Companies organize their business operations in several ways. Some choose a horizontal organizational structure where one manager oversees many employees. Others choose a tall organizational structure where each manager oversees only a few employees, incorporating many levels of management.
A tall organizational structure offers various levels of authorization for different actions taken by managers. This structure assumes that lower level employees lack the experience and knowledge to make good decisions for the company. The structure builds in authorization levels, eliminating the potential for low level employees to make decisions that hold negative consequences for the company. A tall organizational structure incorporates a level of internal control by not allowing lower level employees to make certain decisions.
A tall organizational structure consists of several layers of management. The lowest layer includes employees with no managerial authority. These employees report to the next layer, or the first layer of management. Each layer of managers reports to the next layer of manager which culminates with the president of the company. The level of authority and responsibility increases with each layer with the final authority resting with the president.
A tall organizational structure offers several advantages to companies. With several layers of management, the company is able to promote more employees to management positions. Employees who see potential growth opportunities tend to work harder as they strive for higher level positions. Senior management is able to groom employees for future moves into senior management positions. As the employees progress up the corporate ladder, they acquire the experience necessary to make bigger decisions for the company. Finally, the company limits the span of control held by managers at each level. Senior management maintains the greatest level of control while the lower management levels enjoy much less.
Tall organizational structures also offer disadvantages compared to other types of structures. With so many layers, tall organizational structures stifle the ability of employees to act when they see a potential issue or opportunity. Instead, the employee must contact his manager regarding the issue before taking action. If his manager is not authorized to make a decision, the manager must move up the chain of command until an approval is received. By this time, the opportunity may have passed, or the issue may have escalated. A disconnect between mid levels of management and employees can also develop. Managers who are several layers away from employees find difficulty in relating to them.