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Do “Flat” Business Systems Eliminate Hierarchies?

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For the last year the Think Tank at Transformation Agency has been diving into the intricacies of creating our own “flat” business system.

Our system is flat in the sense that control is decentralized and the system allows all participating members to interact as equals.

Pay is distributed to each member of the group meritocratically, based on contribution.

What does that really mean, though?

Our system is not intended to avoid the creation of hierarchies, but it’s intended to foster the growth of informal hierarchies within the small groups.

Informal hierarchies naturally adapt to their circumstances via the various personalities in the group.

In an economy that’s increasingly changing, one of the markers of a business that can stand the test of time is that it continues to adapt its informal hierarchies to its circumstances, while adding value that is specific to what’s needed at the present. Businesses that hold onto hierarchies and value of the past will inevitably fail.

The more diverse the skill set within that group of people, the more adaptable the organizations can potentially be.

Adaptability and responsiveness to the market create mobility within the market.

As automation is on the rise, a whole job market will arise for jobs that are entrepreneurial in nature and will ultimately amount to small groups of people finding high-leverage, specific tasks and figuring out how to accomplish those complex tasks in an elegantly ordered way.

Relentless innovation and adaptation will be essential for the survival of the business organism. So while rigid hierarchies are unnecessary and often harmful, informal and adaptable hierarchies are essential.

If those groups of people can stay together, and keep adapting and letting different forms of hierarchy take shape as needed while everyone’s being held accountable and the resources are getting distributed in a meritocratic fashion based on participation throughout, then you’ve got a recipe for something that can survive in an increasingly changing economic environment.

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