First let's look at the problem with many websites.
As this headline implies, poor site structure must therefore be deep (not flat).
Here's what bad site structure looks like...
The problem with this structure is that as pages get further and further away from the Home Page they lose the carried through benefits of the 'authority' associated with the Home Page.
The further away from the Home Page a web page sits within the structure of the website the less important it is deemed to be by the search engines.
This means that these deep pages are likely to get lower positions in the search engine results.
So, you could be working hard to optimise a key product or service page on your website for important keywords, but if it is 5, 6 or 7 levels deep within your site structure you could well be wasting your time.
The solution is to create a website structure that positions pages...
No more than 3 clicks to the deepest level
Ideally you want to structure the navigation of your website so that there are no more than 3 clicks to the deepest level.
That means your website navigation structure should look like this...
And you want to have your most important pages with your best keywords at levels 1, 2 or 3 to ensure that they maximise their full SERP (Search Engine Results Page) potential.
The outcome should be higher indexation and better longtail SEO results.
You can find more on website architecture for SEO from SEOMOz here
2. Allocate your web pages to Silos
The other key aspect is to organise your content into 'silos' containing like content, creating 'mini sites' within your website.
So for example, if your website is for your Bike shop, all of your Mountain Bike pages should go under the navigation tab and URL yourwebsite.com/mountainbikes, which would look like this...