How Flat Businesses Can Still Scale Despite Their Structure
Startups often start with a flat organizational structure. In many cases, there is no hierarchy. As equal partners, financial experts or operations managers don’t answer to an organization-wide overseer like a CEO. Instead, decision-making authority is based on expertise. In fact, some flat companies don’t use job titles at all.
However, the prevailing thought has been that organizations that have not matured past the flat structure are difficult to acquire and scale or that this structure only works for small companies.
I would argue that “flat” businesses can still successfully grow, sometimes rapidly, to exceed projections and reach the point of acquisition by a larger company.
Growth does demand coordination and communication, but it’s antiquated to believe that such a need should hurt autonomy and lead to a breakdown of the flat structure. On the contrary, self-direction must be encouraged and celebrated to work effectively.
Consider automation to fill communication gaps.
Here are the necessary steps leaders can take to scale a flat organization.
In a flat structure, data and information must flow between different silos. Teams must talk to other departments in their organization.
Artificial intelligence can play a significant role in facilitating transparency and communication. Automated systems or more detailed use of artificial intelligence can not only enhance dialogue and transparency but can also identify core competencies and organizational weaknesses.
Using this type of technology is not unique to flat organizational structures, but it becomes critical when there is no hierarchy through which information flows naturally.
Harvard Business Review took a look at a set of companies that have managed to scale despite their flat structure. The Finnish engineering and creativity firm Futurice is a prime example of how flat companies work. Its founder and team divide and conquer the work. Team members handle different tasks and have the authority to make decisions in their lane. Futurice employees work on projects where they feel like they can add expertise.
Set up a pod system.
The company uses AI “as a means of mapping experience, competencies, and knowledge, which is to say, of determining who knows what. To avoid the constraints of structured reporting or paperwork, the company has created a special search engine that draws on discussions in multiple existing data sources, among them Slack, documents, and calendar events.”
Futurice calls this idea a “tribe” system, but it somewhat cheats on the purely flat approach. A pod system aligns the company in groups that work autonomously, allowing for expansion without the burdens of communication overwhelming each individual’s time.
The tribes or pods are obligated to provide a recurring report that chronicles their work, but they have the adaptability and mobility to make decisions independently and react to market conditions.
Maintain culture during growth.
Reactivity is a major benefit of the flat business structure if all are empowered to make quick decisions that benefit the company or their pod.
Some companies lose their identity or experience turbulence during growth. It can lead consumers to believe the company has changed for the worse. For a flat company to scale, it must maintain the culture that made it successful. In fact, any innovative leader looking to purchase a flat company makes sure of this.
When a company expands from 20 employees to 200, it is easy to lose sight of your narrative. That story has to be told and retold creatively to new employees to help them integrate seamlessly into what was the momentum that led to the growth opportunity.
Narrative storytelling can also help new employees buy in and create a company culture that hopefully empowers anyone who walks through the door. If the story details the successes of a new employee who fits seamlessly into the ingrained culture, you know that such a culture is now equipped to carry over to and through new talent.
Win with transparency.
In a podcast with Paul Green, co-founder of The Morning Star Company, host Jacob Morgan learned that the company succeeds without managers or a hierarchy. Green finds it pivotal to prevent employees from forming cliques or working despite one another. “Employees don’t report to a boss, they report to each other and their work is based on CLOU’s (colleague letter of understanding) that they create.”
Agility and the ability to make quick decisions are great until someone disagrees. When a disagreement comes-when another employee challenges another autonomous employee’s decision-there must be transparency in decision-making to adequately explain why such a decision was made.
It’s like something out of the show Veep when Julia Louis-Dreyfus’ character suggests her office release every email and communication in an attempt to hide their actual mess-ups in the deluge.
In the case of Futurice, the company uses extensive transparency measures to build trust. Salaries, earning reports, disbursements and even credit card expenses are available for everyone to view. Such transparency is also vital to a successful internal audit if and when that becomes necessary to grow.
While it may seem like more work to instill such extensive transparency models, it may be the ticket to helping businesses stay true to themselves while maintaining their identity. Many find success in the first years of using such a model as long as they stay nimble and react to market conditions while avoiding the perception of an unwritten hierarchy. It matters how communication and control are organized.
Invest in one another. Celebrate successes. Learn from failures. Succeed as a team, and fail as a team. Companies will find that they enjoy a lot more peaks than valleys in the long run.