Yahoo Finance Hierarchy vs flat structures: How horizontal working causes toxic workplaces and breaks firms
Naked mole rats may hold the secret to efficient and highly-functioning societies. The way they thrive as well as survive is through a complex hierarchy that brings the best out of them. Without that system, there would be chaos.
In this week’s episode of our 10-part series Yahoo Finance Presents It’s a Jungle Out There podcast, we look at how the way naked mole rats thrive in complex hierarchal structures can be applied to the work place and how this stacks up to newer and increasingly popular “flat structures” in the office.
“With hierarchies you get very clear leadership positions and you can get a culture that people work in that people can relate to. So that’s why, even starting small, a hierarchy allows the company to grow and be successful,” said Gerry Brown, author of The Independent Director: The Non-Executive Director’s Guide to Effective Board Presence and chairman of Novaquest Capital Management, a private equity firm focused on life sciences.
He added that when you look at the animal kingdom, in order to survive you need to be able to change and adapt, and hierarchies allow that. “In business, environments are changing dramatically. You need to be able to change quickly and adapt and if you got a strong hierarchy, then that leadership helps you to do that.”
Over the years, flat structure companies have become increasingly popular. While hierarchies have clear and defined reporting ladders, flat structures claim that every worker is on equal level, apart from a small handful of leaders — such as the CEO and CFO. In the startup world, especially in tech, many companies start off with these flat structures because it makes sense when you have a firm with five people or fewer — you’re all getting a business off the ground.
However, the issue is when they scale up and have more than 30 employees.
Tech company Valve is a very public example of how flat structures can create toxic environments. Speaking to Wired, former Valve employee Jeri Ellsworth said:
“It is a pseudo-flat structure where, at least in small groups, you’re all peers and make decisions together,. But the one thing I found out the hard way is that there is actually a hidden layer of powerful management structure in the company and it felt a lot like high school. There are popular kids that have acquired power in the company, then there’s the trouble makers, and everyone in between.”
“I was struggling in the company to make a difference and to make the hardware group move forward. We were having a difficult time recruiting folks. We would interview very talented people but they would be rejected by the old timers at Valve as not fitting the culture.”
Sophie Theen, head of HR and culture at fintech consultancy 11:FS, has also worked at Revolut, Ford and IBM, and is a mentor and career coach. She also joined us on the episode and discussed the best practices in growing a company to scale as well as how firms need to stop pretending that large flat structures work.
“The support system is hugely dependent on the hierarchy of the company but we forget to acknowledge that you’re going to get hierarchy in any place, whether it’s a startup, corporate or any large organisation up to 200,000 employees for instance,” said Theen.
“Even in every small team there is a hierarchy inside that we don’t acknowledge.”
To understand how structures can make or break a company, listen to the full episode above, or download it on Apple Podcasts, ACast, or Google podcasts to listen while on the go.
