003 CFO Mindset, Flat Organizational Structure

Flat Organizational Structures for SME

Large companies usually have multilayered management hierarchy with executive (a.k.a. upper), senior middle, junior middle, and supervisory echelons. Each rank is further divided by functions, groups, tasks, and so on. There are hundreds of people with the words vice president, director, and manager in their titles. These are Egyptian pyramids of organizational design.

Smaller companies are not able to take advantage of economies of scale and absorb large overheads. As the result, they are characterized by much flatter organizational structures with fewer managerial levels. I have seen companies with as many as 80 employees and over $200 million in revenue operating without middle and supervisory managers. This brings executive management much closer to the frontline staff.

A fiscal group composition largely depends on the company’s size, the nature of its business, and the number of functions required to carry out its operations. It can range anywhere from one person holding a controller title and covering all receivable, payable, and general ledger tasks by herself to fully developed accounting and finance departments with middle management and staff in international offices. Ideally, an effective structural arrangement should leave no blind spots in functional coverage, and assure nondiscriminatory workload for all employees without unproductive or idle time, while fitting within your budgetary constraints.