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Vertical Organizational Structure

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The vertical organizational structure is a strict hierarchical structure with power emanating from the top to the bottom. With a chain of command well defined, decisions usually move from the top down through layer by layer, and people at the bottom have the least autonomy. In the structure, each person is supervised by the one directly above him. Employees can clearly monitor their roles and duties.[1]


Vertical Organizational Structure.png
source: Onie Zahudi


Facets of Vertical Organizational Structure[2]
A small business owner should be aware of all facets of a vertical organization structure to decide if it's the right model for the company.

  • Top-Down Management: If an entrepreneur is on top, he gets to transmit his ideas down the chain of command. He relies on managers in the middle to communicate and implement his directives. Vertical structures are characterized by centralized decision-making, which might not include significant input from lower-level managers and workers. Businesses can get around this problem by encouraging workers to send new ideas via email to the business owner.
  • Rules and Relationships: Rules typically govern the levels of authority in a vertical structure. Employees use an organizational chart to understand the reporting relationships. Managers use organizational rules, often set by the owner, to understand how much authority they have. To some degree, managers are responsible for all employees below them in the vertical structure. At the bottom, line managers supervise the work of their workers.
  • Relaxing the Rules: Although small businesses do not operate in a context like the military where vertical control is essential for survival, some businesses find it beneficial to find ways to keep a vertical structure and maintain their competitive advantage. Reporting relationships might stay the same, but managers can change their approach to management. They develop a culture in which employees feel respected and included, and where the structural boundaries do not deter the flow of ideas and communication. They set a high value on people, not products. If employees are treated as equals and their ideas are used, they're less likely to feel hampered by their positions in the vertical hierarchy.
  • Surviving in Evolving Markets: Vertical structures are efficient because of their clear reporting relationships, but they often aren't flexible enough to survive in evolving markets. In these cases, a small business owner should implement an organizational change – or at least a significant shift in how the company operates – by getting the initial support of managers and technical experts to new ideas and approaches. If managers and experts support the structural change and contribute their ideas to the planning phase, they can more effectively lead their employees through the process of the change.
  1. Definition - What Does Vertical Organizational Structure Mean? Org Charting
  2. Facets of Vertical Organizational Structure AZ Central