Vertical or Flat?

What as an entrepreneur was your original organizational decision you made? Most, myself included made a decision revolving around accounting or something to do with internal procedures or else maybe it was something to do with the product or service you would be selling. If you are like the majority of small companies one of the far-off decisions you seldom contemplate when you go into business is how you are going to organize your company as it grows.

Choosing your organizational formation is a strategic decision that calls for a thorough evaluation of your options but before this decision you need have faith in that what you are creating will grow and becoming 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, the reply is simple – you will not simply add a bit of knowledge but possessing this knowledge will actually assist your business’ evolution. The further you contemplate and focus on what your business looks like ‘big’ the better your internal processes and policies develop into when you are starting out. Your business’ foundation is critical to its success no matter how big or small it might be.
Today we are going to concentrate on two structures even though there are different models you can select from as well as hybrids, they can basically be categorized into “Tall” and “Flat” hierarchical set ups. Of course, both have their own pros and cons, and the one that’s true for you would 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 amount 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 more sense.

Tall structures, on the other hand, have received some recoil in terms of lengthy and delayed decision making as authorization is necessary from a long chain of management layers. As well one of the principal drawbacks is that communication in a tall company goes through many levels and in the process essential information may get lost and such lengthy communication procedures frequently lead to grapevine, distortion of information and miscommunication.

On the other hand a fairly flat or horizontal business structure in which there are fewer management levels and a wide span of control results in significant reduction in worker costs. It leads to more successful communication and 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 it also has 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 favour among management gurus. The reason being that 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 a lot of sovereignty.

As an entrepreneur, you ought to be thinking how effective your communications are with internal personal, customers, distributors and others. The more efficient and effective you are communicating as well as how you are consistent in your decision making processes will allow both of these structures to be successful. Over the next few days take a bit of time and review what you’re current decision making procedures are, how you deal with unpredictable situations, how you successfully or unsuccessfully convey to others the needs of the business and how you might be able to enhance the 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.