Hierarchical vs. Flat Organizational Structure and Benefits of Each

An organization’s structure impacts everything from how the organization operates to how well employees communicate internally. A well-defined organizational structure helps employees work more efficiently, laying the groundwork for internal operations, establishing a chain of command, and helps with transparency in the workplace.

Companies typically adopt either a hierarchical or a flat organizational structure to break down their internal operations and how the work will be carried out across teams. A number of factors, including size, goals, skills, and number of employees, determine the type of structure that best fits an organization.

In this article, we’ll break down both hierarchical and flat organizational structures: what they are, the pros and cons to using each type, and examples of companies that operate in each of these ways successfully.

What Is a Hierarchical Organizational Structure?

Hierarchical organizations resemble a pyramid and rely on a vertical chain of command, with the CEO at the top and several layers of management underneath. Large companies and government agencies with a high number of employees typically adopt a hierarchical structure to better accommodate their size and clarify reporting relationships.

Advantages of a Hierarchical Organizational Structure

There are plenty of pros to a hierarchical structure. For example, this type of structure presents a number of opportunities for employees to “climb the ladder” and grow with the organization. Hierarchical organizations have a clear career path, enabling employees to gradually advance and reach more senior positions. Reporting relationships are also clear thanks to the top-down structure.

Companies with a hierarchical organizational structure typically consist of several departments and are likely to have more niche positions than flat organizations, which allows employees to become experts in their field, with many opportunities to specialize.

Disadvantages of a Hierarchical Organizational Structure

But, of course, there are disadvantages to a hierarchical structure as well. Organizations with this type of structure are prone to bureaucracy and tend to experience communication silos and a lack of collaboration across departments. The bureaucracy and red tape can also cause roadblocks that slow innovation and prevent work from getting done.

Amazon’s Hierarchical Organizational Structure

Amazon is an example of an organization with a hierarchical structure, largely due to its size. As the largest internet retailer, the company currently employs approximately 560,000 people around the world. With the hierarchical structure, all of Amazon’s employees report up to the founder and CEO, Jeff Bezos.

Under Bezos, there are several levels of management across many departments, such as:

• Software development

• Information technology

• Legal operations

• Human resources

• Finance and administration

• Business operations

• Product management

The hierarchical organizational structure works for Amazon because the company is organized into a number of small teams under separate management. This structure allows managers to work more closely with heir team members and to facilitate control over their department.

Here is an example of a hierarchical organizational structure:

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What Is a Flat Organizational Structure?

Flat organizations have a structure with few levels of middle management between leadership and employees—or, in some cases, no middle management at all. Small organizations and startups often have flat structures because they have fewer employees and less of a need for hierarchical management.

Although hierarchical organizational structures have been the go-to option for a long time, many modern companies are opting for flat structures that allow for a collaborative, interconnected team where everyone contributes equally.

Advantages of a Flat Organizational Structure

A flat organizational structure has its advantages as well. With this type of structure in place, employees often have more responsibility and are more involved in important conversations. Transparency is also a big advantage when using a flat organizational structure thanks to the limited bureaucracy. Having fewer levels of management also simplifies internal communication and enables fast decision-making, and because the layers of middle management are removed, power and responsibility are divided evenly throughout the organization.

Disadvantages of a Flat Organizational Structure

On the other hand, a flat structure can sometimes make it difficult for employees to specialize in specific roles. In many cases—especially with startups—each employee is expected to be a “jack of all trades” and to pitch in on a number of different tasks. Because there are few (or no) management layers, managers are often stretched thin, which can sometimes cause confusion among employees and lead to issues such as poor oversight and a lack of direction.

Valve’s Flat Organizational Structure

Like many modern organizations, a video game company called Valve has adopted a flat structure for organizing employees and clarifying roles and responsibilities. In fact, the gaming startup has placed an increasing emphasis on the decision to go completely boss-less. Although the company does technically have a founder and CEO, Gabe Newell, his role is much more hands-off than that of the average executive.

“Everybody is expected to essentially vote on what is most important to our customers by the projects that they work on,” explains Newell. “So none of them are working on those projects because somebody else told them to work on them. Everybody’s working on those projects because they thought they could make the largest contributions to our customers by working on them. People move around all the time.”

Here is an example of a flat organizational structure:

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Bringing Your Structure to Life with Org Chart Software

Traditional org charts make it difficult to depict cross-team collaboration, dynamic roles, and limited management roles. However, with more companies moving toward progressive, flexible styles of working, modern org chart software is becoming increasingly essential to accurately illustrate organizational structures and keep them up to date as they evolve.

Whether your company has a hierarchical or a flat organizational structure, using modern org chart software like Pingboard makes it easy to create a holistic visual representation of your employees, roles, and functions. Pingboard org charts are interactive and highly customizable, meaning they can be adapted to fit the needs of any organization, regardless of how it’s structured.

Choosing the right structure is essential in order for companies to provide clarity around roles, operate more efficiently, and be more successful overall—and interactive org chart software is essential for painting a visual representation of that structure and sharing it across the organization to bring it to life.