Mumbai: When the going gets tough, companies go flatter and leaner. Amid the economic dull and gloom, organizations are going in for a flatter hierarchical structure by restructuring their operational model and lower hiring. For some companies, the objective is to save costs as having more layers means hiring more employees, while new-age businesses (ecommerce), and even those in traditional businesses (manufacturing), prefer a flat organizational structure to be agile in afast-changing environment.
While new-age businesses such as online retail, e-commerce, IT start-ups and venture capital and private equity firms already have a flat hierarchy, some like Cipla, Vedanta, Dr Reddy's, Apollo Tyres and Future Group have adopted a flatter structure over a period of time, to be perhaps more competitive, HR experts say.
In times of a slowdown when the profitability and margins are under pressure, companies are in a belt-tightening mode. "They take a series of steps like slashing discretionary spending, cutting back on learning and development skills (of employees), and lastly, freeze increments and hiring," says E Balaji, MD and CEO, Randstad India, adding "trimming the workforce is the last resort, wherein they may let go of their contingency or temporary workforce".
An analysis of horizontal jobs is done and those which are not adding value to the organization may be axed, says K Sudarshan, managing partner-India and regional VPAsia, EMA Partners International. Decision-making is key during these times, and a flatter organization such as the model in companies like Snapdeal.com, Flipkart and HeroITES always helps.
Agrees Kunal Bahl, cofounder of e-commerce retail company Snapdeal.com, which boasts of only two layers between the call centre agent and top boss: "Speed is one of the key determinants of our success. In order to be agile, attached to ground reality and tuned in to our customers, we decided to have minimal layers."
Although Marico is a conventional FMCG company, it is a flat organization with fewer decision-making layers. "A flat organization structure has been an integral part of our culture. We believe it promotes faster decisions and enables us to support our value of bias for action," says Milind Sarwate, group CFO and chief HR officer, Marico.
Traditionally, even consulting companies, including the Big Four—Deloitte, KPMG, E&Y and PwC—that follow a partnership model, are also relatively flat organizations.
Typically in good times, companies breed inefficiencies in the organization unconsciously, says Sudarshan: "It's a kind of a cycle... when the mood is robust, companies create many staff roles and hire more than what is required. But in a slowdown, these staff roles are the first to be weeded out."
A case in point is Future Group, which has been restructuring operations and reportedly trimmed workforce over the last few months.
Faced with a sluggish stock market and slow growth, certain brokerage houses, insurance companies and banks like Barclays, HSBC and Citigroup are reportedly scaling down operations.
"We are witnessing growth of many new-age businesses where the job itself does not require a typical hierarchical structure," says Sunil Goel, director, GlobalHunt, an executive search firm, adding "employees are increasingly being given more autonomy as empowering workers at the bottom of the organization chart to solve customers' issues without pushing all day-to-day decisions up to a manager saves companies money".  |
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