An organisational structure is the process by which work flows through an organization and enables each of its divisions to work in conjunction and manage their individual tasks. These divisions in turn are grouped by their individual functions. The employees are organised in groups to represent different layers of management. The business strategy of a company involves the manner in which all its divisions coordinate with each other so that it can achieve its maximum performance. In other words, the organizational structure of a business goes a long way in determining how successfully it can carry out its strategy and objectives. Organisational structure influences not only the overall decision-making process but defines how power is held and exercised within a company. It affects how the employees work together. Deciding on the right organizational structure of a company or a business is crucial as it has an immense impact on its future. Factors such as team collaboration, productivity, and employee satisfaction are all determined by effective hierarchical structure within an organisation.
Organisational structures used in businesses are mainly of two types – vertical (or tall) and horizontal (or flat). Vertical businesses are characterised by a strong hierarchy against a horizontal organizational structure that has only a few layers of management. Vertical businesses are like a pyramid where the executives at the top have the ultimate power in making major decisions while delegating work to lower level management. Horizontal or flat companies on the other hand have little-to-no emphasis on hierarchy and seniority. They work in cross-functional teams and power is distributed more evenly among people.
Information in vertical companies moves from the top of the hierarchy to the bottom whilst at the same time breeding a highly supervised and low-autonomy environment. On the other hand, in a horizontal organization, the communication is short and constantly moving between all sectors of the organization. Here there are a few managers and power is shared more broadly while all members of the organization are perceived to be equal. There are appreciable differences between a horizontal structure and a vertical one, each with its own advantages and disadvantages. The vertical structure had been a widely used setup until recently. The last two decades are seeing a shift in the way companies operate what with a lot of changes happening in the socioeconomic arena. As companies continue to evolve, businesses seem to be open to a more flexible and less formalised approach that comes with a horizontal or flat leadership.
With small businesses and startups increasingly opting for the horizontal organizational structure, let us discuss the power of horizontal organisations to drive the future workplaces:
1. Greater Employee Satisfaction: Being employee-centric, a horizontal structure gives employees a greater control over their roles as compared to a traditional vertical setup. With the absence of a strong hierarchy, power is distributed more evenly among people. Fewer levels of seniority means a short chain of command and this offers employees more autonomy within a business. Less dominance and supervision leads to fewer conflicts and that gives employees more freedom. This in turn leads to greater motivation and productivity. Without the presence of strict lines between positions, employees have the flexibility to expand their roles. They can freely move between projects as well as initiate projects of their own which can help bring work fulfillment as well as improve employee morale.
2. Optimum Use of Resources: A horizontal structure facilitates an efficient use of resources since different departments do not adhere to strict boundaries, thereby leading to fluidity of movement and greater exchange of resources. When there is a scarcity of a specific resource, business goals are met by communicating and collaborating with another unit to fulfil the requirement of that resource. For e.g., different teams can share software products or database applications whenever feasible instead of buying additional licenses of those products.
3. Specialisation: In a horizontal structure, employees with similar skills and knowledge are grouped together. This allows the employees to improve their skills and continuously upgrade themselves in their field of specialisation leading to long-term professional development. This will boost employee motivation as well as help companies retain their employees as the workers will focus on developing themselves professionally and grow along with the company. Employees gain confidence in their skill sets and carry out tasks more quickly, efficiently, and confidently. Having a team with in-depth knowledge and expertise helps a company achieve its long-term functional goals.
4. Flexibility and Agility: Horizontal leadership is an informal type of organizational structure that puts less emphasis on departmentalisation or job titles and more emphasis on skills. It facilitates communication and decision-making among employees which in turn enables them to adapt quickly to changing business needs and allow for growth. Since they are allowed to make decisions as much as possible, they are more aware of a company’s overarching goals and objectives. Hence they can easily respond to frequent changes and pivot their strategies as needed. Due to a higher level of coordination and flexibility between employees, it is easier to reconfigure systems and facilitate important projects. There is potential for more innovation since employees aren’t constrained by their departments and can easily share their knowledge and make decisions.
5. Improved Communications: Fewer layers of management help employees communicate their needs and concerns better with relevant parties. Information is better relayed as the organizational structure is based on direct contact. Since there are fewer departments, there are fewer opportunities to misinterpret feedback or ideas. As the emphasis is more on teamwork and collaboration, individual employees have greater access to managers which makes it relatively easier to share ideas, request resources, and present improvements to existing processes.
6. Faster Decisions: In a horizontal organization, decisions can be implemented faster since they go through fewer managerial layers. Often the team understands developments as soon as they happen and hence, they can quickly dedicate resources and create effective strategies for handling the changes.
7. Lesser Cost: Elimination in multiple layers of middle management can save labour cost and boost savings since managers cost more than rank-and-file employees.
8. Innovation and Creativity: Autonomy allows employees feel more comfortable in sharing their ideas and opinions without the fear of not having a turn to speak up. When team members are allowed to think outside their respective areas and make decisions, it encourages employees to rethink traditional modes of thinking in other applications of their work as well. Dispensing with the traditional reporting expectations inspire creative ideas and maximizes their best ability to make decisions based on the needs of the entire company. Creativity and productivity are enhanced with this healthy exchange of thoughts and opinions making the employees effective team players as well as independent thinkers. With a working environment conducive for personal growth and group interaction, a horizontal leadership promotes greater innovation within the company. Hence with continuous learning and training across different groups, employees strive to rethink standard business practices and become more efficient workers.
