Employee Performance Reviews in a Flat Organizational Structure

Creating a performance review process is straightforward in most organizations. Managers are responsible for completing evaluations and meeting with direct reports to share results. There isn’t any friction as long as performance management best practices are followed. After all, employees expect feedback from their manager.

At least, that is how it works in a traditional top-down organizational structure. There are multiple management levels so most employees report to someone one level higher in the hierarchy. 

But what is the best way to conduct employee performance reviews in a flat or horizontal organizational structure? 

What is a flat organizational structure?

Flat organizations have little-to-no management levels. All employees are on the same level of the organizational chart and usually report directly to the CEO. There are no middle managers who report to senior leadership while overseeing junior employees.

The flat organizational structure is most common in young startups and small businesses. Some founders do make a conscious decision to have a flat organization but it usually occurs organically when a small team of specialists come together to pursue a business idea.

Advantages of a flat organizational structure

While flat organizations are rare, they do offer a handful of advantages over the common hierarchical structure:

• Employees have a sense of ownership – Team members drive organizational success. They’re responsible for contributing to high-level goals rather than doing menial tasks assigned by a manager. 
• Employees are engaged – Employee engagement is the intersection of happiness and productivity. And employees check both boxes when they’re able to produce meaningful work.
• The organization attracts top talent – Ambitious professionals jump at the opportunity to have the freedom to work with little restrictions. Organizations with flat structures tend to attract and retain top performers. 
• Employees can pursue their good ideas – The term “middle management” has a negative connotation because it’s often where projects are delayed or changed. Employees in flat organizations can act on their good ideas without approval from a manager. 

Disadvantages of a flat organizational structure

The reason flat organizations are rare is because they come with multiple disadvantages that hierarchical structures just don’t have:

• There is no one to hold employees accountable – Even if employees work hard, they need to produce work that drives progress for the organization. It’s often managers who define strategy and ensure direct reports focus on relevant tasks. 
• It’s not sustainable as the organization grows – Middle managers become necessary as the workforce expands. Junior employees need direction from someone who understands the organization’s goals and processes. 
• It’s susceptible to conflict – There is a risk of conflict between team members when there aren’t defined reporting lines. One employee might believe they are in charge of work that is actually owned by someone else. 
• It puts a lot of pressure on the CEO – The person at the top of the org chart has plenty to do besides oversee every employee. Delegating people management to other leaders becomes inevitable as the staff grows. 

Tips for employee performance reviews in a flat organization

Perhaps the biggest challenge in a flat organization is creating a process to ensure every employee is meeting expectations. The person who sits at the top of the org chart puts a lot of trust in their employees but should still take time to evaluate performance. Let’s review how performance reviews can be conducted in organizations where employees don’t have a traditional manager. 

HR and the CEO should lead the process

The performance review process should always be overseen by human resources and executed by individual managers. In the case of a flat organizational structure, the CEO will need to assume the manager role for every employee review.

Depending on the number of employees, that could be a lot of work for an already-busy CEO. In that situation, human resources should create a basic appraisal form to lessen the burden and ensure every employee gets a fair evaluation. There is no need to overdo it, especially since employees are accustomed to working with little oversight. 

Use goals to inform employee performance reviews

Employees should always have goals that drive their performance. Defining individual objectives is even more important when team members don’t have a manager assigning projects and sharing frequent feedback.

Goals also remove the guesswork when completing an employee’s performance review. The CEO can consider if the team member has met their objectives or is making significant progress toward them. If an employee isn’t on pace to hit a target, the CEO should consider why. Is it a performance issue or have shifting priorities and other external factors affected where they devote their time and effort?

Take advantage of 360-degree feedback

You can take a lot off the CEO’s plate and ensure everyone gets an accurate evaluation by using 360-degree reviews. Typically with the 360-degree format, employees are reviewed by their manager, peers, direct reports, and colleagues from other departments. It’s simpler in a flat organization. All the employees who sit on the same level on the org chart evaluate each other.

360-degree feedback is an excellent way to supplement the primary performance reviews completed by the CEO. It brings in the perspectives of the people employees work alongside so evaluations are accurate and thorough. Employees in flat organizations often collaborate on a daily basis so it only makes sense to ask their peers if they’re a solid team player. 

Employee performance reviews are a must in flat organizations

Flat organizations are a unique alternative to the typically org chart consisting of multiple management levels. While employees are empowered to manage themselves, it’s still important to step back and evaluate performance from time-to-time. Ensure every employee has clearly-defined goals and is giving a consistent effort to deliver outstanding results.