Companies starting today are completely different than those that started only 10 years ago. It’s no longer about being “flat,” but taking the innovations of flat and agile cultures further, to empower small teams of people to be mini-startups within the organization.

Pioneered by Google and other Fortune 100 companies,1 flat structures exist in all types of companies, from tech-sharing platform Github, to canned tomato producer Morning Star (which has cleverly been called “flatter than a pancake”).2

A flat company is an organization that has no middle management. At Betterment, the company I founded in 2010, we think of ourselves instead as a group of small, self-managing, and project-based teams.

Betterment_017Having worked at many big financial institutions, I knew our company wouldn’t succeed with the same hierarchical environment as most traditional financial services companies.

The old-guard giants are full of bright and well-meaning people—many of them my friends—but their innovative years, for both product development and the way things are run internally, are often behind them. As one Betterment employee who had previously worked at a large well-known financial institution put it, “It was soul-crushing.”

If you want to produce widgets the same way every year, then traditional large-scale hierarchical structure is great. But, if you want to innovate, you’ve got to be willing to take risks and let people fail. The way that we organize our teams and work to allow for failure and iteration is a model that could be adopted by larger companies to empower more innovation.  

Greater autonomy increases work happiness.

Everyone likes to have autonomy. People like to have control over their day and the ability to execute on projects in the way that they see fit.

Our vacation and work week policy is straightforward: Employees get unlimited vacation and can choose their own hours, as long as they are consistently excelling in their roles and getting their work done.

Another way of thinking about it is that it’s output-based management; rather than watching the clock, we look at the person’s productivity level or the end result. It’s giving people the freedom to do their best work, however they do that work.

Agile and cross-functional teams increase efficiency and empower employees.

A flat structure empowers our teams, while agile development gives them the most efficient way to deliver. While many organizations view agile as solely an engineering process, we live it across all departments.

Agile is a method in which self-organizing, cross-functional teams take a problem and test and deliver the solution on the smallest scale possible to see if it’s worth doing on a larger scale.

“It decreases risk of failure and over-investing in a bad idea or approach, and maximizes a team’s chances for success by not taking on more than is necessary,” said Dustin Lucien, our chief technology officer, who started the agile process at Betterment.

It’s not just a more efficient way for us to build, but it also allows for more opportunities for each individual employee. We empower people to try things out, experience them, and learn.

For example, when one of our engineers started working at Betterment, he asked if he could lead the engineering process for a project to revamp how we provided referral bonuses to new customers. We said yes.

“As a new engineer, I was able to learn faster by leading,” he recently told me. “I made mistakes, but then I learned from them quickly and got better at communicating process.”

This kind of autonomy also leads to better decision-making; you almost always get better decisions from people closest to the work.

There is no such thing as too much communication and transparency.

On a day-to-day level, our teams communicate constantly, either by grouping themselves together at a common area table for work or via email and instant messaging tool Slack. We don’t use phones for internal communication—they’re not efficient, and conversations are not archived and searchable. Each team documents what it’s working on using our robust wiki, Confluence. Every single employee has access to company data via software like Tableau, SQL, and an in-house custom query-sharing tool we built called Snipshot. Each team has daily morning meetings (we call them “stand-ups”) to provide updates on what they’re working on, and anyone is welcome to attend.

We explain the decisions we make. While not everyone has to agree, “because I said so” is rarely an adequate justification for why something is the way it is.

After every project, we have retrospectives, which are meetings where project participants get together and share feedback on what went well and what could be improved. This not only encourages dedicated commitment to improving process, but it gives people a blameless environment where they can share feedback. Here’s an example of actual language from a retro:

What We Did Well

  • Scaled down design work on new CRM emails
  • Smoother iteration planning

What should we have done better?

  • Too many comments on pull requests

Promoting When You’re Flat

At Betterment, we do a performance review process with every employee, myself included, twice a year. This is the time when we look at things like compensation or promotions, but we handle them a bit differently than a traditional corporation.

For starters, we place very little emphasis on titles at Betterment. We change them for employees because we understand that it’s important for career advancement, but we don’t use them as an internal measure of success.

Instead, we focus on things like the Betterment of Betterment Awards, which is an opportunity for certain employees to be recognized by their peers for outstanding achievement, and also to be compensated (with equity awards equal to 50% of what we would hire them for today and granted to 10% to 20% of the company each year) for their accomplishments.

For us, flat doesn’t mean there’s no structure; everyone has a manager, and there are people who are on different levels than others. But, instead of simply being in charge of workload, managers are there to guide your career development, and to challenge and support you. Ultimately, you are the one who determines how far you’ll go.

What we’ve built over time has become The Betterment Way. Just like our service, our company is transparent, automated, efficient, and delights. We work in small, self-sufficient teams, driving toward goals, whether we’re building a new tool or cleaning the office. We learn from successes and failures, iteratively, and we are bold when we sense opportunity. We are powering the pursuit of happiness through efficiency for both our customers and ourselves.

We’ve spent a lot of time talking about these principles, but what’s most important—and will only continue to get more important as we scale—is that we live them. And that you can see them in everything we do.

1 http://www.tibbr.com/blog/topics/enterprise-social-network-topics/why-are-leading-organizations-turning-to-a-flatter-organizational-hierarchy/

2 http://www.inc.com/audacious-companies/leigh-buchanan/morning-star.html

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