I enjoy being able to move from idea to implementation in as few steps as possible, which is why I prefer the informality that’s inspired by few organizational layers. And before you say, “That’s fine for small companies, but what about big ones?” let me add that our firm grew to more than $1 billion in size with no more than five layers of hierarchy at its steepest point. This flat organizational design had other benefits as well. It helped us control overhead costs and also limit the corporate grapevine. In the absence of information, people will invent it. The water cooler chatter is pretty intense at rigidly hierarchical organizations, where communication is concentrated in the layers immediately above and below. By contrast, organizations with fewer reporting levels that work to keep open communication have less rumormongering. There is, however, a potential downside: heightened conflict. It stems from the informality this organizational structure engenders, and it can be uncomfortable at times. But if the culture is such that these interactions are respectful, the company will be better for it.
It’s distressing to watch your children do battle with one another. “If the kids only knew how much they truly need one another” is what goes through our minds as parents. Managers should remember this when they face the line-versus-staff disputes that routinely occur. Sure, the line may indeed be responsible for making the sales that bring in the dollars, but it’s the staff that ensures the quality and timely delivery of the products and services. Therefore, while it’s true the staff may have little to do until the line generates the business, the line won’t have the opportunity to do so if the staff doesn’t attend to the back office.
Employees will tell you that it’s much more stressful to have too little work than it is to have too much, especially when business is less than robust. So be thoughtful about adding staff; layoffs have a destabilizing impact on otherwise cohesive and productive teams. Also keep track of the cost you’d incur to replace the employees you have, to ensure that you are compensating fairly for their work. And, most of all, honor your commitments to deliver performance reviews, raises and bonuses on time. Remember how uncomfortable you felt asking your boss for more money? Don’t make your employees do the same.
Epilogue excerpt from Practical Finance: A Straightforward Guide to Personal and Entrepreneurial Finance