People & Culture
6 minute read

Why flat structures destroy employee retention

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Flat structures sound great, but in practice they are bad for retention, efficiency and even fairness. What you really need is a “flat culture”.

Flat organisational structures are typical in the fast-moving world of start-up culture, and the trend has spread into larger organizations over the past few years. The concept of the flat structure - little or no hierarchy, open communication between all employees, short chains of command and high levels of autonomy - sounds fantastic.

However, flat structures—such as a law firm with four levels: Paralegals, Associates, Senior Associates and Partners—often fail to deliver what they promise, especially once companies grow past the start-up phase. Here’s why:

       1. Employees have changed.

Both Gen Y and Z workers are the product of an education and life built around levels and progression. Both generations value extensive feedback, a clear route to career advancement and measurable indicators of progress.

Nearly 90% of Millennials stated that “professional or career growth and development opportunities” are extremely important to them in a job[1]. A LinkedIn survey found that Gen Z are strongly motivated by financial incentives and career advancement, even when it comes to learning[2].

Flat structures don’t allow for this sense of career development. You may take on more responsibility, but you won’t see concrete examples of career progression, such as a changing job title or hierarchical rank. This could be highly demoralising to your younger employees, and could potentially reduce your retention rates. Both Gen Y and Z employees are willing to move jobs if their ambitions aren’t met - these days, frequent job changes are seen as ambitious, rather than “flakey”.

2. Flat structures don’t really exist.

Software company Valve shot to fame in 2012 for its (then) innovative flat organisational structure. The employee handbook promised, “We don’t have any management, and nobody reports to anybody else.”

It sounded too good to be true, and unfortunately it was. While Valve did indeed scrap traditional reporting structures, former employees described a “hidden layer of powerful management structure in the company [that] felt a lot like high school.” In the absence of traditional decision-making processes, companies can easily devolve into a popularity contest.

Alternatively, the democratic-sounding flat structure may hide a dictatorship. If only a few people (or one person) in the company is recognised as a manager, a flat structure may actually mean that everyone is a direct report of one or two C-level staff, often the founders.

This may work at a small scale, but as the company grows this structure can rapidly become unmanageable. Every decision ends up being passed to the same person, resulting in stagnation and frustration. Worse, without middle managers checking their decisions, the people at the top can become “barons,” who hire and fire at will.

3. Flat structures make it harder to build an equitable company.

In flat companies, decision-making still occurs, and work still takes place. However, the reporting structures and processes are unstated, making it harder to identify issues, call out problematic or prejudiced behaviour, or encourage diversity, equity and inclusivity.

For instance, if there is no official chain of command, meetings can easily be dominated by those that feel most entitled to take charge of the meeting. While, in an ideal world, authority would shift depending on the person who has the most knowledge of the topic at hand, in reality there is a risk that the person with the loudest voice would end up in control of the meeting.

This can happen in any company, of course. But if there are formal hierarchies in place, it is easier to spot issues - if all management positions are held by the same gender or race, for instance.

If the goal of the flat organisation is to promote an easy flow of communication, reduce bureaucracy and encourage an agile decision making process, then the better solution is to build a “flat culture” instead of a flat company. Here’s how that could look:

  • Rethink what it means to be a manager.

It may be more helpful to define the role of line manager as a coach, coordinator, and facilitator, rather than as a typical “boss” who tells you what to do. Management skills then become more about empathy and a service mentality than they do about leadership and assertiveness. This has the added advantage of creating a more diverse range of personalities in management roles.

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  • Improve and “flatten” your meetings.

To encourage a more equitable and inclusive culture, focus on building psychological safety. You don’t need to scrap management roles altogether; instead, make sure that everyone feels comfortable asking questions, challenging the status quo and making suggestions, regardless of their seniority.

How you behave in meetings can be one of the most powerful ways of creating a “flat culture.” Silent meetings, where participants write comments on a document instead of speaking, can be a great way to gather everyone’s insights. Flipped meetings, where the majority of the thinking and discussion takes place before the meeting, can also help to encourage more equal and diverse communication.

  • Encourage “benevolent honesty” and two-way feedback.

Another way to flatten out your hierarchies to promote the concept of “benevolent honesty”. This is the term we use at Learn Amp to describe one of our core behaviours. We all have an obligation to give frank feedback to each other, regardless of our respective levels of seniority. It’s considered a gift to receive this feedback, which should be given kindly but honestly. Whether you’re a manager or a new member of staff, you should welcome the opportunity to learn and grow.

To support this culture, create communication channels that promote two-way feedback, and especially those that encourage upwards feedback. Using the Learn Amp platform, you can set up formal feedback systems - everything from quick digital check-ins to monthly 1:1s, quarterly performance reviews and 6-month 360 degree appraisal sessions.

You can also create informal channels - like remote coffee and feedback chats - to support a less hierarchical social vibe in the company, even when you’re working remotely.

  • Create incremental markers of career advancement.

Instead of a flat structure which gives no sense of progress, consider adding small, incremental career development markers - possibly tied to small salary increases. This will encourage and motivate employees more than waiting several years for a big jump to management. It also gives you mechanisms to recognise progress and seniority without imposing management roles on employees who aren’t interested in people leadership.

By making these changes, you get the best of both worlds.

You create a hierarchy that encourages aspiration and ambition, with appropriate extrinsic motivational factors such as promotions, pay rises and job title changes in recognition of experience, skill and knowledge. You have clearly defined leadership roles, demarking ownership and accountability.

But you couple this with improved performance reviews, more equitable meetings, and a culture with a high level of trust and open communication between all employees regardless of rank. As a result, your employees will feel more valued, more motivated, and more likely to stay.