Maximizing Productivity: Organization Structures – Flat vs. Hierarchical

I doesn't matter if you are starting an online or a physical business, you have to adapt your organization structure to get the high voltage output that you require. Before proclaiming that we should have "out with the old" and "in with the new," it’s important to understand their differences and consider why new systems may have favorable outcomes for your start-up.

Whether you are running an online Start-up in the Netherlands or a physical Start-up in Amsterdam, utilizing the right organization structure is worth its weight in gold. Having well-nourished internal relations, communications and employee value will ascertain the highest returns from your venture capital. When these factors flourish, so does your business, and, in effect, progress becomes a permanently ingrained characteristic of your company.

What is an Organization Structure?

An Organization Structure is a system of staff arrangement that aims at efficient internal communications, management, workload distribution, and responsibility.

What is a Flat Organization?

A flat organization is the antithesis to a pyramid or hierarchical structure. It avoids a lot of middle management and places all employees on a more level playing field when it comes to responsibility and progress within the company. In the past, decision-making power always resided in the upper echelons of management, meaning that lower-level employees have proportionately lower responsibility and less influence in company decisions.

The flat organization spreads responsibility throughout the team, meaning that company decisions are often the result of group votes and tend to be centered around a shared workload. When an office is managed in this way, CEO’s and directors will often share the same workspace as interns and junior staff, rather than having their own private and sometimes grandiose offices.

Why to choose a Flat Organization

  • Prevents the obstacle of employee subordination by giving all employees a valued voice.
  • Brings higher value to the lower tiers of employment structures and spreads responsibility more equally.
  • Alleviates top-down stress as higher-paid workers are not burdened with excessive responsibility, yet still have a valuable say in matters of consequence.

Rather than working as means to an end, i.e. moving up the company ladder, having shared decision making and responsibility makes the company’s progress an important aspect to lower-paid job roles and the higher paid ones. Everyone’s voice is being heard and company progress is directly linked to all levels of the employment structure.

When things are fruitful in the company, people can take pride and find value in the fact that they were a founding part of that professional progress. Conversely, when things may take an arduous turn for a company, people cannot abstain from any responsibility for as they were all involved in the decision-making process. If you get to sunbathe on deck during the peak season, you have to be ready to carry out the water when the ship takes a hit. In this sense, a strong feeling of teamwork and community naturally results from a flat organization.

What is a Hierarchical Organization?

This structure adheres to a pyramid of responsibility where company owners and directors have the bulk of decision-making power. Responsibility for the company’s direction resides mainly at the top and gradually decreases as you move down the management ladder. Traditionally, this organization structure has dominated and still works well for many large companies. Juniors, interns, and low-level management aim at working their way up to higher paid, higher responsibility roles, and tasks within the company are more clearly distributed based on employment level.

Why to choose a Hierarchical Organization

  • Faster and more clear-cut decision-making process
  • Greater employee loyalty as employees stay at a company longer to work their way up the ladder
  • Advantages primarily for larger companies

The reason this model has flourished for a long time is that important decisions can be made quickly and come from employees with a lot of experience. For example, the CEO will trust their Head Accountant to make a responsible decision for the company’s finances since the Head Accountant is experienced, responsible, and has a good understanding of the company. Employees often stay in companies of this structure for longer, because the longer you stay, the further up the company ladder you get and the more of a voice you have in crucial company decisions.

As you move up the ladder, you will feel more valued as an employee, and thus work will feel more important to you. From this perspective, managers and directors know that people have a more solid loyalty and a coherent understanding of the company by the time they reach managerial roles. The reason this approach is necessary for bigger companies is that wide-spread responsibility and "involved decision-making" would be hugely time-consuming. Take an entity like amazon with around one million employees - constantly making group company decisions would simply take too long.

Understanding your Organization Structure

With a good look at both sides of these business structure curtains, it is clear that there are clear strengths to each approach. Progress is more easily measured when responsibility is hierarchically distributed and decisions can be made quickly and efficiently.

However, in smaller companies like most start-ups, flat distribution of responsibility is likely to raise productivity in all tiers of the company. Lower-level employees get more of a say and feel more valued in the workplace, and higher-level employees are under less stress, but still have a notable influence on important decisions.

Thus, with the pro's and cons laid out for you only one question remains: What Organization Structure will you choose?