The Difference Between Vertical & Horizontal Business Organizations

There are a number of considerations, including advantages and disadvantages, to make when choosing between a vertical and horizontal business organization. Since the industrial revolution, businesses have taken the form of vertical organizational structure.
Vertical business organizations have many levels of management and supervision with a long chain of command running from the top of the organization down to the bottom of the organization. Typically, vertical business structures seldom exceed eight levels of management, because the increasing number of management layers diminishes the span of control and the disadvantages begin to outweigh the advantages of a vertical structure. Vertical business organizations have been the norm up until modern times, which has progressively given way to the horizontal business organization. Horizontal business organizations are usually smaller organizations, which has partially to do with fewer layers of management. In contrast to vertical business organization, horizontal business organizations have comparatively few levels of management.

Advantages of Vertical Business Organizations

The advantage of a vertical business organization is a clear management structure, such that the lines of responsibility and control are clear and the function of each layer will be clearer and more distinct. Also, the ladder for promotion and progression is clear. In addition, each manager has a smaller number of employees under his control, giving him a narrow span of control, which allows him to more closely supervise his employees.

Disadvantages of Vertical Business Organizations

Communication between the upper and lower layers of management must be transmitted through many layers, resulting in a redundancy and delay in communications. Thus, business decisions and actions are delayed when approval by each level of management is required. Furthermore, the quality of the effectiveness of those business decisions and actions is further diminished because of the limited freedom and responsibility of subordinate employees. In addition, vertical business organizations incur a higher cost of management because managers are generally paid more than workers and each layer of management is paid a higher salary than lower layers.

Advantages of Horizontal Business Organizations

Vertical business structures have been the norm up until modern times, which have progressively given way to the horizontal business organization. Horizontal business organizations have better and increased communication between the levels of management and subordinates. In addition, because there are fewer layers of management in the chain of command and less bureaucracy, making decisions is easier and of higher quality. Furthermore, the smaller number of layers results in lower costs to the organization in number of managers and a lower cap to their salaries. Also noteworthy is that there is better team spirit.

Disadvantages of Horizontal Business Organizations

A disadvantage of a horizontal business structure is that it may limit or hinder the growth of the organization, since upper levels management have a more direct and greater span of control of each lower layer, and taking on more departments will diminish their capacity to manage. Thus, this organizational structure typically is limited to smaller and private companies, such as partnerships and LLCs. Another disadvantage that may result, because of the broader span of control of each manger, is that subordinates may have to answer to more than one superior, which may cause a conflict in their duties or an ambiguity in their work orders. Furthermore, the function of each department could become indistinct and merge into the job roles of others.