The Flat Hierarchy Fallacy

On finding the balance between structure and flat hierarchy at a tech start-up.

In my first job I was employee #1. Fresh out of university and first on the payroll, I joined a startup building bespoke web applications for SMEs. The company was rounded out by two directors who, well, directed me on a daily basis. Today I’d rail against such a prescriptive way of working but at the time it was necessary, so green was I in the field of software development.

Looking back, I consider this induction into the world of work to have been fortuitous. It may not have been as glamorous a post as a position at IBM, in to which some of my peers graduated, but it offered me an opportunity to see exactly what it takes for a startup to succeed. I think it gave me an entrepreneurial mindset that has served me well since.

Eventually we three became nine, with two additional directors, but the approach never changed – the employees had no input into decision making. Once, I arrived at the office to discover that overnight the company had merged with another, a clandestine plan months in the making. Maybe this is an occupational hazard in the heady climes of Silicon Valley, but it took me by surprise. I was pretty disappointed that nobody had deigned to give the only employee in the company the heads-up that I was about to join a new one.

Locus of Control

I tell this story because it helps explain why I now appreciate being involved in strategic decisions at work, and I’m not alone in this. I think I have an internal locus of control, which is to say that I believe that my actions and decisions control what happens to me – more so than fate or the actions of others, which is instead described as an external locus of control.

An internal locus is a trait often found in people with an entrepreneurial mindset; the sort of people who gravitate towards startups. It’s therefore relevant that nascent companies like Bipsync understand this behaviour.

There’s strong evidence to suggest that people with an internal locus of control also tend to have a high level of job satisfaction and more commitment to their organisation. By encouraging employees of this nature to have a large degree of control over their contributions the organisation engages with them, fostering happiness and reciprocal respect.

Consider The Flat Hierarchy

Maybe that all sounds like mumbo-jumbo, but I think it helps explain why “flat organisations” – companies which have few or no levels of management between executives and staff – have become such attractive places to work in the tech world, where logical people thrive. It’s effectively a perk; one that appeals to people who want to control their own destiny through a high degree of autonomy.

Of course, that’s not to say that there aren’t other benefits. When everyone is able to contribute, more diverse opinions and decisions arise. This gives the organisation a competitive advantage. In the early days of a startup’s life, when resources are thin and people have to wear many hats, if the startup is to succeed it’s essential that everyone feel empowered to contribute wherever they think they can make a positive difference.

I’m sure that the startups I’ve worked at would have been less successful if they’d not had a healthy compliment of people with this mentality. A startup is a demanding place to work. The hours can be long, tasks are plentiful, tempers and nerves become frayed. Feeling like I’m able to make a difference is often what keeps me going.

But here’s the thing: filling a company with confident, independent people and letting them run free with no governance is not the answer. It’s a recipe for disaster.

Structure is Essential

On my first day at my second job, as a still-junior developer at a medium-sized software agency, I overheard one of the senior developers complain that the company was becoming staffed with “too many Indians, and not enough chiefs”. As a newly appointed “Indian” I didn’t appreciate the remark at the time, but in hindsight I understand the intent. He wanted a staff of experienced developers who needed less hand-holding and could, in theory, contribute more.

But a chief is an Indian still, which is to say that everyone, to some degree, needs to work within a structure. It’s essential that when a problem occurs, or some advice is required, individuals aren’t left out in the cold. This is the real danger of a flat hierarchy.

Someone who’s eager to speak up in an engineering meeting to argue the case for using microservices over monoliths is not necessarily someone who’ll feel comfortable complaining about working alone on a project for three months. Someone who’ll work tirelessly to close a sale, or take expenditure down by a third, is not necessarily someone who’ll speak up when they begin to feel the effects of burn out.

When everyone assumes that everyone else is a capable as them, is as responsible as them, or is as happy as them, a culture that oppresses candid discussion and honesty emerges. Nobody wants to look weak in a company where everyone else seems strong.

The truth is that people aren’t Indians or chiefs, but something in between. At Bipsync we found that as we grew we were less attuned to each other’s well-being. In the beginning it was practically impossible to hide a problem from someone else. At double or triple the size though, with employees working remotely, someone could easily go for days without meaningful conversation. Issues were buried to smoulder under the surface, finally escaping through uncontrolled venting.

With no formal way to share their concerns people instead complained amongst themselves, which spread discontent and was ultimately self defeating.

Walk The Line

To address this problem we did two things.

Firstly we reinforced and expanded our line management structure. While we’d had one in place since we hired our first employee, it’d been an “emergency brake” sort of thing: it was there if someone needed it. We’d not considered how it could be used to address issues proactively.

We added additional line managers and started doing monthly one-to-one catchups. These are a chance for people to air their concerns, discuss their professional development, and feed back on anything related to the organisation. The line manager takes confidential notes at each meeting. These are used to follow up afterwards, and set the agenda for the next meeting.

There’s an argument that these catchups should be held more frequently than once a month. While we’re still relatively small we’ve decided to keep meetings to a minimum wherever possible, and instead encourage people to ask for additional one-to-ones as required. We’ll review this as the organisation continues to expand.

From the line manager’s perspective these catchups are also useful for performance management. We’d heard from a few members of staff that we weren’t doing this enough, and as a result some people lacked confidence because they didn’t know how they were perceived within the company. Now we’re able to encourage someone if they’re doing good work, or suggest ways that they can otherwise improve.

The second change we made was to introduce a 360 review appraisal process that features an annual review plus quarterly peer-to-peer catch-ups. Again, we wanted to ensure everyone is encouraged to share their thoughts on all aspects of the company, whether positive or constructive.

The Evidence Is There

Of course we’re not the first startup to experience these issues. Github famously abandoned its ‘flat organisation’ in 2012. A former employee, Zach Holman, shared an insightful post which details his thoughts on why Github’s lack of a serious leadership strategy harmed them. Among the interesting things he states is this:

We were just interested in building a company that was enjoyable to work for and was very productive when it came to building product. Early on, managers weren’t needed for the team that we had, so we didn’t have managers. I think the general consensus was sure, we’d move to a different system once the cracks started showing.

Github is a far bigger organisation than Bipsync, both as it is now and as it was in 2012, so it may sound odd that I’d compare their situation to ours. But the key here is that they envisaged only making changes when the “cracks started to show”, whereas we’re trying to pre-empt our growing pains by considering how we can smoothly make the transition into a medium-sized company. Maybe that’s an unrealistic goal – as Holman says, despite hundreds of operational changes intended to improve matters at Github, mistakes were still made – but above all we want to keep our existing team happy and our customers well-served.

Other companies have experimented with a flat hierarchy with differing results. Valve Software, creators of the Half Life game franchise and owners of the Steam online video game store, are possible the most successful example: at one point they were the most profitable company in the United States of America. Their handbook outlines how nobody reports to anyone else, and everyone is free to decide what to work on. Some ex-employees have cast shade on this idyllic picture but Valve are still the poster child for a flat structure, in the tech world at least.

At the other end of the scale there’s Zappos, an online shoe retailer. They switched to a flat structure (dubbed “holocracy”) in 2013, and by 2016 had seen employee turnover raise to 30%, an increase of 10%. Reports cited confusion over “how to get things done” and “how to pay people at a company with no job titles” as significant issues arising from the change in structure. Employees do value the autonomy, though – one saying that “It’s empowering everybody to have the same voice.”.

As Michael “Rands” Lopp says in his book “Managing Humans”:

I support… a flat organisation where power, accountability, and responsibility are equally distributed. But I do not yet understand how this idea scales.

He suggests the formation of ad-hoc, meritocratic leadership teams based on experience and track record, which is a method that’s been proven at companies like Apple. This way decision making can be inclusive, while still being achievable within large-scale organisations.

​Appeal to Everyone

The conclusion we’ve come to is that, in practice, a drastically flat hierarchy is no more beneficial to overall employee happiness than a stratified one would be.

Yes, people want the chance to work on what excites them and yes, they’re eager to contribute wherever they feel they can. The best employees thrive on opportunity and access to information.

But people also need someone to confide in; a process to raise grievances and complaints; a clear path towards self improvement. This is difficult to provide if everyone is focussed on their own work, rarely finding time to consider anyone else.

Encouraging people to control their destiny and contribute where they can, and providing a line-management structure that allows people to feed back in a secure, organised way, don’t have to be mutually exclusive endeavours.

With all this in mind, here’s three tips that’ll help a flat-hierarchy startup keep their entrepreneurial employees happy as they introduce more structure:

  1. Ensure that the leaders of the company (CEO, CTO, etc.) are approachable and interested in the opinions of everyone in the company, regardless of their role or amount of experience.
  2. Appoint responsible, empathetic line managers who are both able to encourage their reports to contribute wherever they can, and also have the authority to ensure that happens.
  3. Don’t prevent anyone from making a difference in the organisation. Try not to withhold information, and encourage employees to attend any meetings they find interesting. Avoid unnecessary levels of management and bureaucracy to encourage a feeling of freedom, while still providing a safety net.

That should give your organisation the benefits of a flat hierarchy, with none of the downsides. We’ve noticed a distinct improvement in well-being within our team since following this approach.