A company’s structure doesn’t just affect its employees but can also influence consumers’ decisions, according to a new study from the University of British Columbia (UBC).
The study, which involved more than 4,000 participants from Canada, the U.S., and the U.K., examined consumer behaviour after they read information about a company.
Participants who were introduced to a company with fewer management levels were more willing to make purchases than those introduced to one with a more hierarchical structure, the research found.
“A company's organizational structure has a broader impact on the company than previous research suggests,” said Guanzhong Du, a PhD student at UBC Sauder School of Business.
His thesis, Why Horizontal Organizations Don’t Fall Flat: Organizational Structure Shapes Perceptions of Egalitarianism and Company Warmth, was published earlier this month.
“People probably thought that was not something that consumers would care about, but in my research, I showed that they do care about that.”
Du said he began the project after noticing that more companies were adopting flatter structures and highlighting this when they introduce themselves to the public.
“I felt a positive connection to those companies, and I wanted to know whether this was a broader consumer phenomenon,” said Du.
In one experiment, participants were divided into two groups and shown one of two versions of a chocolate company—one with a flatter structure and the other with a more traditional top-down hierarchy.
They were then given the option to buy up to six pieces of chocolate using their own money. Those who viewed the flatter company bought more chocolate.
The research also found that customers were more likely to contribute to a company’s crowdfunding campaign or click on its social media ads if its horizontal structure was highlighted.
“We found that consumers think flatter companies are warmer because they infer that these companies foster relational egalitarianism,” said Du.
However, he noted that customers who dislike egalitarianism or are politically very conservative tend to prefer more hierarchical organizations.
“This is what companies need to be aware of when they communicate flatness to consumers, but overall, it has a positive effect,” Du said.
“If your company has adopted a flat structure, communicating this feature to consumers and the public can differentiate yourself from competitors, and make your company appear more appealing to consumers.”
