Designing the Organization : FLAT ORGANIZATION

 A company that selects the prospector business strategy is likely to choose the flat organizational structure . A flat organization has only a few levels of managers and emphasizes a decentralized approach to management. Flat organizations encourage high employee involvement in business decisions. Nucor (a Charlotte, North Carolina, steel company) has a flat organizational structure.
Though Nucor has over 5,000 employees, only three levels separate the frontline steel workers from the president of the company. Headquarters staff consists of a mere 30 people in a modest cluster of offices.

Flat organizations are likely to be divided into units or teams that represent different products, services, or customers. The purpose of this structure is to create independent small businesses that can respond rapidly to customers’ needs or changes in the business environment. For example, Johnson & Johnson, a manufacturer of health care products, is organized into more than 200 operating companies that are located in 57 countries. Each operating company behaves like a minibusiness that is responsible for generating profits for the overall company, and employees within each unit feel as if they are working for a small company. The flat organization structure has fostered an entrepreneurial culture that has enabled Johnson & Johnson to innovate.

The flat organizational structure reduces some of the boundaries that isolate employees from  one another in bureaucratic organizations. Boundaries between workers at the same level are reduced because employees are likely to be working in teams. In contrast to workers at bureaucratic organizations, employees of a flat organization can cross functional boundaries as they pursue their careers (for instance, starting in sales, moving to finance, and then into production). In addition, job descriptions in flat organizations are more general and encourage employees to develop a broad range of skills (including management skills). Boundaries that separate employees from managers and supervisors also break down in flat organizations because employees are empowered to make more decisions.

Flat organizational structures can be useful for organizations that are implementing a management strategy that emphasizes customer satisfaction. Implementing a customer-focused strategy may require changing work processes so that customers can receive higher-quality products and better service. For example, an auto insurance company may change its claims adjustment process to speed up reimbursement to customers. Rather than using 25 employees who take 14 days to process a claim, the company may create a claims adjustment team that works closely with the customer to take care of all the paperwork within 3 days. The flat structure works best in rapidly changing environments because it enables management to create an entrepreneurial culture that fosters employee participation.