The Challenges of Becoming a Less Hierarchical Company

The Challenges of Becoming a Less Hierarchical Company

By Matt Dallisson, 15/04/2024

Last March, Meta’s CEO Mark Zuckerberg labeled 2023 the “Year of Efficiency” in a company-wide email, noting that “flatter is faster.” According to Zuckerberg, “It’s well-understood that every layer of a hierarchy adds latency and risk aversion in information flow and decision-making.”

The consulting firm, McKinsey & Company, has echoed these sentiments, describing how unstructuring your organization can unlock massive value through the promise of increased collaboration, agility, and employee empowerment. Research findings lend further support to these ideas — a meta-analysis of 54 published studies involving 13,914 teams found that hierarchy tends to harm performance.

Although experiments with flattening the hierarchy in high-profile companies like Zappos and Google have yielded mixed results — leading some to claim that certain types of flat structures are “hella crazy” and “rarely work” — the fact remains that firms are gradually becoming less centralized. Thus, successfully organizing for the future requires a deep understanding of how to design, implement, and assess flatter organizational structures.

We have reviewed hundreds of internal documents, videos, presentations, and employee surveys provided to us as part of an ongoing collaboration with the third author, Juan Pablo Sánchez Celi, the CEO of Avinsa, a food processing company in Santander, Colombia, with roughly 350 employees. Avinsa is in the midst of a change initiative — referred to internally as Avinsa Viva — aimed at flattening the hierarchy.

This corpus of information, meticulously documented over a three-year span, illustrates the fact that leading this type of organizational change is messy, nuanced, and really hard. The path is riddled with complexities, from managing employee expectations and redefining leadership roles to reconfiguring communication channels and decision-making processes.

By integrating the CEO’s personal experiences leading this change initiative with our review of internal company records, we shed light on some of the challenges, learnings, and strategies that can guide organizations in their quest to flatten hierarchies without compromising on efficiency, growth, and employee well-being. Specifically, we focus on two areas: structural and people dynamics.

Structural Dynamics

These are the dynamics related to the structural and operational challenges facing organizations that are transitioning to a flatter structure. They include:

The persistence of zombie structures.

Old habits are like the undead; they just won’t stay buried. As companies aim to flatten structures, the ghosts of past hierarchies can linger, haunting the change effort. These zombie structures manifest in various ways – a decision-making process that still seeks approval from the top, or a communication flow that remains bottlenecked through specific channels, reminiscent of the before times. This inadvertent reversion can stifle the very essence of flat structures: agility, empowerment, and direct communication.

During the early days of Avinsa’s transformation, for example, teams would unconsciously defer to the historically dominant quality control and internal control departments during process redesigns, spotlighting deep-seated habits and perceptions that the organization needed to unlearn. Furthermore, the former head of the safety and health at work department found herself navigating the complexities of operating alone as a safety coach. Meanwhile her former aides, now part of different “circles” — autonomous work units where members collectively make decisions regarding their specific operational tasks without external supervision — faced difficulties adapting to their new teams. Addressing these challenges required significant effort, including coaching, physical relocation, and role redefinition.

To truly flatten an organization, it’s not enough to build anew; one must also actively dismantle and guard against the resurrection of the old. Regular audits, feedback sessions, and reorientation programs can help eliminate these lingering tendencies.

The integration imperative.

As some work units transition to a flat model, they may need to interface with units still operating under traditional hierarchies, creating potential friction and misalignment. At Avinsa, this dynamic was evident when units with different structures tried to collaborate. While middle managers and senior leaders — who company leaders believed were best positioned to adapt to decentralization with minimal disruption to their day-to-day work — were incorporated into the decentralization initiative, frontline workers, responsible for processing 100,000 chickens and 50 tons of ice per day, continued to work under a hierarchical structure. This dual approach led to palpable disparities: as some employees enjoyed newfound autonomy, frontline workers felt left behind. Such inconsistencies can be taken personally, making it crucial to navigate communication gaps without seeming contradictory.

Avinsa’s journey spotlights the importance of context and adaptability. Although the company’s  leaders aspire to design a completely flat organization, they are unsure when, if ever, they will extend the decentralization initiative to the frontline workers. Similarly, not every organization fits neatly into theoretical molds, and decentralization decisions must be tailored to specific challenges, personnel, and organizational objectives. Company leaders can make progress in this regard by slowly and organically incorporating more decentralized principles into some parts of their organization without expecting these efforts to look the same in other parts of their organization. By pursuing deliberate and incremental change that gives employees the time to make sense of and adjust to their new work environment, company leaders can alleviate, though not entirely eliminate, feelings of disorientation, threat, or anxiety that some employees may have. If executed effectively, organizations can not only prevent potential conflicts but also harness the strengths of both models, fostering a more harmonious and effective collaborative environment.

Uneven progress.

Different departments, with their unique histories, cultures, and operational nuances, may not transition at the same pace. Avinsa experienced this unevenness firsthand. For instance, while stringent regulations regarding processing poultry for human consumption reduced the occupational health and safety department employees’ decision-making latitude that decentralization seeks to expand, maintenance department employees were quick to embrace their newfound autonomy. Before decentralizing, maintenance employees implemented an offsite manager’s decisions without having input. For example, the manager could unilaterally require employees to use a particular brand or style of equipment based on a crude cost analysis without fully understanding how this decision affected the employees who had to use it. After decentralizing, the employees who worked on the plant floor and best understood their area’s needs collectively made those decisions.

Avinsa’s leaders could have avoided some growing pains if they had been more sensitive to these unique departmental factors. More generally, a tailored transition strategy might involve extended training for one department, a phased rollout for another, or even the provision of additional resources where needed. Importantly, these efforts may increase employee engagement and sense of ownership over the transition process.

Juggling multiple change initiatives.

Organizations frequently manage several change initiatives at once. Balancing the shift to a flat structure with other organizational changes can feel like changing the tires on a moving car, leading to potential clashes and misalignments.

After investing considerable time in the decentralization process, a surge in demand from Avinsa’s largest client necessitated other operational adjustments, including transitioning from one 12-hour work shift to two 9-hour shifts. Faced with extended hours and new roles, employees began associating the disruptions from this operational shift with the broader decentralization initiative. As a result, support for the decentralization initiative began to wane among some employees; the fragile groundwork the company had laid was on the verge of collapsing.

In hindsight, assuming that employees would intuitively discern the effects of the two changes was an oversight and underscores the importance of using clear and consistent communication to guide employee perceptions in the face of concurrent change initiatives. More generally, companies can provide clarity to their workforce by delineating the sequence and interrelation of various change initiatives. This might involve phased rollouts, where one change is solidified before introducing another, or designating specific teams to champion each initiative. Prioritization, based on factors like urgency, impact, and feasibility, ensures that resources are optimally allocated. Regular communication about the progress and rationale behind each change can further align employees.

People Dynamics

These dynamics highlight the human aspects of the transition, emphasizing the importance of effective communication, training, and leadership in influencing the organization’s culture and its people. They include:

The razor’s edge of empowering leadership.

In the dynamic landscape of flat, decentralized organizational structures, the role of leadership undergoes a profound transformation. The conventional paradigms of command-and-control give way to a more nuanced, and arguably more challenging, model of leadership. Leadership in such a structure becomes an intricate dance. Leaders are expected to be visionaries, setting the direction and inspiring their teams, yet they must carefully calibrate their influence. Exerting too much control can stifle the empowerment and initiative that flat structures aim to foster. Conversely, being too hands-off can leave teams directionless, craving the clarity and decisiveness that leadership is supposed to provide.

The challenges of this delicate balance were vividly illustrated at Avinsa. Here, leaders continually navigated the tightrope between asserting their views and encouraging independent decision-making among team members. In their enthusiasm to drive progress, leaders inadvertently dominated discussions at times, thereby curtailing the very autonomy they sought to promote. In other situations, their reluctance to intervene led to a lack of clear direction, resulting in confusion and inefficiency.

Such experiences are not unique to Avinsa, but rather are inherent to the nature of decentralized leadership. They underscore the need for leaders to develop a heightened sense of self-awareness and a willingness to adapt their style. Regular feedback from team members and consultants involved in the decentralization process becomes crucial. This feedback loop helps leaders gauge how their actions and decisions are perceived and whether they are successfully maintaining the equilibrium between guidance and empowerment.

At a deeper level, leaders in decentralized organizations must adopt a learning orientation and embrace this complexity. Mistakes and missteps are inevitable. The key lies in being open to feedback, reflecting on one’s leadership style, and continuously fine-tuning the approach to meet the unique demands of a flatter, more empowered organizational structure.

Adapting external ideas to the internal culture.

Determining how to effectively flatten an organization’s structure can be daunting. Enter consultants, who can provide guidance and best practices. To gain initial traction, Avinsa’s leaders partnered with an organization that helps companies and other collectives learn how to organize in a decentralized way. However, it soon became apparent that adopting an established model for decentralization like holacracy, sociocracy, or teal — as the consultants had suggested — would not work at Avinsa.

Likewise, separate communication consultants hired by the company seemed somewhat detached from the nuances of Avinsa’s transformation. While they provided essential technical expertise, their suggestions occasionally misaligned with the company’s culture and overlooked local challenges. As a result, Avinsa’s in-house communications team decided to ignore several of the external team’s recommendations and chose not to renew their contract.

Overall, external consultants’ advice should be assessed in light of the organization’s core values and capabilities, ensuring alignment and authenticity. This can motivate employees when they see familiar values reflected in new practices.

The jargon jungle.

Organizational change often brings with it a wave of new terminologies. While intended to streamline and define the transition, new terminology can sometimes have the opposite effect. Instead of facilitating clarity, these new terms can become barriers, muddying understanding and creating divides among employees. Such disparities in understanding can hinder collaboration and impede the very progress these terms were meant to support.

The architects of Avinsa’s decentralization effort dealt with this challenge by promoting new terms like “circles,” “sub-circles,” and “coordinators,” while steering clear of other relevant, yet potentially confusing terms like “holacracy,” “sociocracy,” and “teal,” opting instead to couch the essence of those terms in more familiar concepts like “power,” “autonomy,” and “decision-making” when communicating with employees. Furthermore, company leaders attempted to embed these concepts in Avinsa’s culture through repetition in the form of animated videos that explained the decentralization effort and its rationale, as well as videos of employee interviews and testimonials featuring the new terminology.

A clear glossary of terms, orientation sessions, and regular workshops can ensure that employees not only understand the terminology but also grasp its relevance and application. Through these measures, organizations can achieve a shared language that enhances collaboration.

The reskilling requirement.

As roles evolve, so too must skills. While potentially empowering, this shift can be challenging for many. For instance, after adopting a flatter management structure, Avinsa’s budget responsibilities shifted from former department heads to sub-circle coordinators, some of whom lacked experience managing budgets. Accordingly, Avinsa grappled with budgetary challenges for several months until the “Financial Club” was born. Led by the finance team, this initiative provided tailored coaching on budget management, empowering the new financial stewards with essential knowledge related to P&L, cash flow, and profitability.

The company also administered formal assessments across the company more broadly, which identified other gaps between current technical and interpersonal skills and desired competencies. They followed these up with training modules related to topics such as communication, financial analysis, negotiation, and customer service that employees were incentivized to complete.

More generally, organizations may offer a mix of workshops, mentorship initiatives, and hands-on projects, aimed to equip employees with the tools they need to thrive in a less structured setting.

Setting the right pace.

As companies adopt flatter structures, an excessive emphasis on collective agreement can slow down decision-making processes, diverting employees from their main duties and negatively impacting essential business functions.

Two insights were crucial to improving Avinsa’s decision-making process, which relied on collective consent. First, it was essential for employees to understand the scope of their responsibilities and decision-making authority. When role boundaries were clearly defined and collectively understood, employees felt empowered to swiftly execute tasks without seeking approval. Second, when a large or particularly profound issue (e.g., an ethical decision) demanded group input, it was helpful to break down the subject into digestible pieces, examine each, and secure collective agreement step-by-step.

Staying patient and committed to the broader goal was also key. At Avinsa, external facilitators  from other areas of the company play a crucial role, not only in guiding the discussions but also in emphasizing the rationale and benefits of the company’s chosen approach. Facilitators assist in ensuring that commitments are recorded and that these commitments are reviewed and followed up on in future meetings. For example, individuals from corporate communications, finance, or accounting have served as facilitators in circles related to operations. The idea is that these employees merely facilitate conversations, but do not participate with comments and judgment.

Demonstrating short-term agility while maintaining a long-term vision.

Adopting a flat structure can bring enhanced collaboration, empowerment, and adaptability, but recognizing these benefits requires participants to adopt a long-term view, especially when immediate results are elusive. At the same time, organizations must be equipped to pivot, adapt, and recalibrate their strategies in real-time.

Avinsa discovered that providing employees with structured opportunities to reflect on and share the ways in which Avinsa Viva impacted their roles, perceptions, and job satisfaction helped them connect their experiences in the present with their desired future — both individually and collectively.

For example, what began as informal reflections on the structure and impact of Avinsa Viva during routine circle and sub-circle meetings evolved into a structured forum for employees to share their reactions and ideas related to the decentralization effort. Company leaders also administered surveys every three months to assess employee attitudes related to the change at the sub-circle level, and facilitated a one-time reflection exercise for all employees aimed at uncovering employees’ sources of motivation and purpose at work and outside of work, the results of which company leaders sought to align with the anticipated benefits of the ongoing decentralization effort.

When employees see the bigger picture, understand the nuances, and believe in the transformative potential of a flat structure, they become more than just participants — they become co-owners. This sense of psychological ownership increases commitment, fosters resilience, and ensures that every step taken is imbued with collective purpose and conviction.

This content was originally published here.