Flat hierarchy: four ways companies make it work
Last week I traveled all over China, having conversation after conversation with top leaders about flat organizations.
Most of them shared the same concern.
They all asked some version of: "If you radically flatten the hierarchy... what's left of the organization's structure?"
It's a valid question.
But it touches on perhaps the biggest misconception about flat hierarchy: that flattening means removing structure altogether.
It couldn't be further from the truth.
Before we continue the story, let's define "flat hierarchy".
Definition of Flat Hierarchy
A flat hierarchy is an organizational structure that spreads power and decision-making across the company instead of concentrating it in a management chain. Middle layers are removed, and work is carried out by a network of small, autonomous teams connected to customers — coordinated by a small top team that sets strategy and boundaries.
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Back to China
What I told these leaders during my trip is simple: flat organizations don't lack structure.
They replace hierarchy with something else. And that "something else" is just as intentional as what traditional hierarchies rely on.
Over the past 10 years, we've visited more than 200 organizations working with a flat organizational structure. No two are identical. They come in many shapes and forms.
Still, across all these cases, four recurring patterns stand out.
Before we explore these different configurations and how companies actually make this work, let's first define what we mean.
What does a flat hierarchy actually look like?
A flat hierarchy is built on an extremely shallow organizational structure. In most cases, middle management layers are removed.
That said, the most successful flat companies, especially those that scale, still have a small top management layer. This group focuses on strategy, organization-wide topics, and setting the boundaries within which others operate.
The rest of the organization is built from autonomous teams, connected in a network. In our book, we call this a network-of-teams structure.
In practice, this creates a simple two-layer system:
- A small top team
- A network of autonomous teams
That's it.
How those teams are divided into the network varies, but it always follows common sense: geography, customer segments, products, or the value chain.
Teams are typically small (often capped at around 10-15 people) and closely connected to a customer, either internal or external.
Each team has clear rights and accountabilities, so it's obvious where responsibility begins and ends.
And teams are measured on clear performance metrics (productivity, customer satisfaction, employee satisfaction) to ensure they meet the organization's standards.
Four archetypes of flat hierarchy
The 200-plus organizations we've studied organize their flat hierarchy in four distinct ways.
1. Cell-based structures
Teams are organized like biological cells: multidisciplinary, self-contained, and responsible for their own region, customer group, or other kind of domain.
When a cell grows too large, it splits. Just like in nature.
Growth of the company simply means more cells being formed through splitting, or the addition of new cells.
You see this at Buurtzorg, the Dutch nursing organization that scaled to thousands of employees in less than a decade using this model. Each nursing team serves a specific neighborhood, handling everything from intake to care delivery.
VkusVill, the Russian grocery chain, uses the same approach. Store teams operate as autonomous cells, each responsible for their location's full operation.
Niverplast and Net Protections follow similar patterns. Former-BSO built its entire consulting model around self-contained cells that split when they reach capacity.
2. Chain-based structures
Teams are arranged along the value chain, with each team responsible for a specific function: sales, supply chain, R&D, manufacturing.
Coordination happens through representatives who connect teams across the chain.
As the company grows, it typically adds new chains to the organization.
This structure is typically found in manufacturing firms within the NER Group. Take Panelfisa, which reorganized its factory floor into chains where teams manage their piece of the production process autonomously.
NER-inspired companies like Indaero and P4Q use the same model. Each team owns its part of the value chain but coordinates closely with adjacent teams to ensure smooth handoffs.
The beauty of this structure? It maintains the flow of work while distributing decision-making to those closest to the action.
3. Circle-based structures
The circle-based structure is rooted in Gerard Endenburg's sociocratic design.
Rather than being organized on the same plane, teams are structured as embedded circles, with each circle linked to its inner and outer circles.
Growth of the company means adding more circles, with outer circles expanding accordingly.
This structure is found in companies running on Sociocracy and its derivatives. Viisi, the Dutch mortgage advisor, uses Holacracy to organize its circles. So do ten23 health, Luscii, and Relations.
EPPO, the Brazilian environmental services company we've written about before, uses O2 (another sociocracy derivative) to structure its circles. Each circle focuses on specific areas like sustainability, governance, equipment management, and human development.
What makes circles unique is their formal connection system. Each circle has lead links and representatives to ensure coordination and flow of information between levels.
4. Microenterprise-based structures
Teams function as mini-companies inside the organization.
They contract, transact, compete, and collaborate through internal markets, often within a specific ecosystem.
As the organization grows, it develops multiple ecosystems, with successful microenterprises evolving into ecosystems of their own, enabling new microenterprises to emerge around them.
This structure is found at Haier, the Chinese appliance giant that transformed itself using what they call Rendanheyi. Their microenterprises operate with full profit-and-loss responsibility, buying and selling services to each other.
Fajar Benua in Indonesia adopted the same model. Their microenterprises compete for internal contracts while collaborating within product ecosystems.
In Haier's case, some microenterprises serve external customers directly (user-facing microenterprises) while others support them internally (node microenterprises). The distinction can blur, with some units playing multiple roles depending on the context.
3 reasons for why a flat hierarchy works
So why would you design an organization like this?
At its core, a flat hierarchy is simply a more human-centric way of organizing. It tends to work better for people.
But the benefits go beyond that.
1. Motivated people, better performance
Flat organizations give people real autonomy.
Most people thrive on that. They become more engaged, more responsible, and more motivated.
And that translates into performance.
Take the NER companies as an example. On average, organizations that transformed from hierarchy to a chain-based structure reported these results within two years:
- Revenue up 80%
- Profit up 210%
- Productivity up 40%
- Accidents down 86%
- Absenteeism down 32%
These aren't feel-good metrics. They're hard business results.
The meta-study by Gallup that we reference in our book confirms this pattern across industries. Workplaces with high employee engagement consistently show better financial returns than those with unmotivated staff.
2. Extreme customer-centricity
Flat structures are designed around the customer (or client, or patient).
Teams are directly connected to the people they serve and have the autonomy to act to serve them in the best way possible.
Instead of pushing decisions up the hierarchy, teams can respond immediately: creating more value, faster.
Think about Buurtzorg's nurses. When they see a patient needs something, they don't fill out a request form for management approval. They just do it.
The same goes for VkusVill's store teams. They adjust their product mix based on neighborhood preferences without waiting for headquarters to analyze data and issue directives.
This direct connection between those doing the work and those receiving the value is what makes flat organizations so responsive.
3. Rapid scaling
When done well, flat structures scale surprisingly effectively.
Why? Because instead of adding layers of management, they simply add new autonomous teams to the network.
Buurtzorg is a good example. They scaled to thousands of employees in less than a decade. No new management layers. Just more nursing teams added to the network.
Haier went from a struggling state-owned enterprise to a global giant using microenterprises. As demand grew, they didn't build a bigger hierarchy. They spawned more microenterprises.
The constraint on growth isn't organizational complexity. It's finding enough capable people to staff new teams.
The trade-offs of a flat hierarchy
That said, flat organizations are not without their challenges.
New coordination and reward mechanisms
Structure alone isn't enough.
Once you create a network of autonomous teams, you also need mechanisms to integrate them.
The goal is not just independence, but coherence: to become more than the sum of the parts.
That requires redesigning coordination mechanisms so teams can make and fulfill commitments across the system. Weekly town halls at companies like UKTV. Representatives connecting teams in chain-based structures. Lead links in circle organizations.
It also requires rethinking reward systems to ensure they reinforce value creation for customers, not internal competition.
Distributing power (and the training it requires)
Going flat means, by definition, redistributing power.
Managers have to let go. Others have to step up.
That sounds straightforward, but in practice it's one of the hardest parts.
Through our impact fund Krisos, where we acquire hierarchical companies and transform them, we've learned that this requires serious capability building.
People need training in adult-to-adult communication, self-awareness, personal leadership, and emotional intelligence.
This connects to Eric Berne's Transactional Analysis work we've explored before. Traditional organizations run on parent-child dynamics: orders flow down, approval flows up.
Flat organizations need adult-to-adult interactions. Peers talking to peers. Adults working with other adults.
Without that shift in mindset and capability, the flat organization doesn't hold.
Radical transparency
Distributed authority only works when information is widely available.
People can't make good decisions without access to relevant data. That means moving from a culture of information control to one of openness.
That includes company financials and salary data.
For many organizations, this is uncomfortable. Because the reason information is hidden is often simple: it feels too risky to share. Or it's not fair.
And transparency forces them to confront that reality.
At Chorus, the Australian care organization, they use digital tools that make roles, accountabilities, decisions, and work visible across the entire organization. Instead of an org chart, they use a relational mapping tool that shows who does what and how roles connect.
Work is tracked openly. Budgets are visible. Decisions are documented.
Peer accountability through radical transparency replaces top-down supervision.
More deliberate, not less
Every flat organization we've studied has replaced hierarchy with something more intentional.
Clear team boundaries. Defined accountabilities. Transparent metrics. A network designed around the customer.
They didn't remove structure. They built better structure.
The Chinese executives I met last week were right to ask what's left when you flatten the hierarchy. The answer isn't "nothing."
The answer is: structure done right.
Ready to redesign your structure, not just flatten it?
Reading about cells, chains, circles, and microenterprises is one thing. Designing the version that fits your organization is another. That's where most attempts to "go flat" fall apart: teams get autonomy, but nobody rebuilds the coordination, accountability, and information flow that hold the network together.
In the Corporate Rebels Masterclass, I walk you through the exact frameworks we use to transform hierarchical companies.
