Vertical Organizational Structure
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.
source: Onie Zahudi
Facets of Vertical Organizational Structure
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.
Advantages and Disadvantages of Vertical Organizational Structures
Advantages of Vertical Organizational Structures
Vertically structured companies have uniform standards and excel at designating tasks to employees or departments. Generally, managers have an easier time managing vertical organizations. The staff in a vertical organization has well-defined roles and responsibilities. This centralized model encourages efficiency, promotes collaboration and provides opportunities for further development of professional expertise and a path for growth within the organization.
Disadvantages of a Vertical Hierarchy
The vertical model requires considerable effort to maintain the power and balance. Therefore, this organizational structure rarely works without strong leadership at the top. Further, departments in vertical organizations often develop a narrow view of the organization and consider singular goals of the department more important than the company’s goals. Additionally, vertical companies lack the transparency of a horizontal company with many levels of management. On the other hand, organizations typically find the horizontal structure much harder to implement, especially as the business grows. Employees in horizontal organizations can become less sure about individual and group responsibilities, and project managers can become frustrated by their lack of authority.
Vertical Vs. Horizontal Organizational Structure<ref>Differences between horizontal vs. vertical organizational structure Here are some differences between horizontal and vertical structure:
- Who makes decisions: Decision makers vary in each company and organizational structure. However, in vertical organizational structures, it's often only the highest level of managers who have the authority to make decisions. Conversely, horizontal organizational structures often empower employees to make decisions about certain things, and they may rarely require manager approval.
- Number of managers: Different organizational structures may have different levels and types of employees. Vertical structures often have many managers. These structures include middle-level managers and upper-level managers. Horizontal structures, however, often have a few managers with many autonomous employees.
- Level of employee input: Different organizational structures embrace different levels of employee input. Horizontal organizational structures encourage employees to share their ideas or suggest ways to improve processes. Some organizations allow employees to implement changes without authorization from managers. However, vertical organizational structures rarely ask for input from employees, expecting employees to follow orders from their managers without objecting to them.
- Flow of communication: Communication in vertical structures is often slow and only between department leaders or managers. The layers of middle management may slow communication or lead to miscommunication, which may slow progress on projects. Communication in horizontal structures is often more free-flowing as employees can talk to each other as much as they want. This may help improve productivity and efficiency.
- Level of efficiency: Vertical organizational structures often have complex approval processes which can be slow and inefficient. Employees usually complete work which their direct managers must approve before upper managers approve them. However, horizontal organizational structures often empower employees. Companies with these structures are often more efficient because there are few approval processes or none at all.
- Level of creativity: Horizontal structures often allow employees more freedom. They can be creative and try new things. Vertical structures, however, offer employees little to no autonomy and focus on strict processes. However, some companies now use a waterfall methodology within vertical structures, meaning they encourage employees to be innovative or creative within their own departments.
- Amount of collaboration: Different organizational structures have different levels and types of collaboration. Horizontal organizational structures often encourage collaboration and allow it to happen organically. These structures allow employees to try different things and collaborate with different departments. Vertical organizational structures, however, often only have formal collaboration or meetings, and employees often only collaborate with those in their own department.
- Willingness to take risks: Horizontal structures are often more willing to take risks than vertical structures. Vertical organizational structures may be more risk averse because of departments leaders or managers with defensive stances to prevent potential failure. Conversely, horizontal structures encourage brainstorming and alternative ways of thinking. These structures may see the potential benefits of the risks rather than the potential failures.
- Job satisfaction: Horizontal organizational structures often allow and empower employees to try new things. This often helps increase employee engagement, leading to high job satisfaction rates. However, employees who enjoy rules and process may prefer vertical organizational structures.
- Amount of structure: Vertical organizational structures often have more structure than horizontal organizational structures. Vertical structures have clearly defined roles with specific responsibilities for each person, reducing the level of employee autonomy. Horizontal structures have less structure, often providing employees with equal opportunities. However, this may result in a lack of guidance or lead to internal conflict.