The end of middle management

Cross posted from The Conversation:

by Massimo Garbuio, Senior Lecturer, University of Sydney and Nidthida Lin Senior lecturer, University of Newcastle

The trend of “flat” organisations is catching on at some of the world’s biggest companies. It’s easy to see the appeal when you think of a utopia where everyone in an organisation has a say and can act autonomously.

Elon Musk, CEO and product architect of Tesla, says in the communication policy to his staff within Tesla:

Anyone at Tesla can and should email/talk to anyone else according to what they think is the fastest way to solve a problem for the benefit of the whole company.

In a flat organisation, fewer management layers are actively involved in decision-making. People who have the relevant information make the relevant decisions, which reduces the hierarchical overload.

You can imagine this working in small and medium size organisations. But for larger companies, an enormous amount of investment is required for the transformation, which often makes a flat structure often unrealistic and unimaginable.

Read more: The agile working style started in tech but it could work for banks

At online retailer Zappos, CEO Tony Hsieh has pushed flat to a whole new level, adopting holacracy principles. These are customisable self-management practices, where roles are defined around work, authority is distributed and the organisation in regularly updated in small iterations.

To take this a step further, Gary Hamel, a well known scholar and consultant, advocated for firing all managers, as he claims they are the least efficient part of an organisation.

Why so appealing?

As organisations strive to respond quickly to new challenges and opportunities, flatter organisations shorten the chain of command, increasing communication between employees and management.

Not only that, but researchers Raaj Sah and Joseph Stieglitz argued that hierarchic style organisations produce problems like the rejection of good projects without reason. The greater the number of organisational decision making layers, the greater the probability that a good project will be rejected that would have otherwise had a positive impact on the company’s growth.

And it’s not just lower level employees disheartened by the traditional hierarchic corporation. In our research, we spoke to the vice president for corporate development of a large American company, operating in the energy sector. He told us:

I worry that I might not get a chance to see some projects …as they go through a “filter” and and I can’t make a choice because I don’t get to see …them all. There is a natural tendency to only show ideas that have a higher likelihood of getting funding.

This point is reinforced by research that finds in situations where there are many levels in an organisation relative to the total number of employees, information gets distorted when it passes through hierarchical levels. These structures encourage employees to bypass superiors or simply use them as messengers.

Cutting through organisational layers also improves the speed of decision making and the time it takes to get a product to market. A studyof over 300 executives from around the world, found that the greater the number of organisational layers, the slower the organisation reached customers with new products and services.

Beyond human relations in the office, flatter organisations are often cheaper to run and more dynamic. These benefits are similar to what organisations would achieve through outsourcing, where companies avoid investing in resources.

By keeping the number of management layers minimal, a flat organisational structure helps cut down the overhead costs of management.

Not everyone can be flatter

Organisational structures do have challenges. Individual managers can resist moving to a flat structure because they fear losing their job.

Flatter structure might also lead to a lower sense of accountability as each employee has more than one boss. If the communication between employees and the management is not well managed, it could potentially overwhelm executives.

Another challenge is the significant time, resources, and investment required for a large organisation to transform to a flatter structure.

Read more: Business Briefing: are our standards dropping in the workplace?

In reality, the push to become flat is much like the focus on agility. Agility is the ability to quickly reconfigure strategy, structure, processes, people and technology for the most benefit. One of the key elements is a flat organisation.

According to a recent McKinsey Global Survey, two-thirds of respondents indicated that their companies have already begun agile transformations. Examples include Google, Netflix, Spotify, the Dutch banking group ING and, more recently, ANZ.

Interestingly, this study shows that only 4% of all respondents say their companies have fully implemented agile transformations by creating a flat structure.

The bottom line is that different industries have different dynamics and different degrees of disruption – and so may need different organisational structures to operate efficiently.

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    • Sounds like the death of the B Grade fat cat. Met many in my day, none of which impressed.
      Yet they did seem to favour themselves a lot.

    • Managers will never restructure themselves out of a job … They would rather outsource their workers. Also, without middle managers who will upper management handball all their work to?

  1. I see managerial incompetence almost every day, but I sure as hell dont think that flatter organisations is going to change any of that. What it does do is turn managers who are ostensibly supposed to be ‘strategic’ into managers who while priding themselves on being capable of ‘getting their hands dirty’ invariably turn into micromanagers inclined to do things on a whim and justify their whims with some form of specious policy

  2. The Wealth Navigator

    Page 25 they state house prices fall 1.7% but on page 26 they state mortgages fall by 21% how does that work in the real world? It does not so how many other formula mistakes have they made

  3. Groan. The memo in the early 90s was that middle mgt would fade away for multiple reasons. The credo of Agile or Scrum originates in a creative non hierarchical collaborative group but once its adopted into a bank or a govt dept it’s destroyed. It’s just another mgt cliche for the drones to cite at their conferences. Something similar has occurred with the ‘start-up” culture for corporates and even govt agencies. It’s risible and delusional that some public servants adapt ideas which are not applicable. But adopting a fad is needed to make the folks feel they have some definition in their otherwise meaningless work lives.

    • Right. Why does a bank need to be agile? All they do is collect interest. Maybe make a stupid ad every now and then – but an ad agency does that rather than a bank.

    • I work for a bank and can confirm, agile development and scrums are just buzz words for us pushed by upper management to make us look ‘progressive’. Yet the bank is so dominated by audit and risk avoidance, all the systems and procedures to get things done are the complete opposite of agile. There are so many hoops and people to go through to get simple things done, it is extremely difficult to deliver continuous deployments to be truly agile. This is not even dealing with office politics or capital expenditure to improve systems so they are more flexible.

  4. Sounds like the author is trying to rationalise cost cutting. Flexible/ innovative/ agile etc. Most change is not for the better.

      • Two wrongs don’t make a right either. I’m not saying that they should be saved, but alternately, don’t jizz on my cupcake and tell me it’s frosting: just because you’re firing them, doesn’t mean the services are going to improve.

  5. While some companies are loaded with middle management that is truly there just for the sake of being there and contribute nothing towards any strategy nor do they help with operational side of things (getting their hands dirty), large companies will always need certain level of middle management. Team Managers are too busy with making sure things are running smooth in order to have enough time to think strategy and frankly some don’t have relevant skills to think strategically.
    On the other side, too many middle managers with competing priorities will never propose a strategy that will be beneficial to the company as a whole at the expense of their own domain. I’ve seen some brilliant ideas being canned because they would have eaten into the revenue of a particular person and endanger her/his domain even though such idea would have given the company massive overall revenue and margin boost – much higher than the amount that was protected.

    Kodak is probably one good example where decisions were made to protect traditional film revenue by suppressing the digital business even though Kodak invented the digital camera. To note, I am not sure what influence Kodak middle management had in such decision but I have seen this destructive culture at work at couple of companies I worked before and is very depressing.
    Middle management is required in large organisations but those roles should not be contained in Silos and must have broader responsibilities rather than just focusing on a single domain.

    • Management’s a bit like economic theory; take people out of the equation and all theories work fine.

  6. Flat management means big teams, which is to say collections of people who aren’t actually part of the same team in real life. It’s a recipe for interminable meetings where people describe projects far removed from what you do, and managers who barely know their reports names let alone what they’re supposed to be working on, are completely inaccessible cos there’s another ten employees also trying to see them at any one time, and aren’t much help when you do see them because they don’t have the time to understand your area.

    • Good points.

      Add in that flat agile structures work well in companies where every employee is talented / motivated and has a unique role. In other words, people who don’t need managers because they self-manage. These are the employees everyone wants. Startups etc. might be like this.

      But guess what.

      A lot of people are pretty ordinary. You have to manage them. Flat structures don’t work well in companies with larger workforces of varying quality – yep some slow drones, some fast movers, some lazy farks, some who have promise but lack experience, and so on. And let’s face it, some businesses need to employ those people because not everyone is above average. On balance they all contribute to profitability (in theory) -IF you can keep them all working. That’s what middle managers are meant to do (with varying success).

      So while 50% of workers continue to be below average, you’re gonna need middle managers to whip them into shape. (And as long as there are middle managers, 50% of them will be below average too!)

      • I’d probably put it slightly differently. I’d say a flat structure is fine if all you want your manager(s) to do is rubber stamp annual leave and assign work. If you want them to add value, either by making the team function better or by making individuals perform better then you have to keep team size small so the manager knows everyone, what they’re doing and has time to help them improve.

      • ” (And as long as there are middle managers, 50% of them will be below average too!)” – and that is where the model breaks. Middle managers should be strategic but when you have 50% below average, selfish and shortsighted then you have serious problem.
        Senior managers (in larger corporations) don’t have enough visibility and exposure to make strategic decisions on their own and depend on talented middle managers to provide feedback.

      • But it’s not exactly right is it? 50% of all middle managers will be below the median but 100% of those in your firm could all be top tier if your recruitment and development is good.

    • Mostly, when an organisation flattens it means more responsibilities for everybody. As maligned as it is, management picks up a lot of responsibilties so that the team underneath can get on with its job. Take that away, and everyone’s got to pitch in, which is generally less efficient and detracts from focus on the task at hand. Its also far harder to coordinate activity across teams because there’s no natural point of coordination and control.

      These Agile and flat structures can be effective in the right circumstances, but there’s a danger of taking them way too far.

      • Exactly right! As a manager, my job is threefold: 1. Deflect all the shit work (requests for status updates, dealing with the latest “buzzword” initiatives, etc.) so my people can concentrate on their tasks to get the projects done; 2. Catch things as they fall through the cracks, thus protecting the whole of team (think of inverted pyramid with tasks falling on its base, and the manager is at the tip, but below the team, so no tasks filter through or are dropped); and 3. support my people by providing guidance, training, as necessary, advice, etc. so they too can grow.

  7. Flat sounds like a nightmare from which the solution would be to have people in charge of areas and then your back to middle management

  8. Give people three months paid holidays. If the world doesn’t fall apart and others aren’t doing a ridiculous amount of covering, the role is superfluous.

    My favourite is when a manager goes on holiday, someone takes their role for that period and stuff actually gets done.

    Now, I wonder if I’m superfluous….

    • C.M.BurnsMEMBER

      good point. The inverse is also true when the subject of the experiment is “tasks”

      So much time per week is consumed with “tasks” that are actually not required, but are performed by people for all sorts of reasons. take time off, see which of your tasks are actually picked up / escalated / cause problems for others by not being done… those are probably the tasks that are worth resuming once you get back from leave.

  9. “The bottom line is that different industries have different dynamics and different degrees of disruption – and so may need different organisational structures to operate efficiently.”

    This is the key point. There is no one size fits all.

    • Spot on mate. I work in the architectural realm and from my experience its the new fad amongst hr and upper management .lol. Another wage suppression tool that doesnt work in terms of creating a project. Bring in the ideological interns and put them on equal terms with senior staff (exc pay) with 20 yrs experience. And lets all clap hands and sing. As someone on here once said we have gone about replacing what works with what feels good.
      Pay the upper management more, exploit the doers and promote the sayers. Why would would you bother becoming an expert in anything when you could just be a salesman / marketeer. What a farked end game we are approaching.

      • ‘Why would would you bother becoming an expert in anything when you could just be a salesman / marketeer’.

        As observed below, it’s worked for Musk.

      • I say! You could just as well work for a particular sandstone uni in Qld… with the only difference they went full retard and retrenched their 20 years plus experts and replaced them with poo-flinging simians….

        Ooh docker! Ooh, amazon…. ooooh To the cloud – NOW!
        Oh my…. what do you mean “how does this service work?” – can’t you just move it to the clowd?

  10. C.M.BurnsMEMBER

    There is a big difference between working in an Agile manner; and working in a flat organisation.

    It’s entirely possible to have an agile, hierarchical organisation. As long as people at all levels understand what is required of them (have received adequate agile training and ongoing coaching; and with KPIs and formalised work contracts and culture has also evolved) and understand what they need to do in order to enable and support the various teams etc they are part of.

    similarly it would be possible to have an inflexible, bureaucratic and risk-adverse organisation that happens to be flat.

    another way of thinking about organisational structures without necessarily removing layers of peolpe is cross-functional teams. which is probably more widely applicable if done correctly.

  11. The newest trend I’ve seen at my ex-Government company is to fire the old manager, then ‘promote’ someone in the team to ‘team leader’, give them notional additional authority but not actually pay them any more.

  12. Johnston444 Another trend is to reduce the pay for a position when someone leaves. The work stays the same. This is common in parts of the public service.

    • Common in the public service? In that case, it’s a trend I support. God knows a reduction of middle management is also much needed in the public sector although it will play merry Hell with affirmative action programs.

  13. As that american president said… “Sounds good, Doesn’t work”

    In a small company, where innovation and creativity is critical to success and you have a risk-taking owner or director, this is already happening.

    But in a big company?, with many share holders or many areas affected? like logistics, marketing, engineering, service and maintenance, R&D etc. Not gonna work.

    Banks and entities like Government agencies also it wont work, because GOVERNANCE are key and VITAL to those companies.

    I know engineers who left Australia to work for Tesla and I’ve heard bad things about how Musk run things over there…. in any case, he’s good for social media oriented demographic…. but he’s a bit of a rogue, which can be good and bad for Tesla in the long term.

    • If Musk’s game was as good as he says it is, we wouldn’t be seeing headlines in Forbes (or anywhere else) about missed Tesla 3 production targets, and he wouldn’t be in ‘production hell’. Much better salesman than engineer. (if his sales skills weren’t top notch,investors would have already pulled the plug)

  14. Sack the people who think vaccines cause autism. With thinking like that, what else are they getting wrong?

  15. Good arguments both sides but what we’re really looking at here is the bloody boomers scrapping management costs now they’re done. Typical.