Mr. Smith goes to flatland: institutions, public policy and the bossless company

Abstract

Purpose

This study aims to explore a range of institutional, environmental and policy conditions that influence the creation of “bossless” or “flat” companies, i.e. firms with little or no formal hierarchy.

Design/methodology/approach

The author builds on the theory and evidence presented by Foss and Klein (2022) in their study of the costs and benefits of organizing without hierarchy. The author also draws on a variety of related theoretical insights and empirical evidence. The paper is exploratory and anecdotal though and is intended to motivate further research rather than provide a definitive account of bossless organizing.

Findings

The paper develops nine propositions. It suggests that high levels of economic freedom create maximum scope for entrepreneurs to experiment with different organizational forms (1). Likewise, a lack of economic freedom increases the scope for the government to experiment (2). Markets characterized by technological innovation and uncertainty are likely to discourage bossless organizing (3 and 4), while stagnating industries with major capital requirements are likely to encourage it (5). Labor market interventions that increase the cost of employment contracts sometimes encourage firms to flatten (6), but more generally, these interventions encourage expanding management layers (7). In environments with strong intellectual property (IP) laws, companies with more modular and knowledge-based work are more likely to flatten (8). The creation of low-hierarchy firms such as cooperatives is encouraged by public subsidies, access to cheap credit and preferential tax treatment (9).

Originality/value

Studies of bossless or flat firms focus almost exclusively on describing their internal organization and evaluating their performance; little attention is paid to the conditions that encourage or discourage the emergence of these firms. This paper focuses on the latter, with a view to encouraging more scholarly interest in this field.