December 27, 2022

The Difference Between Horizontal & Vertical Organizations

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The business world contains a wide variety of structures and models, but two basic forms can be used to define the structure of most organizational charts: vertical and horizontal. Whether your company follows a vertical or horizontal structure affects everything from how your leaders make decisions to what project management software you choose. In this guide, we’ll explore the difference between horizontal and vertical organization and offer tips for choosing between them.

What Is a Vertical Organization?

Vertical organizations feature well-defined leadership at the top of the entire organization whose influence filters down to middle management and department heads. These middle managers then assign work to employees within their departments. Similarly, when work is complete, it goes back up the chain until it reaches a middle manager with sufficient authority to approve the work, which is then moved outside its original department to other areas of the company for quality assurance or production.

Vertical organizations emerged in the 20th century, when a significant skills gap existed between managers and their subordinates. Managers often boasted higher levels of education and were competent in the tasks their employees completed on a daily basis. Today, vertical organizational structures are often found in large companies and corporations where there are many employees spread across different levels, with chains of command that all flow up to the C-suite.

What Is a Horizontal Organization?

In contrast to vertical organizations that feature a tiered structure of management, horizontal organizations focus on skill proficiency rather than vertical hierarchy. Less division exists between upper management and skill workers. For example, a CEO might work directly with a development team in completing and approving projects, but in very technical situations, a CEO would defer to a software developer whose knowledge far exceeds that of their own.

Organizations with a horizontal, or flat, organizational structure often begin as startups with little need for traditional management. In horizontal management, titles don’t matter as much as skill, so employees without impressive positions are trusted with greater input into project decisions and given the ability to solve problems creatively. Productivity is what most concerns these flat structure organizations, making them less preoccupied with distinguishing job roles and more focused on executing their goals. However, the horizontal organizational structure can sometimes be tough to scale as the company grows and more defined roles become necessary.

What Is the Difference Between a Horizontal and Vertical Organization?

There are many key differences between horizontal and vertical organizations that set them apart from one another. Here are the main ones you need to know about:

Communication and collaboration

Communication and collaboration can look very different in vertical and horizontal organization. In a vertical team, communication is often hampered or delayed because messages have to be passed up and down the chain of commands. In a horizontal company, anyone can communicate to anyone else, which makes it much easier to get a quick response. However, this unstructured approach to communication can sometimes lead to key team members getting left out of a fast-moving dialogue.

The greater freedom of communications offered by a horizontal organizational structure also encourages more creativity and collaboration, since employees can more easily form relationships across cross-functional teams and departments. This type of cross-disciplinary project management is more difficult in a siloed vertical structure where communication is more complicated and roles are more clearly defined.

Role definitions

Roles for individual jobs tend to be more rigidly defined in vertical organizations where there is a strict hierarchy. In horizontal organizations, especially small businesses, individual employees may wear many different hats at once, fulfilling multiple jobs at once. This decentralization can lead to role confusion in horizontal teams, whereas positions and their duties tend to be very clearly defined in vertical teams.

Decision-making

The decision-making process looks very different in vertical vs. horizontal organizational structures. In a horizontal structure, employees typically have much more autonomy and decision-making power, and there is less emphasis on getting approval from management before proceeding with decisions. In a vertical structure, lower level employees typically don’t have as much input or autonomy when it comes to major strategic decisions, reducing employee engagement.

One downside of this arrangement is that horizontal teams can also make it difficult to reach a consensus for decisions, especially if everyone has been given an equal vote in the name of employee empowerment. In contrast, most vertical teams have one person or at most a handful of people making the decisions, which means that reaching a consensus is typically easier.

Both of these decision-making arrangements can also backfire due to lack of knowledge and accountability. In a horizontal structure, particularly startups, the employees may not have the necessary experience to make sound business decisions. This can also be true in vertical companies, such as when CEOs who are far removed from daily business operations make decisions that affect rank-and-file employees.

Risk tolerance

While risk tolerance can vary due to a variety of factors, on the whole, horizontal organizations tend to be willing to tolerate a higher degree of risk than vertical organizational structures, which can be both a pro and a con. Part of this lack of risk tolerance is due to the extra bureaucracy and red tape in vertical companies, which makes it more difficult to get the necessary approvals from management on riskier plans.

Should I Use a Horizontal or Vertical Structure?

Choosing a functional structure for your company is an important decision. Both horizontal and vertical team structures can work, depending on your company’s size and needs. Before you make a decision either way, you need to determine your current team structure, then review your current performance and future goals to see if your current organizational structure is working or not.

You should also consider the age and size of your company. Typically older, larger companies like corporations benefit from a more vertical structure. But younger, smaller companies may prefer a more horizontal structure. The larger a company becomes, the more difficult it is to maintain a truly flat organizational structure.

You should also think about how you want to structure growth opportunities for employees. Typically, vertical teams have a clear path to promotion since there is a strict hierarchy in place. On the other hand, it’s easier to gain new skills on a horizontal team where jobs are less defined.

Keep in mind that hybrid organizational structures are also a possibility, so you may not need to stick to one side or another. For instance, your overall company might have a vertical organization structure, but you could set up your team like a flat organization to encourage collaboration and autonomy.

Once you’ve determined if your business has a horizontal or vertical organizational structure, you may have a better idea of which project management tools will best fit your business model. You can check out our guide to the best project management software for some of our top-rated picks to get started and go from there.

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