Jeri Ellsworth, who worked for Valve building hardware, described a lot of shadow-management going on when it comes to larger scale:

http://www.wired.com/2013/07/wireduk-valve-jeri-ellsworth/ (best text version I found, podcast with the actual interview is linked at the end)

“But the one thing I found out the hard way is that there is actually a hidden layer of powerful management structure in the company and it felt a lot like high school. There are popular kids that have acquired power in the company, then there’s the trouble makers, and everyone in between.”

The problem as she sees it is one of scalability. What works for five or 20 people doesn’t necessarily support 300.

There are some articulate descriptions of how it does or doesn't work at Glassdoor: http://www.glassdoor.com/Reviews/Valve-Corporation-Reviews-E...

Yes, Valve is an amazing example of a flat company. I had intended to talk about them in my original essay but couldn't manage to make it fit in anywhere. Their employee handbook is a fantastic read on how knowledge workers should work together: http://www.valvesoftware.com/company/Valve_Handbook_LowRes.p...

Your comment makes it sound like you've worked there, is that so?

Yes, its all flat and community driven ... until one day you come to work and get informed by Gabe ALL of your team is being fired, with no warning.

Also worth a mention is Teamtreehouse and their "no manager" rule: http://blog.teamtreehouse.com/working-in-a-flat-company