A recent study by McKinsey found that 79% of of European employees are unmotivated at work. This leads to increased absenteeism, higher employee turnover, and major company losses.
While there are countless recommendations for increasing that engagement, they ignore one simple truth – that working under a manager isn't very motivating in and of itself. There's a saying that “people don't leave bad companies; they leave bad managers”. So, what if we took that layer out?
We implemented this is approach at Balcia Central Office, and the results were astounding. Our employees are now to be reported as more engaged than ever. We've experienced massive business developments, such as the successful launch of the Balcia mobile app, entering the Estonian market in just 90 days, and many more achievements. In 2023 alone, 79 people were promoted, contributing to a stronger company culture than ever.
So, what is a horizontal organization? In short – it's a team where there are no managers. You have CEO and functional or area leads, and then all of the individuals in the company, each responsible for their own area of expertise. We have teams created in “functional areas or “hubs ”, where each person has their own area that they drive forward.
While horizontal organizational structures might seem revolutionary, it's actually old news. Some of the most innovative teams (startups, for example) have been doing it for ages. As we see ourselves as an innovative company, it was a no-brainer for us to pursue this method.
Personally, I think it's just a matter of time until all organizations “flatten out”. Yes, many legacy corporations will find this a challenging shift, but their competitiveness will ultimately suffer for it if ignored.
The benefits of horizontal organizations are too good to ignore
We all know that happy employees are productive employees. But horizontal leadership takes this a step further:
This is one of the only ways to build trust and respect
In a typical pyramid-shaped business, employees are simply asked to execute tasks, which have been passed down and are monitored by managers. With a horizontal structure, the entire team is aware of the organization's main objectives, and it's up to them to decide and execute their own strategic visions to support that objective.
We do that by each having our own OKRs (and bonuses for achieving them) that are aligned with Balcia's organizational goals, and each individual has the freedom to make decisions and implement their own vision. It gives employees the agency and responsibility for decision-making, while also keeping everything aligned. Achieving goals begets respect and cultivates mutual trust between leadership and employees. What's more, it makes it possible for faster responses and agile decision-making, thus helping reach company goals faster.
It's the best environment for personal growth
You would think that if there are no ladders to climb, that people would be limited in their capacity for career growth. In reality, it's the opposite. As a person develops in a horizontal organization, so does their earned trust, and in turn, their decision-making power. Their role within the company grows, as does their level of responsibility.
As an employee gains a greater understanding of different areas of the company, they better understand what they can bring to the table. This opens doors not only to growth in responsibility, but also for horizontal career growth. So, you have multiple areas for personal growth, and it's entirely up to you.
Horizontal structures save A LOT of money for the company
By eliminating a layer of costly managerial positions, as well as the bureaucracy required to maintain communication in a multi-level organization, the horizontal structure saves companies a lot of money.
It also is self-organizing in that it automatically roots out unmotivated employees. If they are not motivated enough to set ambitious goals and achieve them, they will not feel good here. But motivated employees will thrive. And so we're left with a self-organizing, high-performing team.
But can a company scale without managers?
One of the biggest arguments for a classical business hierarchy is that it is necessary for a company to grow. As the company scales, teams grow in size, missions must be aligned, etc.
A team of academic scholars in Finland challenged this myth. They found that by implementing the right systems, it was possible to stay flat, but continue organizational growth. Those systems were:
- Modular teams – they called them “tribes”, we call them “hubs”. Teams in a particular area, but where each person becomes responsible for their area of expertise. For example, we have a “marketing” hub, where different people are responsible for SEO, communications, the website, etc. You then become accountable to the people in your hub.
- Decision-making frameworks – having an established decision-making process that anyone can filter their question through. The Finnish Futurice team uses a 3x2 framework, meaning you can make the decision if it benefits “your clients, colleagues, and numbers (the “3” component of the 3×2), and that it will do so both today and tomorrow (the “2”).
- Transparency – the system relies entirely on trust, and therefore there has to be company-wide transparency. On salaries, profits, revenue, losses, etc.
- Knowledge mapping – because there are no managers, there have to be systems in place to be able to find out who knows what in the organization. Futurice does that by using an AI-powered search engine that can go through all of the communications channels to help indicate who has what information.
- Embracing experiments – because people are empowered to make their own decisions, they're able to move quickly and act on new ideas. This agility can be the competitive edge that drives growth, but it can also lead to failures. The company must be ready to embrace both outcomes.
- Telling your story – making sure to reiterate company values often within the team (and outside of it) is crucial to keep everyone looking in the same direction.
While on paper horizontal organizations look great, we can't deny that change is uncomfortable, and any company pursuing flat leadership will inevitably run into challenges along the way. Companies can expect to encounter concerns about career growth opportunities, concerns from existing managers about their fate at the company, a general fear of relinquishing control over every task.
Is this for everyone? In some organizations, such as governmental organizations, this may be more difficult to implement. But I want to encourage you that it's not impossible. With good planning, transparent communication, and good management, it's doable. Ultimately, while it is hard to have a large ship sailing in the same direction, rather than being pulled every which way, you'll get further and with less energy required. I believe that eventually we will see a societal shift towards flat organizations, and it will be everywhere.
If you want to learn more about how we work at Balcia, take a look at this piece.
For example, our IT team, which constitutes roughly 30% of our central office workforce, does not have a direct manager. The team is organized into functional squads, each responsible for a specific product or country's technological innovation development, overseen by a functional board member. Also, in the marketing team hub, we have one person responsible for communications, one for brand, one for design, one for e-commerce, another for CRM, etc. And I can tell you from experience, it works perfectly.
