Startup Organizational Structure: Which is Better? Horizontal? Or Hierarchical?

The way an organization is managed has a tremendous effect on its future success and in maintaining its position. A business organization structure also affects the way customers take the business and overall culture of a particular business. Thus, the organizational structure must be chosen very wisely and keeping many factors in mind. It is observed that most company first use the horizontal organizational structure and with the passage of time and growth of the company, they prefer using hierarchical organizational structure. Implementing the vertical organizational structure helps the company in competing with other companies operating all around the world.

Organizational structure can be defined as the method in which information flows in an organization. Not only does it help in the flow of information it also helps in overall organization of a company. It also determines the nature of leadership that a company flows. An organization chooses among hierarchical or horizontal organizational structure for better management.

Startup Organizational Structure: Which is Better? Horizontal? Or Hierarchical?

Difference between Horizontal and Hierarchical organizational structure

A horizontal organizational structure is the one having no or fewer levels of management. In a horizontal organizational structure, the top-level managers can give direct orders to the lower levels. This structure is also known as a flat organizational structure.

A hierarchical organization is very different than a flat or horizontal organizational structure and contains many levels of management. Here the top-level managers like CEO cannot directly communicate with the lower level employees. If the top-level managers have to convey any message, it will flow through many levels to reach the lower level.

Though both the organizational structure is different, both of them are having their advantages as well as disadvantages. So let’s know about the advantages and disadvantages and then decide which one is best for any startup.

Advantages of flat or horizontal organizational structure

A horizontal organizational structure helps in elevating the level of responsibility of an employee. As a horizontal organizational structure has no or few levels of management, decisions in this organizational structure are taken quick as it removes any unnecessary level. Even the process of decision making becomes easy as it involves very fewer people. This organizational structure also helps in reducing the budget of the company as it needs fewer people thus less salary.

Disadvantages of flat or horizontal organizational structure

As in horizontal organizational structure, there are no or few managers; employees often get confused when it comes to reporting their work. In a flat business organizational structure there will a huge number of generalists but very few specialists. Thus, the job quality may not be perfect sometimes. A flat organizational structure is also not able to take advantage of the growth opportunities and thus they often fail to expand.

Advantage of Hierarchical organizational structure

The different levels of the management as well recognized by employees and the authority level is also maintained. In a hierarchical organizational structure, employees are given equal opportunities to get promoted and gain success in their career. There are many specialists in this type of structure as employees develop a tendency to narrow down their field to become an expert in a single area. Employees working in a hierarchical organizational structure are comparatively loyal to their respective departments than those working in a horizontal organizational structure.

Disadvantage of Hierarchical organizational structure

The communication between each department is generally weak in a hierarchical organizational structure as compared to a horizontal organizational structure. Often it is noticed that employees working in different department tend to develop a relationship of rivalry which affects the productivity of the organization as a whole. In this type of organizational structure decision making is a very lengthy process and thus requires a more time as compared to a flat organizational structure. As the organization includes a huge number of people, budget of the company is also high comparatively.

Thus, we can conclude by saying that both the organizational structures are having their own brighter and darker side. The decision of choosing a particular organizational structure depends on the organization’s future goal and many other factors. If a company’s priority is to expand its reach in the market in future them, it should surely choose hierarchical organizational structure. Whereas if the goal of a company is to reduce its budget it should go for horizontal organizational structure. When it comes to a start-up, the horizontal structure is given more preference as the generally the budget of any start-up is very low.

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