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Lots of companies claim to have a flat structure because everyone can approach or talk to the boss. But that’s not truly flat. For complete flatness, employees must have as much responsibility as possible, and this means pay levels should also be everybody’s business.

In a flat hierarchy, everyone knows exactly what their colleagues are earning, there are fixed salary levels depending on experience and skills, new hires know exactly what to expect, and promotions are decided by the whole team. We’ve rolled out this structure at CareerFoundry, and as a result, we have seen that:

1. Ownership = results
People feel ownership when they have a choice. They do not feel ownership when they are told what to do. That’s why, in a company with flat hierarchy, the team decides who gets promoted. The team members also decide which projects they want to be involved in. We work in project teams that have a six-week cycle, with each project pitched to the company and voted for or against. Because we’re all choosing which projects we take on, everyone feels the ownership and responsibility for what they’re producing. For example, we just built and launched a new offering in only five weeks, which was quite a tight time frame. But everyone owned different parts of the build and pushed each other to deliver something amazing. This may sound crazy for the typical workplace, but our peer promotion system really sets the right incentive for the team to show maximum results in these projects, since these are the key deliverables the team will judge everyone on in the next promotion cycle (twice yearly).

2. Less politics = better teamwork
The truly flat structure means less politics, which means the team can focus on results rather than their standing with the boss. It’s not about impressing middle management, it’s about performing your best with everyone. Imagine the mindset shift that happens when employees can decide on their coworkers pay. It moves their thinking from a consumerish employee mindset towards a much more founder/entrepreneurial mindset. They question their results and those of their colleagues, they question strategy, they question focus. All of which leads to better results. This requires a culture where employees can speak freely. Therefore, you will find a lot of constructive disagreements. We say it is good to disagree, and we have implemented processes such as retrospectives, to voice disagreements and find the best solutions.

3. More ideas = better execution
I’ve worked at very hierarchical companies before, where you see a small few making decisions for the masses. This means that innovation is limited to the minds of the managers. But with a flat hierarchy, you can have many talented people with a whole background of experience to draw on. In our team of 50, everyone from developers to marketers, administrators, and UX designers works together to give their unique insights on each project. It can sometimes slow things down at the very start, because getting signoff from each “department” takes rounds of collaborating and tweaking the idea. But once it’s ready, it means everything’s been thought of, so we can execute the idea properly — and quickly. Again, the transparent-pay and peer-promotion system supports this mindset of execution and focus on achieving tangible impact.

4. Transparency = fairness
Knowing what everybody earns and having fixed salary levels has increased trust amongst the team. Nobody has anything to hide because salaries and promotions are decided collectively and objectively. While traditional salary practices are based on secrecy, this never actually works — people always talk. So having everything out in the open means we know who wants and deserves promoting. It’s fair and reduces pay discriminations and also means everyone is looking out for each other. When it was first introduced, there were some imbalances based simply on experience. But the team noticed where these were and fought for equality. In the first round of promotions, a junior web developer who had the natural ability to work at a more senior level was promoted, where he would have been held back under a traditional structure.

5. Freedom = power
We have a very open culture because of the flat structure. Everyone in the company has a voice and is able to share their opinion and give feedback because there isn’t a barrier there. We are also open to receiving feedback, including me, the CEO. We have had a few situations where my cofounder and I have presented changes for the company that the team didn’t agree with. For example, there was really strong opposition to a pricing structure we suggested. Instead of us forcing them to do what we said, they forced us to listen to them, and in the end, we compromised and came out with a solution everyone was on board with. I think it’s great that they have the power to shape the company. Of course, it could, in a very extreme case, mean that I could be “overthrown” if our ideas didn’t align, but that just keeps me accountable for my actions and decisions.

Raffaela Rein is CEO of Berlin-based CareerFoundry. She previously launched companies for Rocket Internet and Axel Springer and working as an investment strategist for BlackRock.

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