Why flat structures destroy employee retention

Monday, 16 August 2021 00:00 - - {{hitsCtrl.values.hits}}

Flat structures sound great, but in practice they are bad for retention, efficiency and even fairness. What you really need is a ‘flat culture’.

Flat organisational structures are typical in the fast-moving world of start-up culture, and the trend has spread into larger organisations over the past few years. The concept of the flat structure – little or no hierarchy, open communication between all employees, short chains of command and high levels of autonomy – sounds fantastic.

However, flat structures – such as a law firm with four levels: paralegals, associates, senior associates and partners – often fail to deliver what they promise, especially once companies grow past the start-up phase. Here’s why:

1. Employees have changed

Both Gen Y and Z workers are the product of an education and life built around levels and progression. Both generations value extensive feedback, a clear route to career advancement and measurable indicators of progress.

According to a Gallup poll, nearly 90% of millennials stated that “professional or career growth and development opportunities” are extremely important to them in a job. A LinkedIn survey found that Gen Z are strongly motivated by financial incentives and career advancement, even when it comes to learning. Flat structures don’t allow for this sense of career development. Both Gen Y and Z employees are willing to move jobs if their ambitions aren’t met – these days, frequent job changes are seen as ambitious, rather than ‘flaky’.

2. Flat structures don’t really exist

Software company Valve shot to fame in 2012 for its (then) innovative flat organisational structure. The employee handbook promised: “We don’t have any management, and nobody reports to anybody else.” It sounded too good to be true, and unfortunately it was. While Valve did indeed scrap traditional reporting structures, former employees described a “hidden layer of powerful management structure in the company [that] felt a lot like high school.” In the absence of traditional decision-making processes, companies can easily devolve into a popularity contest.

Alternatively, the democratic-sounding flat structure may hide a dictatorship. If only a few people (or one person) in the company is recognised as a manager, a flat structure may actually mean that everyone is a direct report of one or two C-level staff, often the founders.

3. Flat structures make it harder to build an equitable company

In flat companies, decision-making still occurs, and work still takes place. However, the reporting structures and processes are unstated, making it harder to identify issues, call out problematic or prejudiced behaviour, or encourage diversity, equity and inclusivity. If the goal of the flat organisation is to promote an easy flow of communication, reduce bureaucracy and encourage an agile decision-making process, then the better solution is to build a ‘flat culture’ instead of a flat company. (https://www.managers.org.uk/knowledge-and-insights/article/why-flat-structures-destroy-employee-retention/)