Advantages & Disadvantages of a Vertical & Horizontal Organization

Businesses have traditionally operated using a top-down, hierarchal structure known as a vertical organization. An alternative is to implement a horizontal organizational structure consisting of fewer layers of management and greater reliance on the use of cross-functional teams. Both types of organizational structure offer a number of advantages as well as possible disadvantages.

Vertical Organization Identification

A vertical organization typically consists of a president or chief executive officer at the top and a series of vice presidents who oversee specific functional areas such as marketing, finance and manufacturing. As you move down the chain in each functional area, the level of authority and responsibility decreases accordingly.

Vertical Advantages
Vertical organizations provide clear lines of authority and a tight span of control, which can lead to high operating efficiency. In general, the organization is comprised of relatively small departments, allowing managers to closely monitor and control the activities of their subordinates. Each layer of the organization reports to the one directly above it, all the way up the chain to top management, and each layer has its own clearly defined functions and responsibilities. Employees seeking advancement within the organization also have a clearly defined "career ladder," with each layer of the organization representing another rung the employee attempts to reach.

Vertical Disadvantages
Employees at the bottom of a vertical structure may feel less valued than those higher up in the chain. Some employees may not relish the accompanying culture of politics, which places heavy emphais on pleasing the boss. It can also take a great deal of time for top management decisions to filter down through multiple layers, reducing the organization's ability to react quickly to a rapidly changing business climate. Because of the centralized control of power, weak leadership at the top can hamper the effectiveness of the entire organization.

Horizontal Organization Identification

A horizontal structure differs from a vertical structure in that there are fewer structural layers. Each department consists of several lateral functional areas overseen by an individual known as a product manager or process leader who reports to top management. For example, the product development department may consist of the lateral functional areas of market analysis, research, product planning and product testing. The product manager is responsible for the end result.

Horizontal Advantages
Employees may attain greater satisfaction in a horizontal structure due to greater freedom and autonomy. The use of cross-function teams can also lead to high levels of cooperation throughout the organization. The heavy emphasis on innovation can lead to ideas that keep the organization ahead of the competition. The absence of multiple structural layers provides streamlined communication and reporting processes, making the organization more nimble and adaptable to change.

Horizontal Disadvantages
The decentralized structure could lead to a "loose ship," as the team and project leaders have high levels of responsibility for achieving results but little real authority over their team members. A resulting lack of control can lead to finger-pointing when things go awry, which can hinder productivity, according to the Practical Management website. Organizations attempting to convert from a vertical to a horizontal structure can face challenges, as management needs to adjust to a less authoritarian and a more peer-like relationship with subordinates.