Perpendicular, vertical, tall or parallel, flat business structure? As an entrepreneur your first organizational decision you made was likely something to do with accounting, products or services. If you are like the majority of small companies, one of the far-off decisions you seldom think about is how you are going to organize your company as it grows.
Choosing your organizational formation is a strategic decision which calls for a thorough evaluation of your options. But before this decision is made, you need have faith in what you are creating. Belief it will grow and become its own entity and therefore needs to have its personal family tree. This article is going help you with your visualization of what two of these foremost organizational hierarchical structures are.
As a small company you may well be questioning why this article is even worth reading. My reply is simple – you will not simply be adding knowledge to your tool chest. This knowledge will actually assist your business’ evolution. The further you delve into it and focus on what your business looks like at it’s fullest potential. The better your internal processes and policies develop when you are starting out. Deciding if your business will be vertical or flat is critical to its success no matter what it grows into being.
Today we are going to concentrate on these two structural forms. Even though there are different models you can select. Such as hybrids, but they can basically be categorized into “Tall” or “Vertical” set ups. Of course, both have their own pros and cons. The one that’s true for you will depend on the nature of your business. The size of your company, as well as your organization’s culture and core values.
Like the name suggests a tall organization structure refers to numerous management levels in a company. A tall or vertical structure leads to a narrow span of control. Which means a supervisor has limited number of subordinates beneath him and can focus on his main responsibility. Also the few employees beneath him can be closely monitored and trained. Subsequently, in case of specialized positions this type of company structure makes the most sense.
Tall structures, on the other hand, have received some recoil in terms of lengthy and delayed decision making. The reason being authorization is necessary from a long chain of management layers. As well, one of the principal drawbacks is communication in a tall company goes through many levels. The process for essential information may get lost. As such lengthy communication procedures frequently lead to grapevine, distortion of information and miscommunication.
On the other hand the fairly flat or horizontal business structure has fewer management levels; and a wide span of control results in significant reduction in worker costs. Vertical leads to a more successful communication process. As well as faster decision making which has a direct impact on your organization’s productivity and profitability. Because if your business is democratic in nature, the flat arrangement is also believed to encourage greater team spirit. Of course, there are drawbacks. Similar to subordinates working beneath too many managers, workflow confusion due to conflicting directions and unsuitability for very large organizations.
In spite of the shortcomings, flat organizational structures have been finding more interest among management gurus. The reason being they are leaner, fitter, democratic and more suited to today’s dynamic business scenario.
These classifications, however, are somewhat theoretical; in the real world organizations use different versions of these structures. For example, some large organizations create a number of departments to manage workflow. But provide each department with greater sovereignty.
As an entrepreneur, you will need to think how effective your communications with internal personal, customers, distributors and others. The more efficient and effective you are communicating as well as your consistency in your decision making processes will allow both of these structures to be successful. Over the next few days take time to review what your current decision making procedures are. Ask yourself how you deal with unpredictable situations. Or how you successfully or unsuccessfully convey to others the needs of the business; and how you might be able to enhance those communications. At the end of the day your organizational configuration you select needs to help you in reducing the hurdles in the growth and expansion of your business. As a result, you need to choose and adapt yours depending on your specific needs.