A Blog by Jonathan Low

 

Jan 19, 2022

Why Startups With Flat Organizational Structures Often Fail

In an age of transcendent human and intellectual capital, where collaboration is often a key driver of success, flat organizational structures are often appealing to founders and venture investors because they appear to sideslip messy arguments about who's leading whom which can enhance the risk losing essential talent.

The problem with that theory, research shows, is that flat organizational structures can flatline a startup once it starts growing beyond initial hires. The reason is primarily that there comes a point where individual initiatives have to be sublimated to the greater good of the enterprise. To achieve operational and financial goals in order to optimize outcomes, it is necessary for decisive leadership to lead. JL 

Knowledge@Wharton interviews Prof. Saerom Lee:

Startups with flat organizational structures often fail. Lee found most successful businesses that begin with a flat structure start creating levels of management when they reach 20 or 30 employees. At that size, good managers step in. Without supervision, employees may lose direction, drift into endless exploration, create projects they aren’t capable of accomplishing, and fight with each other. “While a flat hierarchy can foster creativity, it can lead to dysfunction, turnover and commercial failure. No matter how good the business idea or how brilliant the team, mismanagement can ultimately kill their business.”

Wharton management professor Saerom (Ronnie) Lee has a word of warning for aspiring entrepreneurs who envision an egalitarian workplace where there are no bosses and every employee ranks the same.

According to his latest research, startups with flat organizational structures often fail.

“Although many entrepreneurs dislike the notion of hierarchical structure and managers, they ultimately do need managers, and do need to plan ahead and design the appropriate hierarchical structure way earlier than they think,” he told the Wharton Business Daily show on SiriusXM. (Listen to the podcast above.)

In his study titled “The Myth of the Flat Startup: Reconsidering the Organizational Structure of Startups,” Lee pushes back against the popular view that firms, especially new ventures, work best without managers stifling creativity and getting in the way of progress. He said it’s only natural for founders at the beginning of their journey to get caught up in the excitement of generating ideas and finding the right product-market fit. But focusing solely on the near-term will cost them down the line when having a clear delineation of duties helps firms to scale.

“What many of them realize over time is that no matter how good the business idea is or how brilliant the team is, mismanagement can ultimately kill their business,” Lee said. “Unfortunately, there are many cases where startups fail simply due to the lack of management structure.”

Lee found the most successful businesses that begin with a flat structure usually start creating levels of management when they reach about 20 or 30 employees. At that size, good managers step in to keep order and prevent the company from descending into chaos. Without supervision, employees may lose direction, drift into endless exploration, create projects they aren’t capable of accomplishing, and fight with each other.

“With no managers to keep them in line, they can start competing for projects, and these competitions start to get out of control and result in conflicts,” Lee said, pointing out that male employees, who are typically the majority, tend to accumulate influence in a power vacuum. Consequently, they secure the most promising projects for themselves, leaving female and minority employees with lesser contributions.

“While a flat hierarchy can foster experimentation and creativity at the early stage, it can lead to dysfunctional conflicts and coordination failure among employees, result in employee turnover, and ultimately lead to commercial failure,” Lee said.

Striking the Right Balance

Lee acknowledged that it’s hard for entrepreneurs to balance the twin pursuits of creative innovation and commercial success. They often realize one at the expense of the other because it’s difficult to achieve both at the same time. Movies are a great example of that: Artistic films rarely make the kind of box-office profits raked in by blockbusters, which are usually devoid of artistic value.

In the study, Lee found that the trade-off between the two desired outcomes can be mitigated by adopting the right organizational structure. That’s why it is important for founders to consider what kind of hierarchy will work best, and when to implement it.

“Unfortunately, there are many cases where startups fail simply due to the lack of management structure.” –Saerom (Ronnie) Lee

“To commercially succeed, startups need to some extent limit their employees’ creative freedom and prevent endless exploration of ideas. They also need to cull ideas diplomatically without demotivating or creating conflict among employees, who tend to get emotionally attached to their ideas,” Lee said. “This is easier said than done.”

As they build hierarchical layers, founders may also find it harder to retain their original employees who were attracted to the job in the first place because the organization was flat. In such cases, Lee said, it’s helpful for founders to temper employee expectations by making it clear that managers will be added as the firm grows.

The key message for entrepreneurs is to think just as much about their people as the product, especially during those heady early days of the business.

“Because it’s very difficult to make the transition from a flat to a hierarchical structure while busily working on ideas, entrepreneurs need to plan ahead and have a structure in mind,” Lee said.

In related, forthcoming research, Lee and his co-authors conducted a field experiment with 8,000 job candidates to examine whether startups that advertise a flat structure in job postings attract more female applicants. Contrary to the common belief that women prefer a flat organization, as this structure would be more egalitarian than traditional hierarchies and provide a healthier work-life balance, they found that advertising a flat structure decreases the female representation in the applicant pool by 25%.

“Featuring a flat hierarchy can inadvertently decrease diversity at a startup and ultimately hurt performance in the long run,” he said.


1 comments:

FIRMWARE HACKS said...

��Binary scam recovery
��lost loan money recovery
��money laundry recovery
��Device hack
��Bank issues
��Access to school/company/fellowship/organization files
��Lost cars tracking
��fraud payment
��Access to cheating husband/wife device
��extending and subtracting of stamped file concerning a giving end line period of time
��tracing and recovering lost emails/conversations/contacts / and accessories
ETC
Firmwarehacks@gmail.com
Firmwarehacks@gmail.com


AS LOMG AS ITS TECHNOLOGY IT WILL BE HACKED , with firmwarehacks service you can get all of this and more done !!


❌ Binary Option, Forex and their likes are a means of making money but it’s more like gambling. There are no sure means to guarantee that a person could make profit with them and that’s why it can also be reasoned to be scam. Let’s not forget that some individuals even give you �� % guarantee of making profits and end up running away with your money. The internet today is full of Binary Option Recovery Scam, you see so much testimonies been shared about how a firm or Company helped them recover what they lost to Binary Options. But believe it, it’s just a way to lure more people and end up scamming them.

❌ You might have also come across some individuals that say they will give you guarantee on successful trades but they only end up as SCAMMERS as well. You here them say stuffs like 200% guaranteed in just 2 weeks and when you go into trade with them, they start telling you to pay profits percentage before you can get your income. These are all liars please avoid them. But if you have been a victim of this guys, then you should contact FIRMWARE now‼️

✳️The big Question is “Can someone Recover their money lost to Binary Option and Scam⁉️
I will say yes, and will tell you how.

The only way to Recovery your money back is by hiring HACKERS to help you break into the Firms Database Security System using the information you provide them with, Extract your file and get back your money. It seems like a really impossible thing to do, I will tell you, it should be impossible, but with the use of specially designed softwares known to HACKERS and Authorities (such as The FBI, CIA e.t.c) it is possible and the only way to recover your money.

✅FIRMWARE are a group of hackers who use their hacking skill to hunt down SCAMMERS and help individuals recovery their money from Internet SCAMMERS.
We just need the contact details of the SCAMMERS and Paymnet Info and within 4-8 hours your money will be return to you.

✳️ You can contact us via the emails below-:
firmwarehacks@gmail.com
Firmwarehacks@gmail.com
2022 ©️ All right reserved ®️

Post a Comment