Organizations adopt flat structures to eliminate hierarchy. No managers, no titles, no reporting lines. Everyone is equal. Decisions happen through consensus or emergence. Coordination occurs organically through direct communication.
The pitch is compelling. Hierarchy creates bureaucracy, slows decisions, and concentrates power. Flat organizations promise speed, autonomy, and egalitarianism.
Then reality intrudes. Someone needs to make the final call on product direction. Someone needs to coordinate across teams. Someone needs to handle underperformance. Someone needs to allocate resources.
Flat organizations don’t eliminate these functions. They make them informal. The managerial work still happens. It’s just invisible, unaccountable, and often more problematic than traditional hierarchy.
Understanding why flat organizations recreate managers informally requires examining what managers actually do, why those functions don’t disappear in flat structures, and how informal power creates worse problems than formal hierarchy.
What Managers Actually Do
Before understanding why flat organizations fail, clarify what management functions are.
Decision closure. When groups disagree, someone must make the final decision. Without formal authority, decisions either don’t get made or get made by whoever is loudest or most persistent.
Resource allocation. Time, money, and attention are finite. Someone must decide which projects get resources and which don’t. This is intrinsically a power function.
Context distribution. Someone must ensure people have the information needed to make good decisions. In small organizations, this happens naturally. At scale, it requires active management.
Coordination. Work that spans multiple people requires coordination. Without formal coordination mechanisms, coordination happens through informal negotiation. This is expensive and unreliable.
Performance management. When someone isn’t performing, something must happen. Flat organizations claim peer accountability solves this. In practice, nobody wants the social cost of confronting peers.
External interface. Organizations interact with customers, investors, and partners. Someone must represent the organization and make commitments. Without formal authority, these commitments lack credibility.
Conflict resolution. Conflicts happen. Without formal authority to resolve them, conflicts persist, creating dysfunction.
These functions don’t disappear in flat organizations. They go underground. The people performing these functions have power without accountability. The organization pretends the power doesn’t exist while experiencing its effects.
How Informal Managers Emerge
Flat organizations create informal management through predictable mechanisms.
Information Asymmetry Creates Power
In flat organizations, information distribution is unstructured. Some people have more context than others. This context becomes power.
The person who was there when the product was designed knows why certain decisions were made. When questions arise, people ask them. Their interpretation becomes authoritative even without formal authority.
The person who talks to customers most knows what customers want. Their understanding shapes product direction whether or not they have formal responsibility.
The person who understands the technical architecture makes technical decisions because they’re the only one who can evaluate trade-offs.
Information asymmetry creates informal authority. People defer to whoever knows more. This is rational individually but creates management by expertise rather than management by accountability.
Coordination Requires Gatekeeping
Flat organizations need coordination. Without formal coordination roles, someone becomes the de facto coordinator.
The person who organizes the weekly all-hands becomes the information hub. Everyone updates them on progress. They know what everyone is working on. This knowledge becomes power.
The person who maintains the roadmap becomes the gatekeeper for new work. Want to start a project? You need to get it on the roadmap. The roadmap maintainer controls prioritization without formal authority.
The person who runs the sprint planning meeting controls what gets worked on. They’re not a manager. They’re “facilitating.” But facilitation involves deciding whose ideas get discussed, whose concerns get addressed, and what makes it into the sprint.
Coordination creates chokepoints. Chokepoints create power. Flat organizations don’t eliminate chokepoints. They make them informal.
Risk Aversion Requires Approval
Flat organizations still have constraints. Budgets, technical limitations, customer commitments, legal requirements. Someone must ensure decisions respect these constraints.
Without formal approval processes, approval happens informally. Before launching a feature, someone checks with the person who understands customer commitments. Before making an architectural change, someone checks with the person who understands technical constraints. Before spending money, someone checks with whoever controls the budget.
These checks become implicit approval chains. The people being checked with have veto power. They’re not managers on the org chart. They’re managers in practice.
Conflict Defaults to Loudest Voice
When flat organizations have conflicts, resolution mechanisms are unclear. Consensus is the goal. But consensus doesn’t always happen.
In practice, conflicts get resolved by:
- Whoever is most persistent
- Whoever argues most forcefully
- Whoever has more social capital
- Whoever has been there longer
- Whoever controls resources needed to proceed
This is management by informal power. It’s worse than formal management because it’s invisible. When a formal manager makes a bad decision, you can escalate. When an informal power holder makes a bad decision, there’s no recourse. They don’t officially have authority, so you can’t challenge it formally.
Performance Issues Create Informal Enforcers
Flat organizations claim peer accountability handles performance issues. If someone isn’t performing, the team addresses it.
In practice, most people avoid confrontation. Addressing peer performance is socially costly. You damage relationships. You create tension. You might be wrong.
What happens instead: the most senior or most assertive people become informal performance enforcers. They’re the ones willing to have difficult conversations. They’re the ones who tell underperformers to improve or leave.
This creates informal management with the worst properties. The enforcers have power to affect careers without formal accountability. They’re not trained in performance management. They don’t have HR oversight. They’re just the people willing to be the bad guy.
External Pressure Requires Representatives
Flat organizations still have boards, investors, major customers, and partners. These external parties want someone they can hold accountable.
Flat organizations designate people to interface externally. These people might not be called managers. But they’re making commitments on behalf of the organization. They’re representing the organization in negotiations. They’re explaining strategy to investors.
External parties treat these people as leaders regardless of internal structure. The representatives accumulate power because they control external relationships. They become managers in everything but title.
Why Informal Management Is Worse
Informal management has all the problems of formal management plus new problems created by pretending management doesn’t exist.
Authority Without Accountability
Formal managers have authority and accountability. When they make bad decisions, it’s visible. Their performance is evaluated. They can be demoted or fired.
Informal managers have authority without accountability. They influence decisions without being responsible for outcomes. When things go wrong, blame diffuses across the flat structure. The informal manager who pushed the decision isn’t accountable because they weren’t officially in charge.
This creates perverse incentives. Informal managers get the benefits of power without the costs of responsibility. They can push pet projects without bearing consequences if the projects fail.
Unclear Decision Rights
In hierarchical organizations, decision rights are clear. You know who decides what. When there’s ambiguity, you can escalate.
In flat organizations, decision rights are unclear. Is this a team decision? A company decision? Who has final say? When do we need consensus versus majority versus individual judgment?
The ambiguity creates decision paralysis for low-confidence decisions and decision collisions for high-confidence decisions. Multiple people make incompatible decisions about the same topic because decision rights are unclear.
Political Skill Becomes Required
In hierarchical organizations, political skill helps but isn’t strictly required. You can succeed by executing well even if you’re not politically savvy.
In flat organizations, political skill is mandatory. You need to build coalitions, manage relationships, and navigate informal power structures just to get basic work done. The person who’s technically excellent but politically naive cannot function.
This filters for political operators over technical contributors. The people who thrive are those who master informal influence. This isn’t necessarily what the organization needs.
No Recourse for Bad Decisions
In hierarchical organizations, you can escalate bad decisions. Your manager makes a bad call, you escalate to their manager. There’s a formal process for disagreement.
In flat organizations, there’s no escalation path. The informal power holder made the decision. There’s no formal authority to appeal to. You can try to build a coalition to override them, but that’s expensive and socially costly.
Bad decisions persist because there’s no mechanism to challenge informal authority without challenging the entire organizational model.
Career Progression Becomes Opaque
In hierarchical organizations, career progression is legible. You know what’s required for promotion. You know who decides. The criteria might be flawed, but they’re visible.
In flat organizations, career progression is opaque. Promotions happen based on informal consensus about who’s valuable. This consensus is shaped by visibility, social capital, and relationships with informal power holders.
People who are excellent at their work but not politically connected get passed over. People who are politically savvy but mediocre at work get promoted. The correlation between performance and advancement weakens.
Higher Cognitive Load
In hierarchical organizations, organizational structure is explicit. You know who reports to whom. You know where to go for decisions. The structure might be suboptimal, but it’s legible.
In flat organizations, you must maintain a mental model of informal power structures. Who actually decides what? Who do you need to convince? Which relationships matter? This cognitive load is constant overhead.
New employees struggle particularly. In hierarchical organizations, you can explain structure with an org chart. In flat organizations, new employees must learn informal structures through experience and tribal knowledge. The onboarding period is longer and more confusing.
Social Capital Determines Influence
In hierarchical organizations, position determines influence. A bad manager has authority even if they’re not respected. This has problems but also benefits. Expertise and judgment can trump popularity.
In flat organizations, social capital determines influence. The people who are well-liked, visible, and socially connected have power. The people who are excellent but introverted or disagreeable don’t.
This creates social dynamics where people optimize for relationships over results. Being liked matters more than being right. Maintaining social capital becomes more important than making correct decisions.
The Coordination Failure
Flat organizations defend themselves by claiming they’re better at coordination. No hierarchy to slow things down. Direct communication. Fast decisions.
The opposite is usually true.
No Clear Ownership
In hierarchical organizations, ownership is clear. Each person or team owns specific domains. When something breaks, you know who to talk to.
In flat organizations, ownership is collective or unclear. Everything is everyone’s responsibility. Which means nothing is anyone’s responsibility.
When multiple people share ownership, coordination requires constant negotiation. No one has authority to make unilateral decisions. Every decision requires building consensus. This is slower than hierarchy, not faster.
Coordination Through Negotiation
In hierarchical organizations, coordination happens through authority. A manager coordinates their team by deciding priorities and allocating resources. This is fast.
In flat organizations, coordination happens through negotiation. People negotiate priorities, resources, and direction. Negotiation is slow and expensive. It requires relationship management, compromise, and repeated discussions.
The negotiation overhead makes flat organizations slower than hierarchies for any coordination-intensive work.
No Prioritization Mechanism
In hierarchical organizations, managers prioritize. You might disagree with priorities, but priorities exist. Resources get allocated. Work proceeds.
In flat organizations, prioritization is collective. Everyone has input. Consensus is the goal.
Consensus prioritization fails when resources are constrained and preferences conflict. The urgent drives out the important. The visible drives out the essential. Projects that excite influential people get resources. Projects that matter but aren’t exciting get starved.
Meeting Proliferation
Flat organizations claim to have fewer meetings than hierarchical ones. The opposite is typically true.
In hierarchical organizations, managers filter information and make decisions. Individual contributors attend meetings relevant to their work.
In flat organizations, everyone needs context for collective decision-making. Everyone attends all-hands, planning meetings, retrospectives, decision meetings, and coordination syncs. The meeting load is distributed rather than concentrated, but the total meeting time is higher.
Documentation Overhead
Flat organizations require extensive documentation. With no management layer to maintain context and distribute information, everything must be written down.
The product direction document must be detailed enough for everyone to interpret consistently. The technical architecture must be documented so anyone can make decisions. The prioritization framework must be explicit so collective prioritization is possible.
This documentation overhead is substantial. Hierarchical organizations can run with implicit knowledge held by managers. Flat organizations must make everything explicit. The documentation cost exceeds the management cost it’s meant to replace.
The Performance Management Failure
Flat organizations struggle with performance management more than any other function.
Diffused Responsibility
When someone isn’t performing, who addresses it? In hierarchical organizations, it’s the manager’s job. Clear responsibility, clear accountability.
In flat organizations, it’s “the team’s” responsibility. But teams are collections of individuals. Individuals face social costs for confronting peers. The responsibility diffuses. Nobody acts.
Underperformers persist longer in flat organizations than in hierarchical ones. The cost is borne by high performers who compensate for underperformers while the organization pretends the problem doesn’t exist.
Lack of Formal Process
Hierarchical organizations have formal performance management processes. Reviews, performance improvement plans, termination procedures. These provide due process and legal protection.
Flat organizations avoid formal processes. They’re hierarchical artifacts. Performance issues are supposed to be handled through peer feedback and organic improvement.
When someone needs to be terminated, flat organizations have no formal process. The decision happens informally. The person being terminated has no recourse. The decision-makers have no accountability. The lack of process creates both unfairness and legal risk.
Feedback Quality Deteriorates
In hierarchical organizations, managers are trained in giving feedback and held accountable for developing their reports. The feedback quality might still be poor, but there’s at least structure and expectation.
In flat organizations, feedback is peer-to-peer. Peers aren’t trained in giving feedback. They’re not accountable for others’ development. The feedback is often vague, inconsistent, or absent.
The people who need feedback most get it least. High performers get frequent feedback because people want to maintain relationships with them. Underperformers get avoided because confrontation is uncomfortable. The feedback pattern is exactly inverted from what would be useful.
Career Development Becomes Unclear
In hierarchical organizations, managers guide career development. They might do it poorly, but someone is explicitly responsible.
In flat organizations, career development is self-directed. People are responsible for their own growth. This sounds empowering. In practice, it means people without clear career models or political connections stagnate.
The people who succeed are those who self-advocate effectively, build relationships with informal power holders, and navigate the invisible career structure. The people who focus on craft excellence over political navigation get stuck.
The Scaling Failure
Flat organizations claim to scale better than hierarchies. The opposite is true.
Information Distribution Breaks
In a 10-person flat organization, everyone can participate in every decision. Information distribution is natural.
In a 50-person flat organization, information distribution requires deliberate effort. Not everyone can attend every meeting. Not everyone can read every document. Context fractures.
In a 100-person flat organization, information distribution is impossible. The organization develops sub-groups with different context. These sub-groups function as teams with informal leaders. The flat structure has become a hierarchy without admitting it.
Decision-Making Slows
Small flat organizations make decisions quickly through discussion and quick consensus. Ten people can reach agreement in a meeting.
Large flat organizations make decisions slowly. Fifty people cannot reach consensus in a meeting. Decisions require extensive pre-discussion, document circulation, asynchronous feedback, and eventual decision by informal authority.
The decision latency in large flat organizations exceeds hierarchical organizations because flat organizations pretend authority doesn’t exist while requiring it for decisions.
Coordination Cost Explodes
Coordination cost scales with the square of participants. In flat organizations, everyone coordinates with everyone. At small scale, this is manageable. At large scale, it’s catastrophic.
A 10-person flat organization has 45 coordination paths. Manageable through informal communication.
A 50-person flat organization has 1,225 coordination paths. Impossible through informal communication. The organization develops coordination mechanisms that are management in all but name.
A 100-person flat organization develops teams, team leads, coordination meetings, and decision forums. It’s a hierarchy with extra steps.
The Dunbar Number
Humans can maintain meaningful relationships with roughly 150 people. Beyond this, groups require formal structure.
Flat organizations that grow past 150 people either:
- Split into smaller units (creating structure)
- Develop informal hierarchy (management without accountability)
- Collapse into dysfunction (coordination failure)
The Dunbar number isn’t a suggestion. It’s a cognitive limitation. Organizations that grow beyond it without formal structure develop informal structure. The informal structure has all the problems of hierarchy plus all the problems of pretending hierarchy doesn’t exist.
The Examples
Looking at flat organizations in practice shows the pattern.
Valve
Valve maintains a flat structure. No formal hierarchy, self-organizing teams, no managers.
Reality is more complex. The company has informal power structures. Long-tenured employees have more influence than new ones. Some people are “more equal than others.” Product decisions are made by people with informal authority.
Former employees describe political environments where social capital determines project success more than project merit. The most influential people get resources for their projects. Less influential people struggle to get attention.
Valve is successful despite this, not because of it. Success is driven by:
- Small size (under 400 employees)
- High talent density (extremely selective hiring)
- Resource abundance (Steam revenue funds everything)
- Technical domain where individual contribution is legible
Most organizations don’t have these conditions. Applying Valve’s model elsewhere typically fails.
Holacracy Implementations
Holacracy is a formal system for implementing flat organizations. It defines roles, circles, and governance processes to eliminate traditional hierarchy.
Organizations that implement Holacracy typically find:
- Coordination overhead increases dramatically
- Meetings multiply (governance meetings, tactical meetings, role definition meetings)
- Decision-making slows
- Most employees find it confusing and frustrating
- Informal power structures emerge within the Holacracy structure
Zappos famously implemented Holacracy. Result: significant employee attrition, confusion, and eventual acknowledgment that the system adds overhead without eliminating hierarchy.
Medium implemented Holacracy. Result: abandoned after finding it created more problems than it solved.
The pattern is consistent. Formal systems for flat organizations don’t eliminate management functions. They make them more complicated.
Flat Startups
Many startups begin flat. Everyone is equal, no hierarchy, collective decisions.
These startups typically evolve in predictable patterns:
Stage 1 (0-10 people): True flatness is possible. Everyone has context. Coordination is informal. Decisions are collective.
Stage 2 (10-30 people): Informal hierarchy emerges. Founders make final calls. Certain people coordinate specific domains. The organization is flat on paper but hierarchical in practice.
Stage 3 (30-50 people): Informal hierarchy becomes untenable. Coordination failures multiply. The organization either formalizes hierarchy or experiences serious dysfunction.
Stage 4 (50+ people): Organizations that maintain “flatness” have developed extensive informal management with coordination overhead exceeding traditional hierarchy.
The startups that succeed typically formalize hierarchy by Stage 3. The ones that maintain flatness either stay small by choice or struggle with coordination as they grow.
Open Source Projects
Open source projects are often cited as successful flat organizations. This is partially true but misleading.
Successful open source projects have clear maintainers. Maintainers have formal authority over code acceptance. They make final decisions. They coordinate releases. They resolve conflicts.
This is hierarchical. It’s a benevolent dictatorship or oligarchy, not flatness.
Projects that try true flatness through fully democratic governance typically fail. Decision-making becomes impossible. Forks multiply. The project fragments or stagnates.
The successful flat components of open source are:
- Contribution is voluntary (different dynamic than employment)
- Contributions are discrete and mergeable (reduces coordination needs)
- Quality is verifiable through code review (performance management is technical)
These conditions don’t apply to most organizational work.
When Flat Organizations Work
Flat organizations work under specific conditions:
Very small size. Under 10-15 people, flatness is natural. Everyone has context. Coordination is informal. Collective decision-making is fast.
High talent density. When everyone is exceptionally competent and self-directing, management overhead is minimal. The organization needs coordination more than management.
Low coordination requirements. When work is independent and parallelizable, coordination needs are minimal. Individuals or small teams can operate autonomously.
Simple domain. When the problem space is simple enough that everyone can understand it completely, collective decision-making is feasible.
Resource abundance. When resources aren’t constrained, prioritization becomes less critical. Multiple projects can proceed simultaneously without zero-sum trade-offs.
Voluntary participation. When people can leave freely and often do, social dynamics are different. Bad cultural fits self-select out. Underperformers leave rather than requiring formal management.
Most organizations don’t have these conditions. Most work requires coordination. Most organizations grow past 15 people. Most domains are complex. Resources are typically constrained. Employment isn’t fully voluntary.
Applying flat organizational models to typical organizational contexts recreates management informally with worse properties than formal management.
The Cost of Pretending
The fundamental problem with flat organizations isn’t that they lack management. It’s that they pretend they lack management while recreating it informally.
This pretense creates costs:
Informal managers have power without accountability. They can make bad decisions without consequences. The organization can’t address bad informal management because it doesn’t formally exist.
People waste energy navigating invisible structures. Understanding informal power dynamics requires time and political skill. This energy could go to productive work.
Decisions are slow and unclear. Without formal decision rights, every decision requires negotiation. The organization is slower than hierarchies despite claiming speed as a benefit.
Performance issues persist. Without formal performance management, underperformers remain longer. High performers compensate or leave.
Career progression becomes political. Advancement depends on relationships with informal power holders rather than objective performance.
New employees struggle. Learning informal structures is harder than learning formal ones. Onboarding is longer and more frustrating.
Scaling becomes impossible. Past 50 people, flat organizations develop such extensive informal hierarchy that coordination overhead exceeds traditional management.
The alternative isn’t necessarily traditional hierarchy. But it requires acknowledging that certain functions decision-making, coordination, resource allocation, performance management need formal structures. Pretending these functions happen organically just makes them invisible and unaccountable.
The Honest Alternative
Organizations wanting to reduce hierarchy’s problems have better options than pretending hierarchy doesn’t exist.
Minimize necessary hierarchy. Use formal management only where coordination value exceeds coordination cost. Many organizations have excess hierarchy.
Make authority and responsibility explicit. Clear decision rights, clear accountability. When someone has power to make decisions, make that power visible and accountable.
Increase span of control. Most managers can handle more than 7 reports if reports are competent and self-directing. Wider spans reduce layers.
Separate coordination from evaluation. Managers spend time coordinating work and evaluating performance. These can be different roles. Technical leads coordinate. HR manages performance. Both are formal and accountable.
Create clear escalation paths. When decisions are contentious or performance issues persist, formal escalation paths ensure resolution. Informal resolution creates invisible power.
Document informal agreements. When certain people have subject matter authority, make it explicit. “Alex has final say on API design” is better than pretending decisions are collective while everyone defers to Alex anyway.
Acknowledge trade-offs. Hierarchy has costs: slower decisions, information loss, concentration of power. Flatness has costs: coordination overhead, informal power, political requirements. Choose based on which costs your organization can afford, not which philosophy sounds better.
Most importantly: stop pretending power doesn’t exist. Power exists in every human organization. The question is whether power is visible and accountable or invisible and unaccountable. Formal hierarchy makes power visible. Flat organizations make it invisible. Invisible power is worse.
The Structural Reality
Flat organizations don’t eliminate management. They make it informal. Informal management has authority without accountability, creates political requirements, slows decision-making, and makes career progression opaque.
This isn’t a failure of implementation. It’s structural. The functions management provides decision closure, coordination, resource allocation, conflict resolution, performance management don’t disappear when formal management is eliminated. They happen informally instead.
Informal management is worse than formal management for most organizational contexts. It has all the problems of hierarchy (concentrated power, coordination overhead, information asymmetry) plus new problems (lack of accountability, unclear decision rights, political skill requirements, opaque career progression).
Flat organizations work for very small groups with high talent density, low coordination requirements, and simple domains. Most organizations don’t fit this description. Applying flat models to organizations that need coordination recreates hierarchy in invisible, unaccountable forms.
The solution isn’t necessarily traditional hierarchy. But it requires acknowledging that certain organizational functions require formal structure. Making power visible and accountable is better than pretending power doesn’t exist while experiencing its effects.
Organizations considering flat structures should ask: do we have the specific conditions where flatness works? If not, minimize hierarchy rather than pretending it doesn’t exist. Fewer layers, wider spans, clear authority, explicit accountability. This is better than the informal hierarchy that flat organizations inevitably create.