I've always kept the company's hierarchy to a minimum. Then one day, an employee said she wanted a promotion, and I was forced to rethink our org structure.

A few months ago, something odd happened: an employee left. That's not common at 37signals. In 11 years, we've lost only 5 employees, and one of them came back seven years later.

But what was really odd was the reason she and I decided to part ways. The problem was ambition. Not a lack of it, but that we couldn't satisfy her aspirations.

She had worked in our customer service department for three years and did a great job. Her intelligence, initiative, and efficiency were never in question. The reward she wanted wasn't money; she wanted some management responsibilities and a new job title.

You might think that's a reasonable request. After all, what boss doesn't want driven people to take on more? In fact, many companies routinely give ambitious employees new positions, responsibilities, and titles to keep them.

But at 37signals, we approach ambition differently. We don't encourage vertical ambition, the traditional career track of quietly working your way up from rookie to manager to VP. We favor horizontal ambition: employees can do what they love, and we encourage them to go deeper and broaden their knowledge so they become even better at their work. We've always wanted to hire people who aspire to be craftspeople. Designers who want to be great designers, not design managers. Engineers who want to master the art of programming, not management.

Giving top performers management duties often pulls them away from the work they're good at. Our rewards stay close to the work: we pay above-market salaries and offer lots of perks, including four-day workweeks in the summer, plenty of free time to do what they love (within reason, of course), and more say in decisions on the projects they work on.

We've done this for years and benefited a lot. But recently, as we've hired more people, this model has started to show some strain. We now have 26 employees. As many entrepreneurs have learned, once your business reaches a certain size, there are problems you have to take seriously and can't ignore. For us, terms like departments, managers, and titles started popping up in HR conversations more and more.

Besides being small, 37signals has always been a flat organization. In fact, flatness is one of our core values. We have 8 programmers but no CTO. We have 5 designers but no design director. Our customer support team has 5 people but no head of support. And since we don't have a marketing department, we don't have a marketing director either.

Even as we grow, we keep a lean team. We don't carry dead weight. Everyone at 37signals touches the product to some degree, from copywriting to updating help docs to interaction design to programmers writing code to operations staff who keep the servers running. We don't pay people to delegate and tell others what to do.

We've tried promoting some people into management roles. Sometimes it worked well; sometimes it didn't. But one thing we've found is that teams manage themselves better than being managed by a single person, so when a team needs structure, we self-manage.

For example, when our customer service department had only three people, we hired someone to manage the team. His job was to review everyone's tickets, watch the tone, make sure our customers got timely and accurate answers, dig into customer needs while talking with developers, and measure the performance of the whole support team. He might also jump in and handle a few tickets, but his main role was behind the scenes, improving the whole department's performance.

It didn't work. That's not a criticism of the manager (he's a great guy who knows how to run a department, and we helped him find another job). It had nothing to do with who the manager was; the role itself was useless. But we still wanted the department to improve, and we felt it was best to change the structure. After all, as everyone knows, when you add people, you add organization.

What we learned from this is that adding professional managers and creating a hierarchy isn't the only way to create organization. Instead, we decided to let the team manage itself. There's still a leader, but the role rotates every week. Each week, the new leader plans the schedule, notes problems that come up and how people are performing, and handles any tricky customer issues.

What I like about this arrangement is that it frees people from the adversarial relationship between staff and management; each side can truly see things from the other's point of view. You'll find plenty of that conflict at many other companies. But because of our weekly rotation, everyone is more empathetic when managing others. Soon you learn to manage yourself and respect management more. It reminds me of one of my favorite ideas, from the philosopher John Rawls: the fairest rules are those people would agree to even without knowing what position they'd end up in. Our support team got better and our customers are happier. We've compared the two approaches, so we know this one works.

Watching the customer service team made me realize that, compared with vertical advancement, flatness benefits everyone. Promoting one capable person upward often holds others back. If a team has three or four such people and we promote only one, the others feel frustrated. We'd rather everyone working in this environment has a chance to grow with pride.

Nobody is happy when an employee leaves. But as a business owner, you have to think about the future. Promoting an employee to management just because they're great at their current job isn't reason enough. Bringing a manager into the company sends a strong signal that the company may be moving from flat to hierarchical. We're certainly not doing that yet, and I hope we never will.

As it happens, this story has a happy ending. The employee who left didn't look for another job; she started her own business. She hosts a show and is very happy. We even gave her advice to help her pursue her new vision. It really was the right choice for all of us.

Translated from Why I Run a Flat Company