Key Takeaways
- Pave data shows that as companies grow, managers take on more direct reports—averaging 2.51 direct reports at companies with 1-25 employees, compared with 5.80 at companies with 1,001 or more employees.
- On average, 77% of a company’s employees are ICs and 22% are in management, and as companies get larger, the proportional share of managers decreases.
- Flattening an org chart reduces management layers and widens spans of control, but it also changes headcount ratios, job architecture, and pay structures in ways compensation teams need to anticipate.
- There is no universally correct span of control. The right answer depends on the company stage, function, role complexity, and the strategic role you want managers to play.
A flat organizational structure reduces management layers between individual contributors and senior leadership, widening each manager's span of control. Companies flatten for different reasons: cost pressure, a push for faster decisions, or a deliberate effort to right-size a management structure that grew faster than the underlying work justified.
Whatever the trigger, flattening isn't just an org chart exercise. It changes headcount ratios, job architecture, and pay structures in ways that compensation and HR leaders need to anticipate, not react to after the fact.
Understanding how spans of control actually shift with company size gives you a more defensible starting point than industry rules of thumb when those conversations start.
What Is a Flat Organizational Structure and How Does It Work?
A flat organizational structure is one with few or no middle management layers between individual contributors and leadership. In practice, "flat" is relative: a 30-person startup where every IC reports to a founder is genuinely flat. A 2,000-person company that removes one layer of directors is also "flattening," just in a different sense.
What defines both is the intent: fewer layers, wider spans, and faster decisions. Managers carry more direct reports and more operating responsibility. Individual contributors get more autonomy and more direct access to leadership.
How Spans of Control Actually Shift Over Time
Pave analyzed various span of control metrics across companies participating in our real-time compensation database. When viewing the data by manager level, the data shows that the average span of control, or number of direct reports per manager, has increased over time.
The largest increases in span of control were among the Manager/Sr. Manager and Director/Sr. Director levels. But across the board, managers had fewer direct reports on average in 2023 than in 2025.
What Are the Pros and Cons of a Flat Organizational Structure?
What flattening gets right
- Faster decisions: Information and decisions move faster when there are fewer approval layers in between.
- Lower management overhead: Fewer managers at a given headcount means lower supervisory salary expense and a leaner merit cycle to administer.
- Clearer role accountability: When a manager carries eight direct reports instead of three, they can't be the bottleneck for every decision, which pushes ownership down to individual contributors.
What flattening gets wrong
- Manager overload: Pave's span of control benchmark data shows average spans are already growing: employees at the Manager and Senior Manager levels now average 4.9 direct reports, up from 4.4 in Q4 2023, based on an analysis of 257,000+ managers. Absorbing more reports without adjusting pay, leveling, or expectations creates a different kind of inefficiency.
- Fewer career ladder rungs: If a layer of senior managers or directors disappears, the gap between IC and leadership widens, and progression paths become harder to define. Pay band architecture needs to evolve alongside the org structure.
- Uneven functional impact: Not all functions flatten equally. Pave data shows that Engineering and Customer Support managers tend to carry the most direct reports, while Finance and Legal carry the fewest. A blanket initiative that ignores those differences will land unevenly.
When Should a Company Flatten Its Org Chart?
Three signals suggest flattening is overdue.
- A high proportion of directors-and-above relative to your stage peers. Pave's data gives you the benchmark: the typical company has 13% of its employees in director-and-above roles, and that share tends to decrease as companies scale. If your ratio runs well above that, it's a signal worth examining.
- Decision-making delays that trace to approval layers rather than complexity. If a decision that should take days takes weeks, that's structural, not cultural.
- Headcount that's been rightsized, but the management structure hasn't followed. Companies that hire aggressively often end up with more management layers than the underlying work justified.
There is no single right answer. A VP of Total Rewards at a large pre-IPO company may deliberately maintain a higher share of managers to preserve space for innovation. That's valid, as long as it's intentional and benchmarked rather than inherited by default.
What Flattening Means for Compensation Teams
When management layers are removed, the managers who remain typically take on a broader scope. If your job architecture doesn't reflect that change, those managers may be underleveled and underpaid relative to their actual responsibilities. That's both a fairness problem and a retention risk.
Tools like Pave's Team View help managers and HR leaders track team-level compensation as org structures shift, rather than reconciling it in spreadsheets months later.
Flattening also changes the IC career path. If a management layer disappears, some ICs lose a visible next step. Compensation teams need to rebuild those progression narratives with clear leveling criteria and pay band visibility before employees start asking questions that the current architecture can't answer.
Merit cycles get simpler in one way (fewer managers) and harder in another (each decision affects more people and more budget). Giving managers better data and clearer guidelines for that shift is part of how compensation teams make flattening land well.
See How Your Org Stacks Up
Flattening decisions are easier to defend when you know where you stand relative to companies at your stage. Pave's dataset of over 9,000 companies gives compensation and HR leaders real benchmarks to plan for their evolving team structure.
When a restructuring is being proposed, that context is the difference between a data-backed recommendation and a guess. And when layers are removed, the compensation implications (band adjustments, leveling changes, and career path redesign) need to move just as fast as the org chart does.
Get a demo to see how Pave’s AI compensation platform helps you stay ahead of those changes rather than catch up to them.
Pave is a world-class team committed to unlocking a labor market built on trust. Our mission is to build confidence in every compensation decision.
Frequently Asked Questions (FAQs):
What is a flat organizational structure, and how does it work?
A flat organizational structure minimizes the number of management layers between individual contributors and senior leadership. In practice, it means fewer middle managers, wider spans of control for those who remain, and more direct accountability at the individual contributor level. How "flat" a structure is depends on company size and design intent: a startup where everyone reports to a founder is flat by default, while a 2,000-person company removing a director layer is flattening by strategy.
What are the pros and cons of a flat organizational structure?
The main benefits are faster decision-making, lower management overhead, and clearer individual contributor accountability. The main risks are manager overload when spans widen without adjusting pay or expectations, fewer visible career progression rungs for ICs, and uneven impact across functions where the right span of control varies significantly. Whether the tradeoffs are worth it depends on the company stage, function mix, and what the organization is trying to optimize for.
When should a company flatten its org chart and widen manager spans of control?
Flattening tends to make sense when the share of underloaded managers is high relative to stage peers, when decision-making delays trace to approval layers rather than complexity, or when headcount has been rightsized but the management structure hasn't followed. Pave's data shows the market benchmark for manager loading by company size, which gives compensation and HR leaders a concrete reference point for those conversations with leadership.
