It’s one thing having a great idea for a business, it’s quite another to work out how that business should be structured. And if you’re starting a bank or a finance company from scratch – where on earth do you begin? Keen to distance themselves from their corporate predecessors, many fintech startups are opting for flat, non-hierarchical structures. But do they really work? Or are they empty organisational rhetoric – the entrepreneurial equivalent of sizzle without the sausage?
The devil is in the management details
Flat can work, but like most things to do with people management, the devil is in the details – and it’s costly to get it wrong. Poorly implemented flat structures can quickly become breeding grounds for employee discontent. Why? Well, more often than not, flat structures avoid creating defined lines of accountability and responsibility. To startups, these attributes smell like fat cats in corner offices, smoking cigars and playing rounds of golf – the antithesis of startup culture. “Who needs managers?” they say. “We’re all self-managed, accountable and responsible. Isn’t that enough to be successful?”
The short answer is yes, the long answer is maybe but probably not. While this philosophy can be extremely successful in the early days, as projects increase in complexity and team sizes grow, this ‘she’ll be right’ attitude can translate into structural voids across an organisation. Responsibility for mission critical project tasks remains unassigned, and chaos quickly ensues. When things invariably go wrong, management finger-pointing follows, leaving teams feeling disgruntled and confused.
Ideology meets reality
A brilliant article written by Mark Nichols from Flow, a project management software startup, charts the company’s struggle with maintaining a balance between the desire to stay true to the ideals of a flat structure and the realities of actually getting work done. As Nichols and his team uncovered during the company’s hyper-growth period, projects that crossed business lines soon stagnated in the absence or clear roles and responsibilities. ‘My personal experience,’ Nichols says, ‘in working in a company without C- or middle-level management (as Flow was in the beginning), was that it created a certain kind of idea paralysis. Every decision felt too paramount because there were too many eyes on every move, and not enough direct management about who should (or even how they should) make those moves.’
Where to next?
So should we all chuck in the towel and give up on the idea of a flat structure? Not at all – we just need to be vigilant about tweaking it every now and then as our company grows. The cautionary tale is not to leave it too late, or you’ll find yourself tearing your hair out about why nothing ever gets done how you envisioned. Having worked in a flat organisation for some time now, below are three things I believe you should invest in from day one.
- Define roles and responsibilities (and write them down)
Flat organisations work when everyone understands who they are in relation to everyone else, and what they are supposed to deliver. Ever played team sport? Matches are invariably won when everyone on the field knows what they need to do – and also what they don’t. Sports teams are a great proof point that flat organisations with defined roles and responsibilities are not mutually exclusive concepts.
Take a field hockey game for example. Wings and centres score goals, and backs and half-backs defend. Every now and then a back might score an opportunistic goal. But if backs were to score goals all of the time, who would be defending? A good team captain and coach doesn’t let this type of behaviour go unchecked. They’ll regularly analyse their players’ strengths and weaknesses, then move people into the best position in order to make the team succeed.
- Don’t always hire yourself
Many entrepreneurs succeed because they are big picture thinkers. When hiring, like when making new friends or starting new relationships, we feel most comfortable with people who think and act like us.
However products aren’t gotten off the shelves by big picture thinkers. They’re built and prototyped by the analytical, detail orientated thinkers, who can interpret the vision and make it a reality. While they are polar opposite personalities, together they act as a type of entrepreneurial yin and yang. Look around your team – do you have a balance of both types? If you’re stagnating with shipping product, or with getting sales and marketing initiatives off the ground, it could be less about lack of ideas, and more about a lack of analytical yang. Flat structures need diversity in thinking approaches just as much as they need defined roles and responsibilities.
- Stop making management out to be the bad guy all the time
Eric Ries, author of The Lean Startup, sees this every day. In a recent interview he spoke about the reticence of entrepreneurs to engage with the subject. ‘Entrepreneurship,’ he says, ‘is management. It is fundamentally about organizing people to do something. Everything else that happens is a side effect of that organization.’
‘Nothing gets me in more trouble than when I speak to audiences about this, because I’m supposed to talk about cool, hip startup stuff like minimum viable products [MVPs], and I come in and say, “We’re going to talk about management, and in a minute we’ll talk about accounting.” In San Francisco, that’s considered uncool. But that’s what startups and entrepreneurship are really about. And I think we’re going to have to confront that if we’re going to get better at it.’
When people learn how to manage other people, invariably they learn crucial skills about what it ultimately takes to lead people. We all agree we need more leaders, so therefore it’s important to give your employees management learning opportunities wherever you can, without falling into the trap of feeling usurped or fearing you’re losing control.
Don’t give up before you’ve started
When it comes to building and servicing customers with financial products, compliance and due diligence will always be key. This can lead many industry veterans to balk at the idea of a flat structure as being not even remotely possible. While it no doubt has its challenges, perhaps more so than other industries, fintech companies like Tyro (where I work) are proving it’s possible. With more and more people seeking out workplaces that can offer them the freedom a flat culture promises to deliver, it certainly is a selling point for great talent. That means the pressure is on for those startup founders that choose the ‘flat way’ to deliver daily on that promise, and turn rhetoric into reality.
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