André Spicer and Elizabeth Holmes infer that Theranos failed due to its flat structure. But weren’t there some employees, such as George Shultz’s grandson, whose efforts to identify the problems that led to failure and fraud, were suppressed by Elizabeth Holmes? If so, then can’t you say that the failure was due to Holmes’s power at the top of the firm? Meaning due to a kind of hierarchy rather than due to flatness? (I remain unclear and conflicted on whether and when flatness or hierarchy is better.)
(p. B2) . . . do flat structures work? André Spicer, a professor of organizational behavior at the Bayes Business School in London, said that, while the “cultural zeitgeist when I was growing up was that hierarchies are bad,” there’s been an increasing recognition of both the need for them and the fact that they often reappear in businesses that, at least theoretically, reject them.
. . .
Mr. Spicer is particularly critical of start-ups that have attempted, or claimed to attempt, flat structures, suggesting that failures — and at least one major scandal — have emerged from these workplaces. He pointed to Elizabeth Holmes and Theranos, her health care technology start-up. In a 2015 interview, Ms. Holmes said that Theranos was “a very flat organization and if I have learned anything, we are only as good as the worst people on our team.”
“The claim that companies like Theranos had a flat structure meant the company fitted into a well-recognized type of agile tech firms,” Mr. Spicer said. In addition to attracting investors and employees, the myth “meant that these companies don’t have to do the difficult and tedious process of putting into place all the systems and controls you would normally find.”
He added that he believed those systems “would have likely stopped much of the wrongdoing.” Ms. Holmes and Ramesh Balwani, the former chief operating officer of Theranos, were each recently sentenced to prison time for defrauding investors and patients.
The notion that start-ups in particular are ill suited to a flat structure was supported in a 2021 study by Professor Lee of Wharton. A flat structure “can result in haphazard execution and commercial failure by overwhelming managers with the burden of direction and causing subordinates to drift into power struggles and aimless idea explorations,” he wrote.
For the full story, see:
(Note: ellipses added.)
(Note: the online version of the story has the same date as the print version, and has the title “In Business, ‘Flat’ Structures Rarely Work. Is There a Solution?” Where there are minor differences in wording between the versions, the passages quoted above follow the online version.)
The academic paper by Lee mentioned in the passage quoted above is: