“We have the advantage of being flexible and much more opportunistic because of this configuration,” said Bob Weatherwax, chief operating officer of Preferred Systems. “Executive management is very in tune with what’s happening with employees and what’s happening in the field. We can be more nimble in resolving problems.”
Flat organizational structures, like the one employed by Preferred Systems, are gaining popularity as companies look for more efficient and cost effective ways to manage operations. The format has existed for decades, but took off in the wake of the recession.
Whereas the average manager supervised one to four employees prior to the downturn, they are now responsible for seven to 12 people, according to Corporate Executive Board, a business research firm in Arlington. This trend is prevalent across industries, but most evident in manufacturing, retail and hospitality.
“The more technical the skill set from an education perspective the more likely you are to see a smaller span of control,” said Brian Kropp, a researcher at Corporate Executive Board.
Companies, he said, expect employees to have a broader knowledge of operations for more engagement and collaboration with managers. Managers, for their part, are empowered to make decisions without immediate review from higher ups.
Advances in technology have simplified the collection and distribution of information, making it easier to abolish the role of middle managers, said Thomas Morris, founder of District-based outplacement firm Morris Associates.
“People in the middle used to get information from the people below, massage it and move it up to the people above,” he said. “Now everyone has got computers and that just cuts out layers of communication. It changes the whole dynamic.”
A flat structure at its best, he added, creates an egalitarian culture where all ideas are equally valued and employees are more engaged.
But Kropp argues that the structure “disengages employees, who may not see a path for advancement, nor a support system for development of their skills.”
Weatherwax said he believes employees at Preferred Systems are actually provided more opportunities for advancement because of the nature of the organization. The contract dictates which employee will head the project, meaning people have more chances to take on leadership roles at some point in their career.
There are 185 people on staff at Preferred Systems, with an equal number of consultants employed at any given time. The company, founded in 1991, prides itself on long having a streamlined structure, especially now as the future of government spending is in question.
“If the government is spending less money, you’re going to have more companies competing for less. All of these big government contractors, like Booz Allen [Hamilton] and Northrop Grumman, have been trying to drive costs out of their systems so they can be more price competitive,” Weatherwax said.
“We don’t have to knock layers of management out because we’re already flat. We can compete on cost because we have less overhead.”
One of the greatest challenges in having a flat structure, Weatherwax said, is having the right people in place. “People that are in management have a very large span of control, and the more you ask somebody to manage the harder the job becomes,” he said.
A greater span of control could expose companies to greater risk, cautioned Kropp of Corporate Executive Board.
“Part of the rationale of having more layers of management is that by having lots of eyes looking at something you’re less likely to make a risky decision,” he said. “De-layering creates more opportunities for systemic risk to creep into the organization.”
Weatherwax believes the best way to combat that kind of risk is to employ “better managers.”