Flat organizational structures in modern corporations and their effectiveness

Flat Organizations

Organizational structure has been defined to comprise the following: the set of formal tasks assigned to individuals and departments, the structure of formal reporting relationships, and the design of systems to ensure effective coordination of employees across departments (Daft and Marcic, 2004). Organizational theory has established that traditional organizations usually have a hierarchical structure or a tall structure that involves a high level of centralization, multiple layers of management, and relatively narrow spans of control. On the other hand, the well developed, modern organizations possess a flat organizational structure, accompanied by decentralization, few layers of management and relatively wide spans of control. It has been acknowledged that the tall structure has a narrow span and more hierarchical levels, while the flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels. Concerning centralization and decentralization it has been stated that greater change and uncertainty in the environment are usually associated with decentralization, while in times of crisis or risk of company failure it is advisable authority be centralized at the top (Daft and Marcic, 2004).

Wulf and Rajan (retrieved from site) by examining the management structure and pay in 300 large U.S. companies reached the conclusion that corporate hierarchies are indeed getting flatter: One of the most visible signs is that more executives are reporting directly to the boss. The number of levels between CEOs and the lowest managers are dropping. In terms of pay it is stated that pay and incentives become more like a partnership. A concrete example is the outline of organizational flexibility of University of Phoenix. In terms of pay, the old structure promoted a fix sum, regardless of the hours worked, while the new one introduced the notion of salary exempt that allowed a flexible pay system; the salary new structure allows for retribution according to performance as well.