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Comparison between Hierarchical and Flat Organization Structures

Comparison between Hierarchical and Flat Organization Structures 

Every organization has some objectives to achieve and these objectives can be achieved only by combined efforts of various resources, which include division of work and grouping of numerous activities performed in the organization, according to the need and specialization. For the achievement of its objectives, it is important for the organization to have a proper organizational structure. The organizational structure is not only to be appropriate but also to match the rate of change in the environment in order to achieve the optimum performance.

The organization is a procedure, which incorporates distinctive sort of exercises to accomplish the organizational objectives, and destinations. To accomplish these objectives there is needed able management guiding the components to play out their activity proficiently and viably. The organization is only is a procedure of incorporating and planning the endeavors of men and material for the accomplishment of set targets. The structure of an organization is fundamentally the arrangement of relations which exist between various roles of that organization. It is a framework, which helps in recognizing the capacities relating to every role in the organization. Structure of the organization is in charge of the working of the whole framework and hence it is to be planned n way with the end goal that it targets accomplishing of the objectives set by the specific organization and encourage its development.

Organizational structure is only one of the several aspects of the organizational design. Organizational structure reflects the way in which work in an organization is divided.  Historically, organizations have developed a number of ways to do this.  The ‘information age’ is creating several more forms of the organizational structure.

Organizational structure is considered to be ‘the establishment of authority relationships within the organization’. Present day organization design draws on ideas from several fields to make functioning more effective and dynamic by blending individual and organizational solutions together into a cohesive whole. New designs focus on adaptability. They depend highly on employees’ involvement, distribution of authority based on skill, and have fewer rules and boundaries, resulting in a more organic structure.

Organizations can vary in the way they are structured. The structure of the organization is very important for achieving high productivity, managing individual work needs, and reaching of corporate goal and objectives. The organizational structure impacts on everything which ranges from how the organization operates to how well employees communicate internally. A well defined organizational structure helps employees work more efficiently, laying the ground work for internal operations by establishing a chain of command, and helps with transparency in the work place.

The structure of the organization consists of the method which the organization employs to delineate lines of communication, policies, authority, and responsibilities. It determines the extent and nature of how leadership is disseminated within the organization.  It is the method to ensure effective channels of communication. There are two types of organizational structures which are normally adapted by the organizations.  Organizations have either a hierarchical or a flat structure. The type of structure chosen by the organization is determined by several factors. These include size of the organization, employees’ skill, leadership style, business objectives, and technology employed etc.

The structure of the organization which can be described as either hierarchical or flat refers to the levels of management in the organization’s hierarchy and the corresponding distance between front line or entry level employees and top management. The organizational structure whether hierarchical or flat has important impacts on a variety of elements within the organizational culture. The terms hierarchical and flat are relative terms, and the size of the organization in question is also to be considered when assessing its inherent structure. Hence, organizations are to be compared to other organizations of similar size and specialization to determine how much hierarchical or flat is their structure

In large organizations, traditional hierarchical organizational structure is basically used but due to the several levels of management between top level and working level employees, decision making is to go through this process, leaving front line employees to answer the delay to the customers and this decreases productivity. The flat organizational structure has less middle level managers and it allows the whole organization work with ease and less resistance. This increases the productivity of the organization as well as using a flat structure can decrease the budget by cutting the middle level employees’ cost and decrease the communication barriers. Organization which analyzes function of middle level managers can allocate necessary tasks to other members by giving lower level employees more responsibility or assigning some duties to higher management. Besides this, there are lots of activities which are actually a burden on the organization and can be eliminated by eliminating the middle level managers.

Hierarchical organizational structure is also known as a ‘tall structure’ or a ‘vertical structure’. It is the traditional organizational structure. It is characterized by a large number of layers between top management and the working level employees in the organization. It is the organizational structure which follows the layout of a pyramid. In such organization, every employee in the organization, except one (normally the chairman, managing director, or chief executive officer) is subordinate to someone else within the organization. The layout of this structure has multiple entities which descend to the base of working level employees, who occupy the bottom of the pyramid. Hierarchical structure is normally adopted by large organizations.

A hierarchical organization links employees either directly or indirectly, and either vertically or horizontally. The only direct links in such organizations are to one’s immediate superior or to one of one’s subordinates. All parts of the hierarchy which are not linked vertically to one another however can be ‘horizontally’ linked through a path by traveling up the hierarchy to find a common direct or indirect superior, and then down again.

Hierarchical organizational structures are tiered arrangements which normally include several layers of management between top executives and employees. Organizations with hierarchical structures have low manager-to-employee ratios. This translates to high manager involvement with employees since each employee does not have to ‘share’ a manager with several other employees. This allows managers to closely oversee and manage employee performance. Hierarchical structure within the organization also tends to encourage employees to fulfill overall corporate goal and objectives over individual goal and objectives.

The hierarchical organizational structure contains immediate levels of leadership from the highest point of the organization to the base. Senior management settles on every single basic choice, which then goes down through backup levels of management. On the off chance that some employees at the base of this organizational pyramid need to decide on a choice, they leave the solicitation behind through the levels of leadership for endorsement, for which a choice is in the end to be returned. A hierarchical structure works well when there are not several items which are produced in high volume, so tight control can be kept up over the plan, quality, generation, and dispersion of products.

The flat organizational structure eliminates middle level managers and adopts a more casual, people-powered approach for running the organization. It is also known as horizontal organization structure. It is the organization structure in which the organization has a few or no levels of middle level management between top executive and the employees. There is only one layer or a few layers between the top of the management and the lower level of employees. Flat structure is normally adopted by the smaller organizations.

The flat organizational structure is a natural choice for several small organizations. The lower number of employees and a more concentrated work focus makes it easy to manage the operations in such organization without a more complex hierarchical structure. However, once the operations start expanding into multiple functions, product lines, or geographic locations, the scope of the work load normally calls for a more formal organizational structure. As a result, organizations which opt for a flat organizational structure can run into difficulties growing and managing employees and achieving product consistency in the long term. The flat organization structure has less supervision of employees and promotes their increased involvement in the decision making process.

The flat organization structure is an organizational structure with few or no degrees of central management. The organizational structure suggests to the idea of the circulation of the units and positions inside it, likewise to the idea of the connections among those units and positions. Hierarchical and flat organizations contrast with respect to the number of levels of management available in the organization, and the controls which are available with the managers.

Flat organization has relatively few layers or just one layer of management. This means that the ‘chain of command’ from top to bottom is short and the ‘span of control is wide’. Span of control refers to the number of employees that each manager is responsible for. If a manager has lots of employees reporting to them, their span of control is said to be wide. A manager with a small number of direct reports has a narrow span of control. Due to the small number of management layers, flat organization has the characteristics of (i) decentralized management approach, (ii) few levels of management, (iii) horizontal career path of the employees which cross functions, (iv) broadly defined jobs, (v) general job descriptions, (vi) flexible boundaries between jobs and departments, (vii) emphasis on teams, and (vii) strong focus on the customer. Fig 1 shows a comparison of the two types of structures.

Fig 1 Comparison of hierarchical and flat organizational structures

Hierarchical organizational structure is common in private and public sector organizations, both large and small. Department heads and divisional managers report to general managers and directors, who report to the chief executive officer. Small organizations normally have fewer management layers than large organizations. Although a hierarchical structure can coordinate the actions of thousands of employees, it has certain disadvantages.

Organizations typically adopt either a hierarchical or a flat organizational structure to break down their internal operations and how the work is to be carried out across the teams. A number of factors which include size, objectives, skills, and number of employees etc. determine the type of structure which best fits an organization. Some advantages of a flat organizational structure include higher job satisfaction, more delegation, and increased communication between levels of management. Some advantages of a hierarchical organizational structure are higher control and better performance.

The difference between hierarchical and flat organizational structures is the layers of management. In a flat organizational structure, there can be just one top manager who is a chief executive officer of the organization, overseeing a handful of other employees, all with equal levels of authority. In a hierarchical organizational structure, by contrast, there are multiple layers of authority between the chief executive officer and lowest  level employees. For example, an entry level employee can report to a line manager, who reports to a manager, who reports to senior level manager, who reports to a general manager, who reports to a director, and finally, the director reports to the chairman or managing director.

Majority if not all work organizations are structured hierarchically, although the character of hierarchy can differ from one organization to another. Some organizations are hierarchical (having several levels) and others are flat. Some have ambiguous lines of authority and others have a clearly defined system of ranks. Some organizations contain a single, simple chain of command while other organizations can be more complicated, having ‘line’ and ‘employee’ as well as the hierarchies. However, in spite of these variations, hierarchy comes as close as any social characteristic does to defining a basic and universal dimension of the organization.

However, hierarchy raises issues which are not unique to the organization, issues which are related to the society itself. Hierarchy means inequality in the distribution of valued goods whether in the form of power, money, prestige, or other social commodities. Sociologists from the very beginning have asked such issues as inequality among human beings, its causes, and methods of its reduction or even abolishing it altogether, or accepting it as a necessary element in the structure of human society.

Organizational structure is a powerful determinant of organizational behaviour.  In fact, several people believe decisions about organizational structure to be the central determinant of organizational behaviour.  Executives are constantly struggling with whether or not to centralize or to decentralize (e.g. how to structure which affects the various functions in the organization).  Despite what several executives seem to think, there is much more to organizational design than just rearranging its structure since ‘the structure is not the organization’.

Organizational structure is the framework of reporting relationships within the organization.  These relationships can normally be diagramed in the form of an organization chart.  The organization chart does not necessarily reflect actual reporting or decision-making relationships in the organization. Hence a distinction can be made between the formal and the informal structure.  However, it is the formal structure, which everyone considers when the subject of organizational structure is discussed.

Organizational structure removes confusion over job expectations. It helps the management and employees to coordinate activities by clearly identifying which employees are responsible for which tasks. In an organization which has a small number of levels, there exists a broad span of management at each level. This needs a good deal of delegation on the part of the management. Employees have more power within the organization. In an organization which has several levels there exist small spans of management. In this case, power is centralized at the senior levels and there is more employee control.

Organizational structure is a formal outline of the managerial reporting relationships inside the organization. Hierarchical organizational structures feature numerous layers of management, cascading from the highest management level all the way down to the front line management. Flat organizational structures feature less layers of management. In flat organizational structures, employees are empowered and expected to take responsibility for a range of traditionally managerial decisions in their daily routines. Fig 2 shows the breakdown of management levels which occur in flat and hierarchical organizational structures.

Fig 2 Breakdown of management levels in flat and hierarchical organizational structures

The framework for organizing formal relationships of authority, responsibility, and accountability is known as the organizational structure. It provides the means for clarifying and communicating the lines of responsibility, authority, and accountability. An operating organization is required to have its own structure in order to operate efficiently. For the organization, the organizational structure is a hierarchy of people, their positions and functions. Although the organization follows a particular structure, there can be departments and teams following some other organizational structure in exceptional cases. Sometimes, the organization can follow a combination of different structures. Different organizational structures which the organizations follow depends on a number of factors which include (i) size of operation, (ii) nature of operation, (iii) geographical region, (iv) work flow, (v) leadership style, and (vi) hierarchy etc. Depending on the organizational values, size, type, and the nature of the operation, organization can adopt any or combination of some of the following structures for management purposes.

Line and line and employee organizational structure – Line organizational structure has a specific line of command. The approvals and orders in this kind of structure come from top to bottom in a line, whereas, line and employee structure combines in the line structure where information and approvals come from top to bottom, with the employee departments for support and specialization. Line and employee organizational structures are more centralized. The decision making process becomes slower in this type of organizational structure because of several layers and guidelines.

Functional organizational structure – Functional type of organizational structure classifies employees with similar skills who perform the same function. In this kind of structure communication has several barriers which make coordination difficult and employees cannot gain knowledge about other specialization.

Divisional and market organizational structure – These type of organizational structure divides the functional areas of the organization on the basis of divisions or markets. Each division or markets is equipped with its own resources in order to function independently. There can be several bases to define divisions or markets. Divisions or markets can be defined based on the geographical basis, products / services basis, or any other measurement. In such type of organizational structures, each department / division operates for its own goals, organizational objectives are not likely to be achieved and unhealthy competition can exist among internal departments / divisions.

Product and process organizational structure – A product or process structure is based on organizing employees and work on the basis of different products manufactured or processes of manufacturing. If the organization manufactures goods or services by adopting three different processes or has three different products, the organization has three different divisions for these processes or products. Process or product focused organization designs and manages end-to-end processes rather than tasks. It measures process results rather than department efficiencies, and think in terms of the customer and related objectives rather than functional objective.

Project and matrix organizational structure – In a project type organization, the majority of employees and resources are assigned to completing projects. Management is hierarchical but fewer levels are needed than in the functional type. These are vigilant structures. The best opportunities for process improvement are normally found in accelerating project completion with fewer employees, on budget, and on time. In matrix type of organizational structure, the organization uses teams to complete tasks in combination with the project type of organizational structure. The teams are formed based on the functions they belong to and product they are involved in.

Bureaucratic organizational structure – In this kind of structure tasks, processes, and procedures are standardized. This type of structure is less adaptable to changes in environment and does not encourage innovative ideas as well as lead to employee dissatisfaction and high attrition.

Network / virtual organizational structure – In this structure, organizational management is required to maintain and coordinate relations with outside parties like customers, suppliers, and associates in order to achieve a collective goal of profitability and growth. Relations are maintained through tele-communication and electronic media. But too much dependence on technologies like internet, phone etc. can cause problems as there is no physical place for employees. It also affects communication.

Characteristic features

Organizational structure is a formal outline of the managerial reporting relationships inside the organization. Hierarchical organizational structures feature numerous layers of management, cascading from the top executive level all the way down to the front-line management. Flat organizational structures feature less layers of management. In flat organizational structures, employees are empowered and expected to take responsibility for a range of traditionally managerial decisions in their daily routines.

The management structure of the organization affects how employees within the organization make decisions and how quickly the organization reacts to different challenges and opportunities. A flat organizational structure, in which the number of managers at various levels is few from top to bottom, is regularly seen in smaller organizations. Larger organizations with larger employee populations face additional challenges not faced by the small organizations. As they grow, small organizations face the question of whether to retain a flat management structure or add levels of management as they add employees.

In flat organizational structure, vertical boundaries are removed to flatten the hierarchy, and horizontal boundaries are removed in order to replace both functional departments with cross-functional teams and to organize activities around the processes. When fully operational, boundary-less organizations remove the barrier of geographic distance from external constituencies. The characteristic features of the hierarchical and flat types of the organizational structures are described below.

Employee motivation – Employee motivation is a key factor of the organizational structure. While employees in a flat organization can feel as though they have more direct influence on the organization, they also have the feeling as though they have no room for advancement. On the other hand, the employees at the hierarchical organizational structure  has several layers through which to advance their careers, but can become frustrated at their relative lack of influence at lower levels within the organization.

An advantage of a flat organizational structure is that it places more responsibility on individual employees to motivate them and maximize their performance. However, this creates challenges at the same time, since the employees have fewer leaders to motivate them and give them individual attention. Not every personality type thrives in a self-starting environment. Some employees need managers for guidance, instruction, and motivation. The challenge in flat organization structure is to create an organizational culture which encourages self-motivation and breaking personal performance records.

Organizational complexity – Hierarchical organizational structure is normally suited for a complex organization. Employees of the small organization can be able to handle all the marketing duties of the organization. However, as the organization grows, employees need subordinates to whom they can delegate certain tasks. Additionally, top managers can be normally much more effective if they have a handful of senior-level managers reporting to them, as opposed to a large number of lower level employees.

Organizational flexibility – Organizations with fewer levels between top management and employees can more easily implement strategic management plans, take action steps for short-term objectives, and take action on policy and procedural changes. By acting on a level closer to the front-line employees, management can monitor progress toward goal and objectives as well as receive more immediate feedback regarding the feasibility of a specific action plan. One difference which the flat organizational structure has with the hierarchical organizational structure is the level of flexibility. Decisions can frequently be made and carried out more quickly in flat organizational structures since there are few layers of communication between the employees doing the work and those making the decisions. Hence, directives and feedback can be communicated more quickly to allow for necessary changes.

Hierarchical structures are frequently inflexible. It is frequently being suggested that the hierarchical organizations slow down timely transformations, which are essential if the organization is to survive in a rapidly changing environment. It is being thought that hierarchies work for standardized processes and they are not useful in dynamic environments. They are slow to react to new opportunities, which frequently need transformative change.

Influence over power – By far, one of the key difference between the two types of the organizational structures is how not to dictate decisions but influence decisions in the right directions with involvement from everyone, adjusting direction for better based on the views from all stakeholders. In the majority of the flat organizational structures, one finds roles and people as influencers as opposed to the power houses and corner offices in the hierarchical organizational structures.

Discussions before decisions – In the flat organizational structures, decisions are normally not taken in some corner office as done in the hierarchical organizational structures. There are lots of discussions happening all around on various topics before reaching to decisions.

Approachability over unreachable parts – Leaders are normally very approachable in the organizations with flat organizational structures. If physical presence is not feasible all the time, there are leaders available over emails, chats, town hall meetings, and other such mechanisms to ensure approachability. This is in contrast to the organizations with the hierarchical organizational structures where approachability of senior management is limited.

Collective ownership over autocracy – In the flat organizational structures, not making decisions is not a choice but normally, decisions are made collectively where everyone gets a chance to express their views and opinions. Collective ownership does not mean democracy.

Accountability towards a team than an Individual or a role – Even though reporting structure can be fuzzy at best in the flat organizational structures, ownership driven teams find themselves accountable to entire team and not to an individual or to a particular role.

Organizational response – Large hierarchical organizations with several management levels cannot cede responsibility to the lower level managers to make strategic decisions or even decisions directly affecting customer service at lower levels. Flat organizational structures allow lower level managers more latitude to make strategic decisions, implement action plans, and communicate these changes to the front line employees. This empowerment can decrease the time it takes to react to new opportunities or threats to the organization.

Shared organizational objectives – Organizational structure refers to how individual and team work within the organization are coordinated. To achieve organizational goal and objectives, employees need to be coordinated and managed. Organizational structure is a valuable tool in achieving objective of maximum profit with minimum cost in the organization. Type of organizational structure has high impact on total cost incurred by the organization. Flat organizational structure has comparatively less layers of management which in turn results into less payment of salaries and low administrative cost.

Large hierarchical organizations can able to effectively communicate organizational objectives, but due to lack of communication between top level management and lower level employees, the shared benefit of reaching these objectives cannot be understood. Flat organizational structures include lower level managers in the objective setting process and empower them to help the organization to reach the objectives. This shared process can foster community and create shared organizational objectives.

Adaptability – Employees and work groups in flat organizational structures tend to be more adaptable to the changes or unique circumstances, due to their smaller hierarchies and lack of bureaucracy. For example, when the front line employees are empowered to handle customer complaints without management approval, complaint resolution can progress more efficiently, boosting customer satisfaction. Work groups assigned to unique projects, for example, can frequently craft their own unique operational processes in flat organizational structures, without seeking the approval of senior level management.

Collaboration – Open communication and collaboration are encouraged in organizations with flat organizational structures. Since more employees are on a level playing field, more responsibility is placed upon each employee, creating a situation where innovative, collaborative self-starters excel and passive followers lag behind. As an added bonus, organizations with a flat structure can attract the type of employees who are encouraged by a work structure which needs self-motivation and teamwork.

Innovation and creativity – Ideas come from a wider range of sources in a flat organizational structure than in the organizations with the hierarchical organizational structure. By giving everyone an equal voice in the organization for submitting new ideas and feedback on operational processes, products, services, business models and organizational policies, organizations can discover new ideas which can lead to competitive success.

Hierarchical organizational structure can stifle creativity and innovation. The top-down decision making structure means that organizational divisions / departments are unable to respond rapidly to the competitive threats.

Communication – Smaller organizations with flat organizational structures can more easily communicate with employees at all levels than the large complex organizations with the hierarchical organizational structures. By sheer volume, large organizations face challenges in communicating consistent and accurate information. Flat organizational structures remove barriers between senior level managers and front-line employees. Communications flow across the organization instead of from the top down in the large hierarchical organization. Another aspect of the flat management structure is that informal communications and honest critiques occur between peers more easily than from managers to the subordinates. Growing organizations which maintain or adopt a flat organizational structure can better maintain formal as well as informal communications and receive more immediate feedback.

Further, since the chain of command in a flat organization structure is small or even only one layer, communication is faster and more effective. Direct input and control of the operations results the employees being less likely to disagree and fight in secret. They can debate their points of view in public. However, the employees can end up with more than one manager and their functions can become confused with those of another employee or department. In case of hierarchical organizational structure, communication begins to take too long time to travel through all the levels. This hampers decision making and can hinder progress which leads to higher cost.

Decision making and authority – Fewer levels of management mean less senior management and more flexibility in decision making. However, it also means that more subordinates are reporting to a single manager, which leads to confusion about the chain of command. When the employees can make decisions quickly, they keep customers happy instead of forcing them to wait while they follow the bureaucratic process for approval. When all the subordinates are reporting to a single (or few) senior manager, it is hard for the managers to be team leaders and keep their employees organized and productive. Also, majority of the subordinate employees suspect that peers are pulling strings behind the scenes and have more of the attention of the senior manager than they do.

Decision-making is normally slower in hierarchical organizational structures since responsibility and authority are concentrated in a few people at the top. It is frequently being stated that the structure of the organization has a considerable influence on employee behaviour. The hierarchical system places limits on the responsibility and authority of individual employees, which reduces the ability of the organization to adapt to dynamic conditions. For giving the employees more responsibility and authority, it becomes a necessity to reduce the hierarchy. Although a command-and-control hierarchical system can work well in a crisis, it is of limited help after the crisis is over.

Hierarchical organizational structures centre decision-making responsibility at the senior level managers, increasing decision-making efficiency in addition to consistency. Strategic decision-making in flat organizations can become complicated and inefficient if the organization relies on building consensus among its employees. Organizations with flat structures can find facing a decision with far-reaching consequences challenging to address the issue quickly and decisively.

Growth – Flat organizational structure is more effective in smaller organizations or when used for small sections of larger organizations. For small organization, giving the employee the authority to make quick decisions leads to better customer interaction and increased flexibility. Those same quality decisions become counter-productive in larger organizations since the offices are too different and have trouble meshing. This does not promote good customer relations.

Morale – Flat organizations rely on highly trained employees who have a voice in the decisions. The idea is that when employees feel that they have power and are responsible for the operations and progress of the organization, they work harder since they have a personal interest in seeing the organization succeed.

Consistency – One characteristic of the flat organizational structure is the ability of the front line employees to make decisions on their own for attending to the operational and customer issues. This strength introduces a new set of challenges. Organizations with less of an emphasis on supervision can be lacking in strict operational policies, creating a situation in which different employees handle different situations in different ways. The same customer complaint can be handled differently at different times which can send conflicting messages to the market place. Or some employees can find a way to sell products which are inferior in some way, while others throw away damaged goods, creating discrepancies in product quality and the organizational costs.

Advancement – Employee development programmes take on new challenges in flat organizational structures. With a higher ratio of front line employees to managers, there are fewer managers to take note of the individual performance levels of the employees. This can make it easier for high performers to fall through the cracks in performance reviews, possibly causing them to leave the organization to find a position with more personal recognition. In addition to this, there are fewer managerial positions in which to promote front-line employees, reducing the advancement opportunities presented to each employee.

Work specialization – Work specialization is the degree to which tasks in the organization are divided into separate jobs. Individual employees specialize in doing part of an activity rather than entire activity which needs arrangement of separate human resource planning, recruitment, selection, training, and induction programme for each specialization. This leads to heavy cost which sometimes does not appear to be beneficial by cost benefits analysis. Work specialization can be implemented easily in the hierarchical organizational structure.

Departmentalization – It refers to grouping of process or purpose activities in to departments. It is grouping of similar or related jobs into logical units with their respective managers. Every organization has its own specific way of departmentalization. They can adopt either hierarchical or flat type of organizational structure. Departmentalization can cause higher dysfunctional conflicts and mangers give more emphasis on achievement of departmental objectives instead of organizational objectives.

Chain of command – Chain of command refers to the hierarchy of reporting relationship from bottom to top in the hierarchical organizational structure. It shows who reports to whom in the organization. The chain can only consist of employees and the top management in flat organizational structures. Duplication of resources can be avoided in flat organizational structure since there are few layers of management.

Span of control – Span of control can be described as number of employees managed by a manager. Wider span of control in flat organizational structure needs few layers of manager in comparison to the hierarchical type of organizational structure which reduces cost incurred by the organizational on manpower, overhead and administrative cost.

Centralization and decentralization – Organizational structure is said to be centralized when authority is held by senior level management and decentralized, when it is delegated to lower level management. Flat organizations normally follow decentralized organizational structure which can increase adaptability, creativity, and job satisfaction among the employees. Employees’ involvement and flexibility to make decisions can be helpful for effective implementation of the organizational strategies.

Formalization – Formalization refers to the degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures. Increased bureaucracy hinders the speed in the organization to respond for changes. The foundation of the hierarchical organizational structure is rules and procedures. In the case of flat organizational structure, there are less rules and procedure which helps the organization to save its cost by optimum utilization of time, effort, and funds.

Responsibility and power – In flat organizations employees are empowered to take decisions, they are held accountable for their specific tasks. In essence, employees put their best efforts for fulfillment of their responsibility which ultimately leads to optimum utilization of manpower. In the hierarchical organizational structure responsibility and power are concentrated with the senior level of management.

It is presently believed that the present / traditional perspectives on management are inadequate to cope with a hyper-competitive and fast changing environment, and that the traditional approaches are better suited to slower and less aggressive competition, characterized by long periods of stability between disruptions. New methods and management systems are demanded by the complex, rapidly evolving, virtual market environment of today. As the organizations become increasingly complex, as the environment changes more rapidly, and as acceptable response times diminish, the old method of organizational structures are simply failing to satisfy.

Additionally, because of the technologically induced changes to work practices, new leadership and management challenges are constantly emerging. One of the impacts which the technology has had on society, especially information technology which allows employees to communicate across intra-organizational and inter-organizational boundaries, is the creation of ‘boundary-less organization in a border-less global marketplace’. The boundary-less organization seeks to eliminate the chain of command, has limitless spans of control, and replaces departments with empowered teams.

Advantages and disadvantages

The following are the advantages of the hierarchical organization structure.

  • Within the organization, employees recognize defined levels of leadership along with their authority and levels of responsibility.
  • Communication gets channeled along defined and predictable paths since employees know who reports to them and whom they are reporting. A clear chain of command is available in the organization and this generates a clearly defined set of responsibilities.
  • Opportunities for advancement in career are available which motivate employees to perform well.
  • Hierarchical organizational structure promotes development of the employees as specialists. It is possible for the employees to narrow their field of focus and become experts in specific functions.
  • Employees become loyal to their departments and look out for the best interest of their area.

Hierarchical organizational structure has a number of disadvantages also as given below.

  • Hierarchical organization structures work for standardized processes but they are not useful in dynamic environment. They are slow to react to new opportunities which frequently need transformational changes.
  • Communication across different departments tends to be less effective.
  • Rivalry between departments can inflame as each department makes decisions which benefit its own interests rather than the organization as a whole.
  • Increased bureaucracy frequently hinders the speed to change in the organization. Hierarchical organizational structure inhibits timely transformation, which is essential if the organization is to survive in a rapid changing environment.
  • Increased time is needed to respond to the customers since decision making is normally slow in the hierarchical organization structure.
  • Salaries for multiple layers of management increase the organizational costs.
  • The structure of the organization has a considerable influence on employee behaviour. The hierarchical organization structure places limits on the responsibility and authority of individual employees, which reduces the ability of the organization to adapt to dynamic operating conditions.
  • A command-and-control hierarchical organization structure can work well in a crisis but it is of limited help after the crisis is over.

The following are the advantages of the flat organization structure.

  • It empowers the employees more and elevates their level of responsibility. It gives the employees more autonomy in the organization.
  • It removes excess layers of management and hence it has a short chain of command. Because of this the coordination and speed of communication between employees is improved greatly.
  • Comments and feedback reach all personnel involved in decisions more quickly. Organizational structure normally depends upon a much more personal relationship
  • Fewer levels of management encourage an easier decision making process among employees.
  • Because of decentralized decision making process, the involvement of employees gets promoted in such organizations.
  • Employees in a flat organization structure are encouraged to work together to solve organizational issues.
  • Expected response to customer feedback is more rapid in the case of flat organizational structure.
  • With the elimination of the salaries of middle management, the organizational operating cost is reduced.
  • Since flat structures provide for minimal supervision over projects and tasks, employees normally experience more freedom, which can translate to more independent thinking and higher levels of creativity.
  • Flat organizations provide greater need satisfaction for employees and higher levels of self-actualization.

Flat organizational structure has a number of disadvantages also. These are given below.

  • Employees frequently lack a specific boss to report to, which creates confusion and possible power struggles among management.
  • Employees in flat organization structures can also feel more ‘role ambiguity’, within their organizations as employees can be uncertain of job expectations.
  • In a flat organizational structure, there is very little room for employees to move up. This makes it harder for ambitious employee to find satisfaction. Some employees enjoy working hard toward a promotion, and there is not much opportunity for this in a flat structure.
  • Flat organizations tend to produce a lot of generalists but no specialists.
  • Flat structure can limit long term growth of the organization since the management can decide against new opportunities in an effort to maintain the structure.
  • Flat organizational structures cause the brunt of the managerial responsibilities to be performed by one person. While a singular control point increases consistency, but the managerial work load can be overwhelming and there is increased stress. Too much responsibility results in missed deadlines, uneven managerial oversight, and poor employee support.
  • One manager overseeing numerous employees decreases the quantity of work oversight and number of review opportunities. These lower control levels are a boon for creativity and place more decision making power in employees’ hands. But this flexibility can result in quality control issues with the finished product. High quality products normally need more instances of management review. A single manager in a flat organization struggles to support numerous reviews.


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