There's One Huge Myth About 'Flattened' Companies

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One of the most celebrated and discussed corporate strategy techniques is the “flatter” or delayered hierarchy, the most common examples being new tech companies like Google and a bevy of startups. The idea is that it’s more efficient and distributes power through an organisation, making your average employee or manager more powerful and more responsible, hopefully increasing buy-in and motivation.According to a recent paper from Harvard Business School professor Julie Wulf (via organisations and Markets), one of those claims just doesn’t really hold up. Flattened firms actually push more control to the top. 

She writes:

We discovered that flattening has occurred, but it is not what it is widely assumed to be. In line with the conventional view of flattening, we find that CEOs eliminated layers in the management ranks, broadened their spans of control, and changed pay structures in ways suggesting some decisions were in fact delegated to lower levels. But, using multiple methods of analysis, we find other evidence sharply at odds with the prevailing view of flattening. In fact, flattened firms exhibited more control and decision-making at the top.

CEOs at flattened firms end up doing more, not less, make more decisions, and centralize more functions. Lower level managers are also paid less, indicating less responsibility. Beyond failing to deliver on its promise of alleged benefits, Wulf argues that this finding has further negative implications:

A manager may flatten structure to push decisions down and then hire and develop division managers suited to “being the boss.” But if flattening actually pushes decisions up, the division managers are now out of sync with the organisation: They don’t have autonomy to make decisions and there is a mismatch between managerial talent and decision rights.

For flattening and delayering to actually work in the way it’s conventionally presented, it has to be more than a cosmetic change. It doesn’t democratize an organisation if decision-making power ends up at the top. 

When the tactic’s sold from the top as empowering, managers and employees should be sceptical of both motivation and eventual results.

Find the full paper here

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