institute for employment studies

publications by IES authors

Is Flatter Better? Delayering the Management Hierarchy

Kettley P
Report 290, Institute for Employment Studies, July 1995

Central to the new model of organisation in the 1990s is a flatter structure, achieved by a reduction in the number of layers in the management hierarchy. Such a structure is becoming synonymous in popular management theory with bureaucracy busting, faster decision making, shorter communication paths, stimulating local innovation and a high involvement style of management.

Despite their popular appeal, the fundamental claims made in the literature are largely unchallenged. Like many organisational design concepts, there is some confusion as to what delayering means in practice, how such a change should be implemented, and what support a shorter management hierarchy requires.

What does flatter mean?

The majority of organisations contemplating delayering anticipate cost savings via a reduction in overheads. For some, the achievement of such savings is the primary objective of their restructuring initiative. For others, a flatter structure is the route to freedom from bureaucracy, speedier communication and the development of a customer focused culture in which team working and high involvement working practices will thrive.

A flatter organisation is achieved in several ways. First, by the elimination or automation of management activities and the subsequent redundancy of those posts performing them. Second, as the result of unnecessary and costly overlaps of accountability being identified and reallocated.

The perception of a flatter structure is also created by widening the span of command of senior roles and/or reducing the number of pay grades and salary ranges. These different interpretations of what a flatter structure means in practice, both between and within organisations, suggests that delayering is a disparate and, potentially, a highly differentiated response to particular business needs likely to change over time.

The delayering process

As with any form of organisational change, there is no single best way to delayer. Organisations have a number of options as to how to implement a flatter structure. The main factors influencing those choices are:

• the pace with which delayering is to be achieved
• the extent to which the revised management structure is imposed organisation wide or is targeted upon particular functions or units
• the degree of employee involvement
• the amount of organisational design and analysis.

Taken together, such choices are indicative of an underlying philosophy of how organisations change and develop. A structure of fewer levels, predetermined as being better by the centre, can be imposed rapidly. Alternatively, delayering may emerge as a means for improvement through a longer term programme of change, enhancing both work organisation and behaviour. Those following the latter approach were more likely to: experiment as part of the process; establish measures to evaluate the impact of the revised structure; and realign HR policies during the diagnosis phase rather than reactively after restructuring.

Evaluating the impact

Employers are uncomfortable with attributing improvements in productivity, performance and employee motivation, to delayering. Ironically, given the absence of measurable criteria, delayering is often accompanied by an increase in the importance of monitoring performance.

Delayering on its own is unlikely to achieve very much. Components of HRM strategy which typically accompany the move to a flatter structure are:

• a greater emphasis upon team working
• cross functional working
• employee involvement or empowerment.

It would appear that the presence of one or more of the above are prerequisites for delayering to achieve an effective outcome, functioning as they do as replacements for the co-ordination and controlling role of hierarchy.

Nowhere is the move to a flatter structure free from potential contradictions and tensions. Most notable are those perceived by individual managers, for whom there have often been significant changes to what is expected of their managerial role and to the style or behaviour with which it is to be performed.

Implications for HR

The role of the HR function in the move to a flatter structure can appear marginalised at worst and simply ambiguous at best. The function has to reconcile the requirements of its different masters, balancing the needs of the organisation with those of individuals.

Recognising that any restructuring is going to be disruptive and difficult for many, steps can be taken to minimise the negative effects of poorly thought through change. The main areas in which the HR function is seeking to develop its contribution include:

• championing cultural and behavioural change via investment in management development
• enhancing systems for reward, career management and resourcing
• safeguarding performance through increased emphasis on staff attitudes as a measure of the impact of change.

Restructuring the management hierarchy with all the associated complexity of unsettling of skills, roles and relationships, will mean that HR has a continuing role to play in managing the adjustments over a number of years. Reducing the HR function to too small a core can prove to be a false economy as, resource starved, the function fails to develop itself and its ability to respond to these future issues.

Guidelines

This research is too small, and conducted over too short a period of time, to support or deny that flatter is better. The following points might be of value to HR practitioners looking to maximise, and sustain, any benefits of a delayering.

• Employers should avoid the seduction of simplistic goals that attribute business success to no more than five layers of management etc. Sustained improvements will be most easily achieved in those organisations which follow the precept that form should follow function.

• Delayering is unlikely to bring sustainable cost advantages on its own. Changing the way in which the work is done and removing unnecessary tasks that fail to add any value is as important, if not more so, than simply changing the levels of managers doing it.

• The hierarchy that served you well for many years cannot have been all bad, and its loss may require replacement. Team working, cross-functional working and a high involvement management style will all need greater emphasis.

• New accountabilities must be clarified as soon as possible and relevant support systems be in place. Simply telling people they are empowered by a flatter structure will ring hollow unless they are equipped with the ability, resources and willingness to do things differently.

• There is no one best way to implement a flatter structure. What makes the most effective change process depends largely upon the prevailing culture and values. Involving employees and winning their commitment increases the odds of success.

• Costly mistakes and unnecessary disruption can be minimised by ensuring performance indicators are in place beforehand, and are monitored using local feedback via pilots and prototype structures.

• Line managers are both the object of delayering and related HRM inspired initiatives, as well as the designers and deliverers of their repercussions. As such, they will require additional support to deliver their people management responsibilities effectively during a period of change.

The personal preferences, motivation and experience of senior management often dominate. The HR function must position itself to minimise the negative effects of poorly thought through change and establish the systems and culture which will support the necessary adjustments to skills, relationships etc.

The study

Interest in the concept of the flatter organisation was widespread amongst the major employers who form the IES Research Club. They funded a small study, the objective of which was to examine the experience of a sample of employing organisations who had or were in the process of delayering their management structure.

Eight case study organisations were visited during the course of the study. They were spread across a number of sectors: chemicals, insurance, public sector, manufacturing, retail, telecommunications and brewing. The case studies were not selected to be representative of UK employers and are not presented in detail in this report. Rather, the findings of our discussions are used to inform an overall picture of the issues, and case study examples are used illustratively throughout.

Is Flatter Better? Delayering the Management Hierarchy, Kettley P. Report 290, Institute for Employment Studies, 1995.
ISBN: 978-1-85184-216-2. PDF Download only: £8.00

• How to obtain this publication