Flattening Hierarchies: A Double-Edged Sword

A recent ATD article, "Middling Returns" (ATD article) sheds light on a growing corporate trend: flattening hierarchies. Companies like Citi, UPS, and Amazon are not only reducing but eliminating layers of middle management, favoring leaner structures to improve agility and cut costs.

🚀 The Pros of Flattening

At first glance, this shift seems like a win for efficiency:

✅ Faster decision-making – Fewer layers mean streamlined processes and quicker approvals-which is a huge plus especially for smaller admin tasks.

✅ Less bureaucracy – Employees may feel a sense of empowerment to take action.

✅ Cost savings – Reducing management layers can cut expenses significantly which can help keep company profits in their pockets.

But, removing middle management comes with serious consequences if not executed correctly.

Understanding Different Organizational Hierarchies

While flattening is gaining popularity, it's just one approach to structuring a company. Different industries and business models benefit from different types of hierarchies.

1️⃣ Traditional Hierarchical Structure

🔹 What It Looks Like: A pyramid structure with multiple levels of management. Each level has a clear chain of command.

🔹 Pros:

✅ Clear reporting structure and accountability

✅ Strong leadership pipelines

✅ Well-defined career progression

🔹 Cons:

❌ Can slow down decision-making

❌ Can create bureaucratic bottlenecks

📌 Example: Large corporations like banks and government agencies typically use this structure for stability and control.

2️⃣ Flat (Flattened) Hierarchy

What It Looks Like: Fewer layers of management, with employees having more autonomy.

🔹 Pros:

✅ Faster decision-making

✅ Less bureaucracy

✅ Encourages innovation

🔹 Cons:

❌ Lack of career pathing if promotions are removed

❌ Harder to scale for large organizations

❌ Managers can become overburdened

📌 Example: Startups and tech companies often lean towards flatter structures for agility.

3️⃣ Matrix Structure

What It Looks Like: Employees report to multiple managers across different projects or departments.

🔹 Pros:

✅ Encourages cross-functional collaboration

✅ Increases flexibility in project management

🔹 Cons:

❌ Can create confusion in reporting relationships

❌ Strong communication is required to avoid conflicts

📌 Example: Consulting and global companies often use matrix structures to balance different business functions.

4️⃣ Holacracy & Decentralized Structures

What It Looks Like: Gone are the days of rigid or traditional hierarchies. In this hierarchy, decision-making is distributed across teams and self-managed groups.

🔹 Pros:

✅ High flexibility and employee empowerment

✅ Faster adaptability to change

🔹 Cons:

❌ Requires strong company culture and alignment

❌ Can lead to chaos if not well-structured

📌 Example: Zappos famously adopted a holacracy, eliminating traditional management roles in favor of decentralized decision-making.

Which Hierarchy Model Is Best for Your Organization?

No hierarchy is best in all scenarios. When choosing the best hierarchy for your company. Some things to keep in mind are the company size, industry, culture, and long-term goals:

✔ Traditional Hierarchy – This tends to be best for large, complex organizations that require stability, compliance, and clear reporting structures (e.g., government, healthcare, financial institutions).

✔ Flat Hierarchy – Ideal for startups, creative industries, and tech firms that prioritize speed, innovation, and autonomy but may struggle with scale.

✔ Matrix Structure – Suitable for global businesses and project-heavy organizations where cross-functional collaboration is key (e.g., consulting, R&D firms).

✔ Holacracy/Decentralized – It works well for companies that value employee empowerment and flexibility but requires strong cultural alignment and adaptability (e.g., agile-driven tech companies like Zappos).

📌 Key Consideration: If a company flattens its hierarchy, it must still invest in leadership development, mentorship, and career pathing to ensure long-term success.

The Hidden Costs of Flattening Hierarchies

1️⃣ Career Growth Must Go Beyond Promotions

Not every employee aspires to be a manager, but that doesn't mean they don't want growth.

💡 The Reality: Many companies define growth as climbing the corporate ladder, but when there are fewer rungs, employees can become disengaged and decide to look elsewhere to fulfill their need for growth.

Instead of getting rid of growth opportunities, companies should offer:

✔ Skill-based development (e.g., certifications, cross-training, Linkedin courses)

✔ Lateral movement (e.g., transitioning into new departments)

✔ Specialist career tracks (e.g., becoming an expert without needing a management title)

🔹 Case in Point: Google has robust individual contributor (IC) career paths. Creating IC career paths and providing employees with the potential to earn leadership-level compensation and recognition without becoming managers increases employee engagement. Companies that eliminate middle management must create similar alternatives.

2️⃣ The Risk of a Top-Heavy Organization

💡The Reality: A company can't survive on strategy alone. If organizations eliminate too many middle managers, they risk becoming top-heavy—with too many strategists and not enough executors.

Example: A consulting firm might have dozens of senior strategists but not enough operational managers to execute initiatives. The result? Brilliant ideas that never get implemented efficiently.

🛠 Solution:

✔ Ensure that execution roles remain balanced with leadership positions. ✔ Develop project-based leadership structures so employees at all levels can lead initiatives.

3️⃣ Mentorship and Leadership Pipelines Are Disappearing

Middle managers play a critical role in coaching and the development of the organization's employees. If they disappear, who fills the gap?

📉 The Reality:

• 32% of layoffs in 2023 were middle managers (Live Data Technologies).

• Only 1 in 5 employees feel confident about internal mobility (LinkedIn Learning).

🛠 Solution: Companies must:

✔ Invest in leadership development programs whether that is internal or external programs to replace organic mentorship.

✔ Implement peer mentoring and sponsorship programs to support career growth.

🔹 Example: General Electric (GE) built a strong internal leadership development pipeline. By investing in leadership training future leaders were able to have guidance despite the adjusted managment structures.

4️⃣ Burnout & Operational Inefficiency

With fewer managers, remaining leaders must do more to maintain organization productivity. The result? Burnout, inefficiency, disengagement and increased turnover.

📉 The Reality:

• Managers today work 50+ hours per week on average (Gallup).

• Overloaded managers struggle to coach and support their teams.

🛠 Solution: Companies must:

✔ Use AI and automation to reduce administrative burdens.

✔ Prioritize workload balance—not just cost-cutting.

Key Takeaways: How Companies Can Flatten the Right Way

✅ Redefine career growth – Provide skill-based development and lateral mobility.

✅ Balance leadership and execution – Avoid a top-heavy structure.

✅ Strengthen mentorship – Invest in structured leadership development.

✅ Support managers – In order to reduce burnout this is a great chance to use AI and automation.

📢 Final Thoughts

Organizations flattening their hierarchies are not necessarily bad—but without a solid strategy, it can backfire. Companies must ensure they balance efficiency with employee development to avoid long-term damage to career paths, leadership, and execution.