Flat, Tall, or Something in Between? Choosing a Structure That Fits a Small Team

Ask a small business owner how their company is organized and there is a good chance you will hear "we're pretty flat." It is said with some pride, and often it is true in spirit. Everyone pitches in, titles don't matter much, and the founder's door is open.

But "flat" is not one structure, and it is rarely as flat as it sounds. Every organization has a structure. The only choice is whether you design it or inherit it. This article walks through the options, the tradeoffs, and how we organize Launch.

Six ways to arrange the same people

• Tall hierarchy. Several layers of managers, each with a few direct reports. Lines of authority are clear and change is slow. It fits regulated, repeatable work where consistency matters more than speed.
• Flat. One leader, everyone else a peer. Fast and personal. It works best under about fifteen people who share one goal.
• Flatarchy. Mostly flat, with temporary teams that form around a project or client and dissolve when it ends. Common in agencies and consulting firms.
• Matrix. People report to a functional lead (say, finance) and a project or program lead at the same time. It lets scarce specialists serve many projects, at the cost of having two bosses.
• Shamrock. Charles Handy's model from 1989: a small professional core, a "contractual fringe" of outside experts, and a flexible workforce brought in as needed. It fits organizations with uneven demand for specialized skills.
• Circles. Holacracy and sociocracy replace job titles with roles grouped into self-governing circles, each with formal rules for making decisions. They work for teams that genuinely enjoy process.

Flatter means wider, and someone has to hold the width

Flattening an organization doesn't remove management work. It moves it. Fewer layers means each manager has more direct reports, which is called span of control.

A layer of management is a level of people whose job includes managing others. Take an organization of 24 people. If nobody manages more than three people, you need three layers: the owner, two managers, and six supervisors. If each manager runs a team of about five, you need two layers. A truly flat structure means one layer, and one person with 23 direct reports. Nobody can coach, review, and unblock 23 people well, so in practice one of two things happens. Either the leader becomes a bottleneck, or informal leaders appear to fill the gap.

Every flat team has a hierarchy. The question is whether you can see it.

In 1972, the feminist organizer Jo Freeman wrote an essay called "The Tyranny of Structurelessness." Her point was that groups without formal structure do not end up without structure. They end up with an informal one, usually based on friendship, tenure, or confidence, and that hidden hierarchy is harder to question because officially it doesn't exist.

OD practitioners see this pattern often. On paper everyone reports to the founder. In practice, two long-tenured people have become the hubs every decision passes through. They hold real power that nobody granted and nobody can review. These are usually good people doing their best, and they are often exhausted. Making the hierarchy visible, naming who decides what, is kinder to them as well.

The most famous attempt to go fully flat at scale shows how hard this is. When Zappos adopted holacracy in 2015, CEO Tony Hsieh offered employees a buyout if they didn't want to work under the new system. About 14 percent took it in the first round, and by early 2016 about 18 percent of the company had left. Self-management can work, but it takes more structure than a hierarchy, not less.

How Launch is actually organized

We describe Launch as flat, and for our people that is mostly accurate. But when we drew it out honestly, it looked like a set of functional teams reporting to the founder, with client and program teams laid across them.

Functional teams are everyone's home base: bookkeeping and payroll, HR, finance, marketing, technology, operations and project management, and business development. Each one reports directly to the founder. Client teams form around each client, drawing one person from each function that client needs. A client who needs clean books and an employee handbook gets a bookkeeper, an HR consultant, and a project manager, all under one contract. Program teams do the same for city contracts, like our technical assistance programs in Seattle, Sacramento, and Long Beach, each with its own program manager. The specialist bench is more than forty contract experts, including attorneys, CPAs, designers, and developers, whom we bring into a function when the work calls for them.

One design choice makes this work. Teams are tags, not boxes. In our systems, a person carries as many team tags as they need. A bookkeeper can sit on two client teams and a city program at the same time while still reporting through their functional team. A traditional org chart forces each person into one box, which is simply not how a small, multi-skilled team works. If that sounds like a matrix, it is a light one: the function owns how the work is done, and the client or program team owns what gets done for whom.

Our structure has costs, too. The biggest is the founder's span of control, which is the risk the span-of-control chart shows. Our answers so far have been per-program managers who own their contracts end to end, and a written decision log so work doesn't stall while it waits for one person to answer.

A rough guide to picking a structure

Start from the work, not from what sounds modern. If you are under fifteen people and share one goal, flat is fine; add temporary project pods if your work comes in projects. Past fifteen, ask whether your demand is uneven or highly specialized. If it is, a core plus a bench of experts will usually serve you better than hiring everyone full time. If specialists are shared across projects, you are probably already running a matrix, so make the two reporting lines explicit.

Mixed answers are normal. The most useful idea here for OD practitioners is that structure is a portfolio, not a single choice. Different parts of one organization can, and often should, run different structures. At Launch, functional teams report to the founder, client and program teams run across them like a light matrix, and our specialist bench works like Handy's contractual fringe. Each fits the work it does.

A note for nonprofits

Nonprofits are almost always running two structures at once: a board that governs and a staff that operates. Volunteers often act like Handy's flexible workforce, with real commitment but no formal reporting line. Most of the conflict we see in small nonprofits sits at those boundaries. A clear, written agreement about which decisions belong to the board, which belong to the executive director, and how volunteers are supported will prevent more problems than any reorganization.

Learn more about each structure

If you want to go deeper on any of these, these are the resources we point clients to. Most are short reads.

• Tall vs. flat, the basics: Flat vs. Hierarchical Organizational Structure (Chron Small Business) and Hierarchical organization (Wikipedia).
• Flat and flatarchy: Flat Organizational Structure: How to Assess Fit and Avoid Common Pitfalls (Workhuman) and Flat organization (Wikipedia).
• Matrix: Problems of Matrix Organizations by Stanley Davis and Paul Lawrence (Harvard Business Review, 1978), still the classic on why matrices are hard, and Matrix management (Wikipedia).
• Shamrock: The Shamrock Organisation (London Business School, where Charles Handy taught) and Shamrock organization (Wikipedia).
• Holacracy: The Holacracy Constitution (HolacracyOne), the actual rulebook, and Holacracy (Wikipedia) for an overview that includes the criticism.
• Sociocracy: Sociocracy For All, a nonprofit with free monthly intro webinars, and Sociocracy (Wikipedia).
• Span of control: How to identify the right spans of control for your organization (McKinsey), which sorts managers into types with typical ranges of direct reports.
• Hidden hierarchies: The Tyranny of Structurelessness by Jo Freeman, the full essay on the author's own site.
• Growth stages: Evolution and Revolution as Organizations Grow by Larry Greiner (Harvard Business Review).

The takeaway

There is no best structure, only a better fit for your work, your size, and your stage. The one structure that consistently fails is the invisible one. Draw your organization as it really works, compare that with how you describe it, and close the gap on purpose.

If you'd like a second set of eyes, our Organization Development team helps small businesses and nonprofits design structures that fit. For a quick first step, start with role clarity: What Is a RACI Matrix?

Sources: Handy, The Age of Unreason (1989); Freeman, "The Tyranny of Structurelessness" (1972); reporting on Zappos and holacracy in TIME (January 2016) and HR Dive (2016).