Using a general model of production in hierarchical organizations, we define the flattening degree function and its determinants, problems of coordination, adaptation, incentives, andknowledge. From the theoretical model, we derive the reduced-form equations that determine theoptimal number of hierarchical levels and firm size, identifying the most appropriate econometric approach and comparing it with previous empirical studies. We estimate it using the European. Company Survey, finding that firms tend to have flatter structures when the abovementioned problems are smaller. The explanatory power of coordination problems is twice that of those related to other types of problems