The Flattened Firm - Not as Advertised*

For decades, management consultants and the popular business press have urged large firms to flatten their hierarchies. Flattening (or delayering, as it is also known) typically refers to the elimination of layers in a firm’s organizational hierarchy, and the broadening of managers’ spans of control. The alleged benefits of flattening flow primarily from pushing decisions downward to enhance customer and market responsiveness and to improve accountability and morale. Has flattening delivered on its promise to push decisions downward? In this article, I present evidence suggesting that while firms have delayered, flattened firms can exhibit more control and decision-making at the top. Managers take note. Flattening can lead to exactly the opposite effects from what it promises to do. *Acknowledgements: This paper draws from many conversations I have had with my co-authors over the years, in particular, Maria Guadalupe and Raghuram Rajan. I thank Bharat Anand, Tarun Khanna, Hongyi Li, Felix Oberholzer, Jan Rivkin and three anonymous referees for very valuable comments on this draft. More broadly, I appreciate the conversations and comments on the flattening phenomenon from my colleagues at Harvard Business School.