I divide my time as dean of the Wharton School between leading the business school on campus and getting to know our amazing alums in business. I am increasingly struck how similar the two worlds are, including what works in management and leadership.
From hedge funds to tech firms, flat organizational structures are everywhere these days. So, too, with the Wharton org chart: 11 vice deans, 10 department chairs, 19 center and program directors, and the CIO and CMO, all report directly into the dean’s office.
Forty-plus direct reports makes for long days for Deputy Dean Mike Gibbons and me. But working with such a flat org chart shows us both the benefits and the risks of decentralization and delegation.
There are four great benefits to being a flat organization:
1. Decentralization and delegation stimulate innovation.
No matter how smart leaders think they are, people working closer to the ground invariably will have a better handle on what to experiment with.
2. Decentralization and delegation increase the intelligence of an organization by propagating more ideas.
People in the corner offices still have to make final decisions. But they will make better decisions the more ideas are fed up the org chart to them and the more able they are to judge ideas by their quality, not where they come from.
3. Decentralization and delegation increases buy-in when it comes to making change happen.
Even people who disagree with a decision are more likely to support its implementation if they feel their voices were heard in the process.
4. Decentralization and delegation help leaders identify and develop talent.
How else can a leader figure out what people are capable of if they aren’t given the chance to show the boss? How else can someone grow if they aren’t given more responsibility when they have mastered their current job description?
There is no denying decentralization and delegation come with significant downside risk. In a very flat organization, the whole may end up as less than the sum of the parts because the left hand doesn’t know what the right is doing.
But good leaders can overcome this by fostering organization-wide communication and a spirit of coordination.
Effective delegation requires leaders to strike the right balance between enough delegation to creating opportunities for growth and success, but not so much as to make failure catastrophic, either for the person or for the organization.
Being a flat organization brings real challenges, creating temptations for leaders and people who work for them to cling to hierarchical org charts, chain of command and well-defined roles. But a year at Wharton has shown me that the benefits outweigh the risks.
Editor’s note: The original version of this article appeared on LinkedIn on July 27, 2015.