What Really Happens When You Have Fewer Managers
New research looks into the real effects of flattened firms and comes up with results that will surprise you.
In the world of start-ups, flatter is generally better, and middle manager is almost a dirty word. Want examples? GitHub managed to make it to 60 employees with "no managers," while gamemaker Valve has generated huge buzz with its radical employee manual describing its leaderless organizational structure.
These may be among the more extreme embodiments of the flattening impulse, but they speak to a real fervor for flat structures as up-and-coming companies try to keep their teams cohesive, responsive, and agile.
Does this enthusiasm for flattened companies hold up to careful study, though?
That's the question asked by Julie Wulf in a new Harvard Business School working paper. Through quantitative research and more qualitative interviews and CEO time-use surveys, Wulf and her team looked into the actual effects when larger companies eliminated layers of management.
She concedes that the impulse behind this delayering sounds sensible. By pushing decisions downward, flat companies aim not only to boost accountability and morale but also "to remain competitive in the face of increased competition" and "pursue a streamlined, efficient organization that can respond more quickly to customers."
The only trouble is that things don't work out as advertised. In fact, the effect of flattening an organization is, in many ways, the opposite of these stated intentions. Wulf writes:
In line with the conventional view of flattening, we find that CEOs eliminated layers in the management ranks… 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. Not only did CEOs centralize more functions, such that a greater number of functional managers (e.g., CFO, Chief Human Resource Officer, CIO) reported directly to them; firms also paid lower-level division managers less when functional managers joined the top team, suggesting more decisions at the top. Furthermore, CEOs report in interviews that they flattened to “get closer to the businesses” and become more involved, not less, in internal operations. Finally, our analysis of CEO time use indicates that CEOs of flattened firms allocate more time to internal interactions.
When middle management is stripped away, then, the powers it once held don't necessarily flow down to frontline team members. Instead, these decisions often get relocated to the very top of the organization. Or, in other words, flattened firms often look less like a democracy of empowered citizen-employees and more like a monarchy, with "a more hands-on CEO at the pinnacle of the hierarchy." The findings may have come from studying large companies, but small-business owners and founders are probably not immune to these unintended effects.
If you're interested in reading more about flat organizations, several other studies have also looked into the idea and found there are often negative consequences when firms go flat.
Have you ever experienced CEO control freakery masquerading as a flat organization?
Posted: February 12, 2013, 10:05 AM