Shrinking Organisational Structure – is it real?

by Aušra Grybauskienė in — April 2016
Have you ever worked for a company without a Managing Director? Or have you ever worked in a department without a department manager for more than 1 year? Can the company live successfully without a manager? My clients’ experience says “yes”.

Redesign Your Organisation

In recent years I’ve seen some international companies in Baltic Countries that decided to shrink their organisational structure and lay off Managing Directors in all companies in Baltic region without replacing them after some time. This happened at companies in B2B sales, production and services industries.

Deloitte recently released their report “Global Human Capital Trends 2016”. It surveys 7,000 people in over 130 countries around the world. Nine out of ten executives in this survey rated organisational design as top priority. Almost half of respondents reported their companies are restructuring or planning to do so.

Companies are striving to adapt to a fast changing environment, want to be more customer-focused and shifting their structures from traditional models toward flexible teams. Organisations are decentralizing, empowering teams, starting to operate as a network of teams in order to be more flexible and dynamic.

Hierarchy – it‘s about the past organisations

Jacob Morgan, keynote speaker and futurist talks about 5 types of organisational structures. One of them is the traditional hierarchy which is well known, seen and experienced by most of us. This is still the structure that exists in most organisations. No brain is needed in the lower layers of structure. The Managers decide and employees execute. But the decision making process is quite slow; innovation stagnates; dissemination of information is slow. Therefore, many companies are thinking about how to flatten organisations and how to diminish bureaucracy along with the number of layers in the structure.

What are the options for flattening organisations?

  • Flatter organisations. It means fewer layers in hierarchy, faster communication, all employees are involved in planning, cooperation between different layers and departments is crucial, the same person might be involved in several roles. Many companies are moving from hierarchical structure to flatter structure and my examples of organisations given at the beginning of this article confirm this tendency.
  • Flat organisations – new type of organisational structure, already in action and gaining popularity. Flat means no position names, no managers, all employees are equal, everybody can join a project team if interested, and some non-formal hierarchy may appear based on seniority. The most known examples of flat organisations are Valve Company from the gaming industry and a pioneer of flat structure The Morning Star Company, from tomato products industry.
  • Flatarchy – some companies are choosing the combination of hierarchy and flat structure. In this case company is acting within a hierarchical design, but also has a flat organisation’s structure for certain departments dedicated to innovation and new product development. Examples of flatarchy are Google and Linkedin.
  • Holocracy – no position names, no departments, there are groups you may join and become insider and to do some job there. Every person may work in different groups at the same time. The goal is to include every individual in decision-making and give everyone the opportunity to work on what they do best. There are just few organisations working under holocracy structure and best known of them is Zappos, from e-commerce industry.

Where we are heading to?

As many futurists point, we are moving to freelancer economy, employees will work more and more on project basis in the future, so the position name or big office space won‘t matter much in the future. Employees will have the possibility to work from different places and have flexible working hours. The technology allows us to do it even today. Organisations must be agile in order to survive and prosper in spite of coming changes.