of hierarchies, but also stay true to the philosophy of shifting away from conventional productivity and profit-focus goals. After all, the non-hierarchal framework is mostly there to serve as a roadmap for creating and sustaining a self-management model. The key is for organizations to continually review and adjust their culture in order to align with their changing needs and aspirations.
Mireia Las Heras
José Peréz del Valle
