Is having middle management worth the cost?


Some companies seem to think a flat organisational structure is more appealing, and are doing away with middle management. But is it for everyone?

There’s a bit of a buzz around flat organisational structures of late. In a flat company, there are less, or even no levels of middle management. Practically, this means lower level employees can talk to people in more senior positions without an intermediary.

Elon Musk, who runs several companies, is an advocate of flat organisational structures. He has implemented one at Tesla, which he says facilitates communication and cooperation. “Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company,” says Musk in Tesla’s communication policy.

A company with a well-run flat structure can help raise the importance and effectiveness of traditionally lower ranking employees. Their good ideas don’t get lost or distorted in the management chain, according to research. It also eases the burden on executives and senior managers: decision making is for people involved in a specific project or action, without the overarching approval of superiors being necessary.

Productivity and output can also be given a boost. By shortening the chain of command, more things can get done in a shorter space of time. Plus costs are kept down due to less overhead costs being spent on middle management. According to a recent article in The Conversation, the benefits of a flat organisational structure are like if you were outsourcing functions, except without the cost of doing so.

Sounds like everybody wins?

But wait… does it work for my organisation?

Before you seek to flatten your company, remember not everyone is likely to be on board, and it might not be the right fit for your company. The executive might prefer not being as open to lower level employees, and generally trust middle management to filter appropriately. Also, it’s hard to imagine the middle managers themselves will want to take a demotion or lose their jobs.

For more junior employees, it can result in a situation where they have more than one boss, making for lower accountability and a potentially greater workload with competing responsibilities.

Another thing to consider is the process of changing structure itself. The change management process is expensive, and according to a previous report in HRM, “poorly implemented change initiatives cost Australian businesses $41.8 million year”.  A lot of this expense is due to employee burnout. And coupled with the fact that 66 per cent of change initiates are unsuccessful, it might be a risky adventure at best.

So, if you are going to make the leap, which kind of organisations is flattening best suited to? It’s definitely easier to be small in this regard. There Is already fewer layers of management to contend with, and communicating with senior leadership is commonplace. Another option is a smaller business unit within a large organisation.

Although with larger companies like Tesla and Google preferring flatter structures, it seems which industry your organisation is in plays a bit part as well And that’s where agility factors in.

“In reality, the push to become flat is much like the focus on agility. Agility is the ability to quickly reconfigure strategy, structure, processes, people and technology for the most benefit. One of the key elements is a flat organisation,” say Massimo Garbuio and Nidthida Lin in The Conversation piece.

“The bottom line is that different industries have different dynamics and different degrees of disruption – and so may need different organisational structures to operate efficiently.”

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Is having middle management worth the cost?


Some companies seem to think a flat organisational structure is more appealing, and are doing away with middle management. But is it for everyone?

There’s a bit of a buzz around flat organisational structures of late. In a flat company, there are less, or even no levels of middle management. Practically, this means lower level employees can talk to people in more senior positions without an intermediary.

Elon Musk, who runs several companies, is an advocate of flat organisational structures. He has implemented one at Tesla, which he says facilitates communication and cooperation. “Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company,” says Musk in Tesla’s communication policy.

A company with a well-run flat structure can help raise the importance and effectiveness of traditionally lower ranking employees. Their good ideas don’t get lost or distorted in the management chain, according to research. It also eases the burden on executives and senior managers: decision making is for people involved in a specific project or action, without the overarching approval of superiors being necessary.

Productivity and output can also be given a boost. By shortening the chain of command, more things can get done in a shorter space of time. Plus costs are kept down due to less overhead costs being spent on middle management. According to a recent article in The Conversation, the benefits of a flat organisational structure are like if you were outsourcing functions, except without the cost of doing so.

Sounds like everybody wins?

But wait… does it work for my organisation?

Before you seek to flatten your company, remember not everyone is likely to be on board, and it might not be the right fit for your company. The executive might prefer not being as open to lower level employees, and generally trust middle management to filter appropriately. Also, it’s hard to imagine the middle managers themselves will want to take a demotion or lose their jobs.

For more junior employees, it can result in a situation where they have more than one boss, making for lower accountability and a potentially greater workload with competing responsibilities.

Another thing to consider is the process of changing structure itself. The change management process is expensive, and according to a previous report in HRM, “poorly implemented change initiatives cost Australian businesses $41.8 million year”.  A lot of this expense is due to employee burnout. And coupled with the fact that 66 per cent of change initiates are unsuccessful, it might be a risky adventure at best.

So, if you are going to make the leap, which kind of organisations is flattening best suited to? It’s definitely easier to be small in this regard. There Is already fewer layers of management to contend with, and communicating with senior leadership is commonplace. Another option is a smaller business unit within a large organisation.

Although with larger companies like Tesla and Google preferring flatter structures, it seems which industry your organisation is in plays a bit part as well And that’s where agility factors in.

“In reality, the push to become flat is much like the focus on agility. Agility is the ability to quickly reconfigure strategy, structure, processes, people and technology for the most benefit. One of the key elements is a flat organisation,” say Massimo Garbuio and Nidthida Lin in The Conversation piece.

“The bottom line is that different industries have different dynamics and different degrees of disruption – and so may need different organisational structures to operate efficiently.”

Leave a reply

Be the First to Comment!

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More on HRM