Flat vs layered: which is the best management structure?

Welcome to a brand new year everyone! As 2014 rolls around there are few signs of big business slowing down, but one story from December – about Procter & Gamble’s structural reshuffle overseas under returned CEO A.G. Lafley – caught my eye. It got me thinking about the ways in which big firms structure themselves, in terms of their employees as well as their separate business decisions. In particular, it is interesting to put P&G’s very layered management operation up against enterprises like Google and Apple, which are remarkably flat by comparison. Why has this become the case? And what are the benefits of each side of the coin?

This excellent article on Google in the Harvard Business Review states that as a company with over 37,000 employees, Google has just 100 vice presidents – a startlingly low number.

A large part of this arrangement comes from Google’s background as an anti-corporate start-up with a mentality that promotes entrepreneurialism, but the company has had to go through a process of change as it becomes part of the global business landscape. The company’s start-up ethos remains at its core however, especially in the powers given to its key executives. As HBR says, “It is not uncommon to find engineering managers with 30 direct reports.”

By contrast, P&G is renowned for its commitment to a multilayered organisation that lends itself to people development and leadership succession. With such a diverse range of businesses and territories, this is essential to ensure that units all over the world have top-level executives overseeing operations. In this interview with Hay Group, chief HR officer Mark Biegger says: “Leadership development is not a program; it’s not an event. It’s an ongoing process over time”, helping to explain why P&G employees frequently serve for longer-than-average periods. All this results in extremely thorough performance reporting and evaluation, something that newer firms like Apple and Google have arrived at much more recently.

Like Google, Apple is noted for its uncomplicated organisational arrangement. As CNN’s Adam Lashinsky reported in 2011, “The org chart is deceptively straightforward […] there aren’t any committees at Apple, the concept of general management is frowned upon.” This represents another similarity with Google; executives at all levels are free to question top-level policy and strategy decisions. Utilising the calibre of people at their disposal and encouraging them to dispense with traditional business guidelines is part of the magic that has propelled Apple and Google to the top.

Of course, neither the flat structure at Apple and Google or the rigorous layout of P&G’s management is perfect. What I wanted to do was draw attention to how these companies, who succeed at very different things, have each created the structure that fits their aims and goals best. Each arrangement is a product of that company’s industry, its history and – especially – its employees. Please let me know what you think at moira@thembsgroup.co.uk, and have a brilliant first weekend of 2014!