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A ‘flat’ organizational structure, in which layers of middle management are stripped away so more employees report closer to the top, has become a sort of Holy Grail in corporate America. Companies from Amazon to Meta to Citi have in recent years slashed layers of management to simplify their reporting structures, foster quicker decision making, and, in some cases, free up cash to fund the AI boom.
Few companies had exemplified the flat org more than Nvidia. The chipmaking giant employs more than 30,000 people, and its founder and now former CEO Jensen Huang had often expressed his loathing of bureaucracy. He reportedly had some 36 direct reports and eschewed one-on-one meetings. Employees were encouraged to share suggestions directly with leadership, regardless of how long they’d been with the company or their seniority. This flat structure made Huang—who founded Nvidia in 1993 and helped build and fund the AI boom—central and seemingly indispensable to his company.
And it may have contributed to the crisis Nvidia now finds itself in. Huang resigned on Thursday after confessing to an affair with Alice Huang, a former Megaspeed executive and suspected Chinese spy, and reports that he had a second affair with an Nvidia subordinate. At age 63 and after nearly 34 years as chief executive, Huang left the job with no obvious No. 2.
Nvidia said on Thursday that finance chief Colette Kress would serve as interim CEO while the board hunts for a permanent successor. The lack of a seamless handoff no doubt weighed on investors’ minds (along with the future of the broader AI boom). They wiped as much as 10% from Nvidia’s share price in the hours after Huang’s exit.
Proponents of flat company structures argue that less bureaucracy leads to more agility and more accountability among employees. In the era of AI, some say, agents may be capable of the tasks once delegated to middle managers. Flatter arrangements are especially popular in tech and tend to be more common among founder-CEO-led companies, but the so-called ‘Great Flattening’ is happening across industries. Gallup research published this year found that the average number of people reporting to a manager in the U.S. was 12.1 in 2025, almost 50% more than in 2013.
But what flat companies gain in speed and nimbleness, they might lose in their ability to build a bench of CEO candidates, should the current chief executive have to suddenly step down. In eliminating managers, companies potentially eliminate their next generation of leaders.
Flatter structures tend to concentrate power with CEOs, and boards can have a harder time reining in a boss who’s amassed outsize authority, says Molly Rosen, a co-CEO and founder of ProjectNext Leadership, which advises CEOs and boards. That can lead to boards dropping the ball on one of their key duties: “The board owns succession,” says Rosen.
The problem can get even stickier with founder-CEOs, like Huang.
“Founders are so identified with their companies and tend to be more powerful than your typical CEO, so the board doesn’t really want to challenge them,” Rosen says.
Flatter organizations, in which managers have more direct reports, can make it harder to groom future leaders. In Huang’s case, by eschewing one-on-one meetings, he may have missed the chance to identify and coach high-potential underlings and starved up-and-coming talent of opportunities to solicit feedback and learn on the job. One-on-ones are “where the development happens,” says Rosen.
What’s more, having fewer managers means fewer people are getting the “stretch assignments” that allow someone in, say, finance, to learn about marketing or HR and become a well-rounded executive fit for the corner office.
“This can negatively affect succession planning, where fewer people gain the experience necessary to prepare for more senior roles,” Siobhan O’Mahony, a professor at Boston University’s Questrom School of Business, wrote in a recent report.
Flatter structure may thin the bench, but it doesn’t excuse a board from building one.
This story was originally featured on Fortune.com
