The document discusses the challenges of decision-making in business due to hierarchical structures, arguing that flat organizations lead to better execution and responsiveness. It asserts that decision-making is often diluted by multiple managerial layers which distort communication and impede efficiency. The proposed solution is to reduce these hierarchical levels, thereby allowing decision-makers to communicate directly with employees, enhancing motivation and operational effectiveness.

1. OPTIMISING
DECISION-­‐MAKING:
Why
Flat
Hierarchies
are
be?er
©
North
Delta
College
2015
Mathema'cs
applied
to
Business
Theory
1

2. INTRODUCTION
Business
Strategy
is
nothing
without
proper
ExecuOon.
The
best
insight
on
the
Corporate
boardroom
table
could
lead
to
a
minimal
response
on
the
day
to
day
field
if
not
properly
executed.
ExecuOon
means
your
idea
also
has
hands.
But
whereas
the
hands
in
the
body
are
directly
connected
to
the
brain
through
nerves
we
will
see
in
this
presentaOon
that
businesses
are
far
more
lethargic.
There
is
an
inner
inerOa
in
any
business
regarding
Decision-­‐Making
due
to
improper
organisaOonal
raOonales.
We
will
hit
here
at
the
root
cause
of
this
phenomenon
and
show
why
fla?er
organisaOons
have
be?er
response.
Mathema'cs
applied
to
Business
Theory
2

3. SUMMARY
Mathema'cs
applied
to
Business
Theory
3
PART
1:
WHAT
IS
DECISION-­‐MAKING?
A)
What
is
Decision-­‐Making?
B)
Who
makes
Decision-­‐Making
C)
Why
is
Decision-­‐Making
tampered?
PART
3:
FLAT
HIERARCHIES
PART
2:
INITIAL
SIGNAL,
TRANSMISSION
LINES
&
NOISE
A)
IniOal
Signal
&
Transmission
lines
B)
Background
Noise
C)
CommunicaOon
Breakdown
PART
4:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
SMEs
A)
An
100
hundred
employee
SME
B)
Ideal
organisaOonal
diagram
C)
Cu`ng
down
on
Layers
PART
5:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
BIG
ORGANISATIONS
A)
A
major
engineering
company
with
150
sites
B)
An
organisaOonal
proposal
C)
Why
the
company
is
working
be?er
FINAL
STATEMENT

4. PART
1:
WHAT
IS
DECISION-­‐MAKING?
Decision-­‐Making
roles
inside
a
company
are
those
roles
which
determine
where
the
resources
of
the
organisaOon
should
be
used
and
which
opportuniOes
in
the
external
environment
should
be
seized.
Decision-­‐Making
is
the
inner
self
of
the
company
where
the
real
choices
are
made
and
the
future
of
the
whole
organisaOon
constantly
re-­‐engineered.
Mathema'cs
applied
to
Business
Theory
4
What
is
Decision-­‐Making?
Usage
of
resources
In
which
direcOons
to
grow
Decision-­‐
Making
Picture
1:
What
is
Decision-­‐Making

5. Who
makes
Decision-­‐Making?
Decision-­‐Making
is
the
prerogaOve
of
the
leadership,
sole,
inside
an
organisaOon.
A
regular
manager
doesn’t
have
it.
Managing
staff
doesn’t
mean
making
decisions.
This
simple
differenOator
is
emblemaOc.
It
indicates
who
the
leader
is
and
who
the
manager
is.
Mathema'cs
applied
to
Business
Theory
5
PART
1:
WHAT
IS
DECISION-­‐MAKING?
Leaders
Managers
PrerogaOve:
Making
Decisions
PrerogaOve:
Organising
Resources
to
execute
Decisions
Picture
2:
Management
&
Leadership

6.
Mathema'cs
applied
to
Business
Theory
6
Why
is
Decision-­‐Making
tampered?
PART
1:
WHAT
IS
DECISION-­‐MAKING?
When
the
leader
takes
a
decision,
although
the
informaOon
will
first
be
communicated
to
his
line
of
immediate
managers,
the
target
audience
remains
at
the
workers
and
clerks
level.
However,
the
worker
or
clerk
will
receive
that
informaOon,
through
his
own
manager.
The
key
points
we
want
to
reach
in
this
presentaOon
is:
-­‐ First
to
understand
that
this
informaOon
whence
received
by
the
worker
or
clerk
is
seriously
tampered
without
the
worker
or
leader
having
any
knowledge
of
the
adulteraOon.
-­‐ And
secondly
to
solve
this
problem
by
showing
that
fla?er
organisaOons
by
cu`ng
down
on
unnecessary
fat
can
re-­‐energise
a
sleeping
business
structure.

7. Now
we
model
the
whole
Decision-­‐Making/ExecuOon
process
by
using
Applied
MathemaOcs,
CommunicaOon
Theory
and
Signaling
Theory.
Decision-­‐Making
can
make
use
of
signaling
theory.
Taking
a
decision
is
like
sending
an
iniOal
signal
inside
the
company.
The
signal
at
the
origin
is
obviously
unadulterated.
To
reach
its
target
desOnaOon,
this
signal
has
to
travel
through
transmission
lines
linking
back
the
decision-­‐maker
to
the
receiver.
Mathema'cs
applied
to
Business
Theory
7
IniOal
Signal
&
Transmission
Lines
PART
2:
INITIAL
SIGNAL,
TRANSMISSION
LINES
&
NOISE
Source
Signal
DesOnaOon
Source
Node
1
Node
2
Node
3
Picture
4:
Transmission
Line
Picture
3:
GeneraOng
a
Signal

8. What
is
Background
Noise?
In
any
case
while
travelling,
this
signal
will
experience
background
noise.
Background
noises
are
echo
chambers
encountered
on
the
transmission
line
which
distort
the
signal.
This
distorOon
while
leaving
the
signal
intact,
tampers
its
iniOal
content
into
something
far
less
meaningful
or
relevant.
The
key
fact
is
that
the
real
receiver
of
the
signal
always
catches
an
adulterated
informaOon
someOmes
very
far
from
the
real
content
of
the
original
signal.
Mathema'cs
applied
to
Business
Theory
8
PART
2:
INITIAL
SIGNAL,
TRANSMISSION
LINES
&
NOISE
Picture
5:
Signal
Distorsion
IniOal
Signal
Distorted
Signal
Echo
Chamber

9. Origin
of
the
noise
The
noise
is
always
due
to
redundant
nodes
inside
the
organisaOon.
As
the
signal
travels
from
top
to
bo?om,
these
nodes
are
the
intermediate
hierarchical
levels.
i.e.
layers
of
middle
and
senior
managers.
Mathema'cs
applied
to
Business
Theory
9
PART
2:
INITIAL
SIGNAL,
TRANSMISSION
LINES
&
NOISE
Source
=
Leaders
DesOnaOon
=
Clerks/Workers
NOISE
Intermediary
Managerial
Levels
Picture
6:
Origin
of
Noise

10. CommunicaOon
Breakdown
The
danger
of
miscommunicaOon
can
become
so
real
that
in
situaOon
of
crisis
the
whole
system
collapses
and
we
reach
a
breakdown.
Strikes,
Change
Management,
BPR…
Oien
the
worker
blames
the
culture
of
the
corporate,
while
the
corporate
is
labeled
as
inefficient
by
Financial
media.
The
managers,
in
between,
have
to
please
both.
The
whole
concept
of
a
Flat
Hierarchy
is
to
prevent
such
situaOons
by
bringing
back
the
decision-­‐making
node
closer
to
the
ground
level.
Mathema'cs
applied
to
Business
Theory
10
PART
2:
INITIAL
SIGNAL,
TRANSMISSION
LINES
&
NOISE

11. Flat
Hierarchies
Flat
hierarchies
means
the
decision
making
point
is
closer
to
the
final
receiver
of
the
signal.
Let
us
give
an
example:
In
a
Library
weekly
reading
class
of
10
people
each
member
takes
turns
to
organise
the
weekly
readings
of
the
other
members.
This
is
a
Flat
Hierarchy
(only
2
levels)
,
dynamic
due
to
the
rotaOve
engine
in
place
and
fair
as
everyone
gets
a
taste
of
leadership.
Mathema'cs
applied
to
Business
Theory
11
PART
3:
FLAT
HIERARCHIES
Picture
7:
Flat
Hierarchy
?
1
2
3
4
5
6
7

12. A
100
Employee
Company
We
now
return
back
to
businesses
in
part
4
and
part
5
and
illustrate
how
flat
hierarchies
give
the
answer
to
the
decision-­‐making
problem.
Let
us
start
with
our
first
sample
example.
We
take
the
case
of
an
SME
with
100
employees
doing
some
web
designing
for
big
organisaOons.
In
its
iniOal
set
up,
we
find
4
layers
of
organisaOon.
Namely
the
CEO,
the
decision-­‐maker.
Below
him,
2
layers
of
management
based
on
seniority.
And
below
them,
the
real
work
done
by
the
clerks.
Mathema'cs
applied
to
Business
Theory
12
PART
4:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
SMEs
Picture
8:
Concentric
circles
of
organisaOonal
layers
CEO
Workers/Clerks

13. Nature
of
the
problem
The
quesOon
now
is:
why
can't
the
CEO
talk
directly
to
the
clerks?
We
will
see
that
creaOng
a
fla?er
hierarchy
is
a
good
pracOcal
compromise
towards
this
ideal
situaOon
and
can
help
avoiding
the
Noise
we
have
been
talking
about.
Why
does
the
CEO
want
to
talk
to
the
clerks
directly?
The
CEO
oien
remarks
that:
1)
His
decisions
do
not
even
reach
the
ground
2)
His
base
employees
are
demoOvated
even
when
the
driving
force
of
the
company
is
so
close
to
them
and
3)
Furthermore
he
has
very
li?le
feedback
on
what
is
really
happening
at
the
worker’s
level.
Mathema'cs
applied
to
Business
Theory
13
PART
4:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
SMEs

14. Ideal
OrganisaOonal
Diagram
Mathema'cs
applied
to
Business
Theory
14
PART
4:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
SMEs
Here
is
our
pracOcal
proposal.
There
are
10
to
15
line
managers
dealing
directly
with
the
clerks.
The
CEO
communicates
with
these
line
managers
on
a
one
to
one
basis
without
any
interference
in
between.
There
is
only
one
manager
in
the
company
reporOng
directly
to
the
CEO
whose
role
is
to
control
and
drive
the
employees
and
replace
the
boss
when
he
is
not
there.
However,
in
normal
circumstances
he
never
comes
in
between
the
CEO
and
the
rest
of
the
workforce.
This
is
how
a
fla?er
organisaOon
can
solve
the
adulteraOon
of
the
CEO's
decisions.
Picture
9:
ideal
organisaOonal
diagram
Line
Managers
CEO
Manager
Clerk
level

15. Cu`ng
down
on
Layers
The
key
idea
here
is
to
cut
down
on
fat.
i.e.
On
the
redundant
managerial
layers
which
exists
in
every
organisaOon.
The
business
is
now
indeed
a
one-­‐man-­‐show.
Which
is
riskier.
But
on
the
other
hand,
it
has
gained
momentum,
speed
of
execuOon
and
its
ability
to
respond
to
the
environment.
It
is
a
pro-­‐acOve
organisaOon
seizing
its
opportuniOes
and
which
has
boosted
employee
moOvaOon
as
there
is
a
closer
contact
to
the
life
source
of
the
organisaOon:
the
decision-­‐maker.
Mathema'cs
applied
to
Business
Theory
15
PART
4:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
SMEs

16. A
Major
Engineering
company
with
150
sites
Mathema'cs
applied
to
Business
Theory
16
Now,
our
second
example
to
the
problem
of
reducing
noise
on
hierarchical
lines.
Our
chosen
company
is
a
leading
engineering
company
in
the
UK
with
more
than
150
sites
across
Europe
and
headquartered
in
London.
Its
organisaOonal
structure
is
such
that
each
site
is
headed
by
a
Branch
manager
with
limited
contact
with
the
London
headquarters.
Is
it
possible
to
streamline
this
structure
so
that
decisions
are
executed
more
efficiently?
PART
5:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
BIG
ORGANISATIONS
Head
Quarters
Picture
10:
a
mulOnaOonal
London
Branch
Frankfurt
Branch
Birmingham
Branch
Paris
Branch

17. Nature
of
the
Problem
The
most
fundamental
difficulty
here
is
that
the
base
employees
on
the
sites
oien
have
problems
with
the
Branch
manager.
They
find
them
too
young,
inexperienced,
bossy
and
out
of
touch
with
ground
realiOes.
For
Headquarters
similarly,
the
main
obstrucOon
to
decision
execuOon
remains
the
Branch
manager.
Very
poor
leadership
skills,
inability
to
understand
headquarters
decision
and
oien
very
poor
performance
too
despite
all
the
KPIs
(Key
Performance
Indicators)
given
to
him.
Mathema'cs
applied
to
Business
Theory
17
PART
5:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
BIG
ORGANISATIONS

18. Mathema'cs
applied
to
Business
Theory
18
An
OrganisaOonal
Proposal
Let
us
come
with
the
following
proposal.
Don't
change
anything
to
the
structure,
just
change
the
way
the
business
at
a
local
level
is
approached.
Every
Branch
Manager
should
run
his
site
as
a
standalone
business.
With
its
own
sales
team,
its
own
procurement
people,
and
a
separate
balance
sheet.
Become
a
profit
centre
in
your
own
right.
Headquarters
would
then
just
maintain
brand
image,
share
best
pracOces,
and
pool
resources
to
each
site.
This
is
very
close
to
the
franchise
business
model
and
is
how
one
cuts
down
on
site
managers
doing
nothing
and
headquarters
just
amassing
profit
on
a
business
model
created
150
years
ago.
PART
5:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
BIG
ORGANISATIONS
Picture
11:
the
new
model
Franchise
Business
2
Business
3
Business
1

19. Why
the
Company
is
working
be?er
Once
again,
there
is
a
fla?ening
effect
by
franchising
the
mulOnaOonal.
On
the
Branch
manager's
side,
instead
of
following
merely
KPIs,
he
is
now
a
businessman
in
his
own
right.
Head
of
a
cash
generaOng
unit
instead
of
following
indicators
that
do
not
trace
business
iniOaOve
and
creaOvity.
On
the
Corporate
side,
headquarters
focuses
on
the
real
strengths
of
the
organisaOon,
such
as
brand
image
and
a
historical
legacy
of
best
pracOces
and
strategises
on
the
real
needs
of
a
major
organisaOon
such
as
streamlining
the
Supply-­‐Chain
instead
of
purely
dictaOng
policies.
Franchising
by
fla?ening
re-­‐dynamises
the
decision
chain.
Mathema'cs
applied
to
Business
Theory
19
-­‐
PART
5:
THE
SOLUTION:
FLAT
HIERARCHIES
FOR
BIG
ORGANISATIONS

20. Final
Statement
We
have
thus
shown
that
in
every
organisaOon,
there
are
redundant
nodes
which
generate
noise
on
any
decision
made
by
the
leaders.
This
Noise
generaOon
is
situated
quite
high
in
the
hierarchy
ladder.
Therefore,
contrary
to
common
belief,
the
obstrucOon
to
implemenOng
a
strategic
vision
is
rarely
at
the
office
clerk
level
but
at
the
intermediate
managerial
levels.
The
best
way
to
solve
this
problem
is
to
fla?en
the
organisaOon
and
get
rid
of
those
extraneous
layers.
Businesses
are
not
meant
for
giving
a
career
to
funcOonally
redundant
brains
but
to
exploit
every
possible
opportuniOes
and
turn
them
into
sales.
Mathema'cs
applied
to
Business
Theory
20
FINAL
STATEMENT