So, you want to start a business but don’t know how to organize it.
First, I’ll say that there’s no one right or wrong way to organize your company. Each business has its own needs and issues. Whichever organizational structure you choose should reflect those needs and provide your business a path toward success.
While that’s a good affirmation, it probably won’t help you decide!
When organizing a business, you might use one of two common types of structures. Tall and flat organizational structures each offer their own uses, benefits, and disadvantages. The decision you make now could have lasting impacts on your business’s success.
To help, I’ll break down the two different structures and the pros and cons of each, so you can make an informed decision about how to organize your business!
Table of Contents
What is a Flat Organizational Structure?
A flat organizational structure describes an organization with only a few levels of management. This results in fewer managers who each oversee a relatively large number of employees. The communication structure and chain of command become similarly flat, with only a few managers (if any) between the CEO and the lowest-level employees.
Flat organization structures are more typical of smaller businesses that don’t require as much oversight or regulatory compliance as a larger organization might.
Advantages of a Flat Organizational Structure
Flat organizational structures have several advantages. These advantages are most typical in smaller businesses that can continue operating and meeting goals with little oversight.
Some of the most common advantages of a flat organizational structure include:
Increased Employee Autonomy: Due to the reduced number of managers, each employee often receives greater autonomy. This increased independence can empower employees to be creative, solve problems, and make their own decisions regarding daily operations. As a result, flat structures often see an increase in collaboration, productivity, and morale.
Direct Employee Communication: The short chain of command provides a more direct flow of communication between management and other employees. This can reduce bureaucracy and red tape in the decision-making process. As a result, management can make decisions, communicate them to employees, and implement changes quicker than larger organizations.
Cost Savings: Having fewer managers provides an added benefit for business owners, as this can reduce the payroll budget. This can free up funds the owner needs for increased advertising, R&D, or hiring more skilled frontline workers.
Disadvantages of a Flat Organizational Structure
Flat organizations also have a few disadvantages. Most of these stem from the low number of managers relative to the number of employees.
Common disadvantages to having a flat organizational structure include:
Role Confusion: The lack of oversight and increased autonomy can often lead to employees taking on various tasks and solving issues that might not technically fall under their purview. This can create confusion about individual roles and responsibilities.
Overwhelmed Management: There’s also an increased chance that the managers could become overwhelmed by the number of employees who report directly to them. This can be especially true if many of their employees come to them with issues they can’t solve independently.
Lack of Upward Mobility: With only one or two managers between themselves and the CEO/owner, there are relatively few opportunities for employees to earn promotions. This can decrease employee morale and/or lead to them looking for opportunities elsewhere.
What is a Tall Organizational Structure?
A tall organizational structure features multiple layers of management. These usually follow a strict hierarchical structure, with the CEO or owner at the top. They might oversee a few departmental managers, each with their own small team of managers and other employees, and so on all the way down. This provides a clear delineation between senior management, middle managers, and other employees.
This creates a longer chain of command in a tall organization. As a result, the flow of communication is usually more formalized. A CEO might only report a decision or change to the managers they oversee, who report it to their departments, who relay it to the next step down, and so on. Communicating up follows a similar path, where employees communicate with their direct report, who can send the message up the chain.
Tall organizations are more typical of large companies that can benefit from more direct oversight.
Advantages of Tall Organizational Structures
Tall organizations have several advantages. Many benefits come from managers overseeing relatively few employees, which provides stricter oversight and closer working relationships.
Some of the most common advantages of tall organizational structures include:
Clear Roles: Because teams are smaller, each employee typically has a clearly defined role and list of responsibilities. This can help ensure that all tasks are correctly delegated, well-monitored, and completed.
Greater Control: Tall organizations allow managers to become more hands-on in completing daily tasks and accomplishing goals. They can help resolve issues, answer questions, and manage projects to ensure they stay on track.
Upward Mobility: The strict hierarchy helps employees follow a clear promotional line up the ladder. This clarity can help them understand what the next step in their career could be and what course of action can help them accomplish it. This can help motivate employees to work harder to earn a promotion.
Disadvantages of Tall Organizational Structures
Of course, tall organizations also come with a few disadvantages. Most of these disadvantages come from the size of the organization and the long chain of command.
Some of the most common disadvantages of tall organizations include:
Slow Decision-Making: The managerial hierarchy typically results in slower decisions. This is because the CEO might confer with their managers about new ideas, looming issues, or possible solutions. Those managers might perform research or reach out to their teams for suggestions. While this can result in more informed decisions, the process from idea to implementation can take longer than in flat organizations.
Employee Disconnect: With tall structures, lower-level employees might not ever meet upper-level or C-Suite management. This can create a disconnect between employees, leadership, and the company’s vision.
Increased Hiring Expenses: Tall structures require more managers. This typically means increased hiring expenses, especially for upper management.
Choosing the Right Structure: Tall vs. Flat Organizational Structures
In the debate between tall and flat organizational structures, there is no definitive answer as to which is better. The choice depends on factors such as the company’s size, culture, industry, and strategic objectives.
It’s also important to recognize that many advantages of a tall organization solve the problems of a flat organization and vice versa.
A startup might benefit from a flat organizational structure due to its flexibility and the need for rapid decision-making. Conversely, larger organizations with many employees may find the tall organizational structure more beneficial due to its ability to handle complex hierarchies and maintain clear lines of authority.