What’s it: A vertical organizational structure is an organizational structure with many managerial hierarchies. Organizations involve many middle layers as intermediaries between top management and bottom management. The chain of command is long, with each manager having fewer subordinates than under a horizontal structure.
Decisions must flow through many managerial layers and are therefore often slow. Likewise, communication must pass through every layer in the chain of command. In addition to taking a long time, messages and information may be distorted as they pass through the layers.
However, a vertical structure allows for a well-structured organization. Companies divide roles and responsibilities and distribute them over many layers. In addition, they also describe the job functions within them, allowing each person to specialize.
Where is a vertical organizational structure widely adopted?
The vertical structure is a rational approach for large companies. This is because they have a large organization with many employees. In addition, the operation is also complex. So, they need more managerial layers to supervise and share roles in managing the company.
Companies with a vertical structure may organize their organization by product or function. For example, an automobile manufacturer divides its organization by product line: trucks, electric cars, and passenger cars. Alternatively, it divides operations into operations, finance, marketing, and human resources departments.
Within each product line or department, the company has several managerial layers. Take the finance department as an example. The positions in the department may be in a row, from top to bottom:
- Finance director
- Vice president
- Finance division head
- Assistant manager.
What are the characteristics of a vertical organizational structure?
Having many managerial layers is the main characteristic of a vertical organizational structure. The company hires many middle managers. For example, a job title in a company might involve a director, vice president, division head, manager, and assistant manager. Other characteristics of a vertical organizational structure are:
- Authority is centralized where the higher the position, the greater the power.
- The highest decision-making is concentrated in the top-level management.
- The chain of command is long, starting from the lowest management to the top management, where each has a different level of authority.
- The span of control is narrow, where each manager has few subordinates.
- Control over subordinates is strict and requires them to comply with applicable rules and procedures.
- The communication path is long because it has to go through many layers.
- Organizations tend to be bureaucratic because they involve a lot of control and regulation.
- Lower levels receive less autonomy and delegation in managing work and making decisions.
What are the advantages of a vertical organizational structure?
More well-organized operation is the main advantage of vertical structures. The company describes the jobs and functions within the organization specifically. Such division leads to specialization, where people can focus on a particular area. Finally, it enables the company to manage large organizations effectively. Other advantages of a vertical organizational structure are:
Higher productivity. Specialization allows everyone to quickly become an expert in their working area. They can become more proficient by learning by doing and training. On the other hand, the company can also find it easier to set priorities in developing their human resources.
More promotion opportunities. The company has many positions to fill. Career-motivated employees see it as a great opportunity to advance their career and professionalism in the future. They are eager to perform at their best to get promoted. In addition, they may be reluctant to switch to another company.
More controlled operation. The company manages the organization by dividing specific job functions and encouraging adherence to rules, policies, and procedures. Thus, deviations are less likely to occur.
Better workload distribution. The company divides operations into specific tasks and distributes them among employees. So, they are less likely to get multiple tasks or roles.
Tighter control. Supervision is tighter because each manager has limited subordinates. In addition, they can provide more support to subordinates because they can be closer.
What are the disadvantages of a vertical organizational structure?
High cost is the main drawback of vertical structures. Companies must hire more middle managers, which is often costly. They have to spend more money to pay and offer benefits, which is higher than staff positions. Other disadvantages of a vertical organizational structure are:
Ineffective communication. Messages have to go through a long chain of command. Besides being slow, it might also cause the information to be distorted as it goes through the chain of command.
Slow decision. When top management has to make decisions about operations at the lowest level, it can be time-consuming as it has to go through many managerial layers. In addition, once a decision has been made, its implementation can also take a long time. This is because instructions must go through the same layer and many levels.
Conversely, suppose subordinates are empowered as under a horizontal structure. In that case, decisions are quicker because they are closer to the source of the problem.
Low job satisfaction. Indeed, work specialization allows employees to be more productive because their work area is more specific. But, because managers do not give more autonomy, their job satisfaction may be low. They do not have the opportunity to self-actualize and control their work. They have to do tasks monotonously and repetitively, making them lose motivation.
More bureaucratic. Organizations require employees to strictly adhere to rules and procedures. In addition, many managerial layers and a strict supervisory system make the company more bureaucratic.
Less flexible. Companies may find it difficult to adapt quickly to changes in the business environment. Bureaucracy and slow decision-making are among the causes.
What to read next
- Organizational Structure: Why It Matters and What are the types
- Tall Organizational Structure: Characteristics, Advantages, Disadvantages
- Flat Organizational Structure: Characteristics, Advantages, Disadvantages
- Organizational Structure By Hierarchy: Advantages, Disadvantages
- Organizational Structure by Function: Advantages and Disadvantages
- Organizational Structure By Product: Advantages and Disadvantages
- Organizational Structure by Region: Advantages and Disadvantages
- Organizational Structure by Customers: How It Works, Advantages, Disadvantages
- Matrix Structure: How It Works, Advantages, Disadvantages
- Horizontal Organizational Structure: Characteristics, Advantages, Disadvantages
- Vertical Organizational Structure: Characteristics, Advantages, Disadvantages
- Shamrock Organization: How it Works, Advantages and Disadvantages
- Project-Based Organizational Structure: Strengths and Weaknesses
- Centralized Organizational Structure: Advantages, Disadvantages
- Decentralized Organizational Structure: Advantages, Disadvantages
- Formal Organizational Structure: Characteristics, Advantages, Disadvantages
- Informal Organizational Structure: Characteristics, Advantages, Disadvantages
- Multidivisional Structure: Importance, How it Works, Pros, Cons