The middle manager: pros and cons of hierarchy in a small business

Should your business have a flat or hierarchical management structure? Here are the pros and cons of setting up your business as a hierarchy.

hierarchy small business

As a business owner, there’s no doubt that when it comes to your business, you’re the king of the castle. However, how you treat your subjects can directly impact your success. A traditional business structure is a hierarchy with the owner or CEO at the very top with levels of middle-managers connecting them to the lowest-level worker.

However, recent developments in business structure have favoured a more collaborative, flat structure. This is when bosses, while remaining authority figures, put an emphasis on the team. They don’t ask anyone to do anything they wouldn’t do themselves, and they encourage collaboration at every level of the business. There are no middle managers blocking access to the CEO and employees get increased involvement in the decision-making process.

How you run your business is up to you. It’s specific to the wants and needs of each individual organisation. When deciding on how flat you want your company structure, it helps to examine the pros and cons of a more established hierarchy.

Advantages of hierarchy in small business

Clear reporting structure and authority chain

With a hierarchical structure, there is a CEO at the top with layers of management below. With this hierarchy, there is a clear process for reporting. The further up the structure, the more responsibility that person takes on. This provides the advantage of a clear promotion path for employees. If they want more responsibility, and to earn more, they have set pathways towards it.

It also means that it’s obvious what authority everyone has. You can just see where they are in the structure. There is no confusion about the boundaries between departments, job descriptions and people understand the chain of command. This is especially useful in a crisis, which requires decisive, fast action. If one person is in charge, they decide what to do and expect their subordinates to carry it out.

Clear communication

Line managers organise and set tasks for the team that they oversee. Any problems, employees know who they can talk to. If line managers aren’t sure about their own tasks, or those they delegate, they can ask their superior.

Another benefit of clear communication is that each person going up the hierarchy only hears what they need to. No unnecessary, and therefore distracting, information gets to them.

Coordination of effort

Hierarchical structures organise employees by job category into departments, so everyone knows their remit. Each department shares an allocated budget decided upon by the manager. This should result in more efficient operations and cost savings through greater expertise and good ol’ fashioned teamwork.

Efficient decision-making

Individuals make decisions faster than a group. Yes, they can ask for all the required information but, at the end of the day, it’s their choice to make. If there are too many people deliberating and working on a project you may never reach a decision, which can lead to disastrous outcomes. As the saying goes, ‘too many cooks spoil the broth’.

Disadvantages of hierarchy in small business

Lack of collaboration

Separating into different departments results in less cross-team collaboration. There is less encouragement to actively share information and work with others. Separation can also lead to inter-departmental cliques and unnecessary competition. It’s understandable to want to do the best job possible, but remember that everyone is working towards the same overall goal. There’s no need for division.

Lack of innovation

Everyone wants an innovative business. To be ‘future-proof’ with new ideas that can increase profits. But, if you have set lines of communication and a clear reporting structure it can lead to an innovation deficit. Employees need the flexibility to share ideas within the company. As the people who carry out the day-to-day business, they may have insight that a CEO won’t. Some decisions are best left in the hands of those who are closer to the situation.

Increased bureaucracy

When there are more layers to your structure, there are more decision-making hoops to jump through. There are more managers who need filling in, employees who need organising and orders to carry out.

This results in more paperwork, more approval requirements and more bottlenecks than a flat structure. If employees can quickly message their CEO about an idea they have, they cut through the red tape. It also allows bosses to identify exactly who comes up with an idea. For example, in a hierarchy, if a worker comes up with an idea they tell their manager. The manager then reports to their superiors and gets all the credit. With a flat structure, you avoid this problem.

Isolation

When employees don’t know what everyone’s job is, they can develop tunnel vision. Departments might become indifferent to the needs and struggles of their co-workers. In its worst form, isolationism can result in departments putting their own needs ahead of company goals. At best, it’s just really annoying.

Our experience of a flat management structure

hierarchy captain ship

I aspire to a variant of ‘mission command’ and ‘command by negation’ as described in the book ‘Turn This Ship Around’. The idea is that each person in an organisation can exercise their initiative and deploy themselves fully in their role. It’s the opposite of a hierarchical organisation where orders flow from top down with mindless obedience below. With shared doctrines, mutual trust and confidence plus clear communication of leader’s intent, teams can/should be largely self-organising.

– Matthew Stibbe, CEO of Turbine/Articulate Marketing

Okay, full disclosure time. Here at Turbine, and our sister company Articulate Marketing, we work under a flat management structure. Matthew is the CEO and we have a few account managers who manage the clients but generally there’s no hierarchy. And we love it. It allows our employees to take ownership of their work and increases pride in our company. Because it is our company, not just the CEO’s. WE are Turbine. WE are Articulate.

The CEO works with interns, junior writers edit blogs and pieces written by their superior. We always remember who’s in charge, but in working together, across the company, we have found a level of creativity and innovation that wouldn’t be possible otherwise.

When considering your organisational structure, think about our experience with flat management. Ask yourself what benefits it could bring to your business. Are you missing out on innovation due to hierarchy? Because, if we can do it, so can you.

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