A recent article in the California Management Review by Julie Wulf examined the prevailing thoughts on why organizations flatten (delayer) their organizational hierarchies.  Traditionally, firms have flattened their structures to push decisions downward thus improving morale, accountability, reducing costs, and increasing market responsiveness.  The resulting benefits for lower level workers in theory would result in the CEO having less control and thus the organization would become more decentralized as the CEO simply could not make as many decisions as the spans of control increased.  However, there have not been extensive studies on this topic to determine 1) are firms delaying, 2) If so, why are they delaying, and 3) what are the actually effects of delaying.

Wulf reports that flattening has occurred over the last 20 years in large Fortune 500 corporations consistent with previous thought.  Firms simply have become less divisional in nature and more focused on their core products, thus removing many division heads.  As competition has increased and customers demand specialized products, the delaying strategy is clearly in place.  However, in contrast to existing thought, much of the delaying or flatting of the organization did not lead to less CEO involvement, but rather, increased CEO involvement!  CEOs have increasingly removed the COO position, hired more functional level managers such as CMOs, CHRM, CIO, and so on that report directly to them.  This practice, coupled with fewer divisional presidents, has created an environment where the CEO actually has more control, which is quite the opposite of a decentralized firm.

Interestingly, the previous thought process of delaying and decentralization being almost interchangeable is not as clear cut as once believed.  From the narrative above, delaying can also be used as form of centralization.  Interviews with Fortune 500 CEOs reveal by their own accord this is actually what has happened at the surveyed firms.  Repeatedly, CEOs stated, the reasons for flattening, which was done mostly at the top of the hierarchy, was to “get closer to the business.”

Julie Wulf (2012), “The Flattened Firm:  Not as Advertised,” California Management Review, Vol. 55, No. 1 (Fall), 5-23.