How to ... Run a company with a flat management system

Sun Hydraulics CEO Al Carlson has spoken nationwide about his company's flat, or horizontal, management system, where titles and hierarchy are nonexistent.

Audiences range from a class of Harvard M.B.A. students in Boston to a group of senior executives from a $16 billion food conglomerate who spent a few days at Sun's Sarasota headquarters.

The key to going flat: Don'ts are more important than do's. The don't list includes: No budgets, sales forecasts, management perks, private offices and formal performance reviews.

It's a jolt to the traditional way of running a business. Not surprisingly, longtime Sun human resources executive Kirsten Regal says a large chunk of people who hear about it will, following human nature, try to “control the chaos.”

But at Sun, flat isn't disorderly. The company instead has a payroll of doers. People gather in pods to solve problems, from workflow to engineering to logistics. The company, which designs and manufacturers screw-in hydraulic cartridge valves, had $227.6 million in sales last year.

Going to a flat management system, say Sun executives, requires a workforce with institutional knowledge of the company's operations. Those employees must have trust in management, and in each other, and willingly take on ownership of projects.

Even with the success, there are challenges. Making sure employees in remote offices are engaged and the financial reporting requirements of being publicly traded, like Sun is, are two that standout.

And before even getting into the how, there's the question of if. Carlson says if a business is doing well, there's no reason to make a change. “It doesn't matter what the end-product or the service is,” Carlson says, “It's about the culture and the success of the company.”

Do's & Don'ts
Here are some do's and don'ts on how to build or turn a company into one with a flat, or horizontal, management system. These are from slides Sun Hydraulics CEO Al Carlson uses
in presentations and speeches he gives on the topic.

The list includes:

Do's
Leadership (with only the necessary dose of “management”)
Leadership (with the purpose to enable)
Continuity and trust
Taking ownership
Peer review
Project orientation
Process orientation
Attention to both knowing and doing
Cultivating an adaptive and agile organization
Maintain a sense of humor

Don'ts
Titles
Budgets
Sales forecasts
Management perks
Private offices
Production scheduling
Organization charts
Departmentalization
Formal performance reviews
 

— Mark Gordon