Question

The CEO of a mid-sized software company is determined to keep the hierarchy at a minimum number of levels. Will this affect the organization’s ability to control activities? What do you suggest?

Answer 1

Before going to the actual answer, let me give a brief description of what a mid-sized company is.

Many international organizations defined small, mid-sized and large companies in different ways. A well-known intergovernmental organization, Organization for Economic Cooperation and Development (OECD) defined mid-sized company as a company that has the number of employees between 50 and 250.

In my opinion, if the CEO of mid-sized software company has decided to have hierarchy in minimum number of levels, he can go ahead with the decision. This minimum level of hierarchy would be sufficient to manage all the activities in the mid-sized soft-ware company. Because the number of employees is between 50 and 200.

Let me explain this concept in more detailed manner. In any organizational structure, there are two main hierarchical structures. One is tall structure and another one is flat structure.

Tall structures have many layers of hierarchies of managers between the top level management and frontline employees. In tall structure hierarchies, there will be less number of employees reporting to each manager, which means the managers can monitor and supervise the employees’ activities closely and give a proper feedback to the top level management and the managers can guide the employees’ activities to increase their efficiency and productivity. In tall structure hierarchies, the employees would be having less freedom and less need satisfaction. This kind of hierarchy would suit well for large and well-established organizations or companies.

There are some studies done on tall structure hierarchy and flat structure hierarchy. A study done by Johnson and Ghiselli in the year 1970 revealed that, the employees in the organizations with flat structure hierarchy would have more freedom, more satisfaction and they achieve greater accomplishments in their area of work. Another study done by Porte and Siegel in the year 2006 also found the same results as Johnson and Ghiselli revealed in their study. However, there are some difficulties in flat structure hierarchies. According to a research done by Chonko in 1982, if a large company follows flat structure hierarchy, the managers in those companies would be in some ambiguity in what to expect from each of the employees in lower hierarchies and guiding & controlling the frontline employees in better way.

So, since it is a mid-sized company, I would suggest the CEO of Software Company, to go ahead with the decision of keeping the hierarchy at minimum number of levels.

Best example of a company following flat hierarchy is IKEA, the Swedish furniture manufacturing company, which is very successful in their business.