Different organizational structures tend to produce certain kinds of behavior in the people who work within them. The nature of organizational behavior of this sort is important in a company's performance. Different organizational structures will produce different kinds of companies that each have strengths and weaknesses. By understanding better the nature of organizational behavior, you will take a great step toward understanding how companies are run.
The traditional form of organizational structure, as it was outlined by the sociologist Max Weber, involved a hierarchical structure that worked vertically. This means that one level of management reports up to another, and so on throughout the organization. This form of organization produces a more rule-bound form of behavior; people learn their places as parts of a greater whole. Weber compared this kind of organization structure to a machine.
Horizontal organizational structures are less common in the business world since the Industrial Revolution but have become more feasible since the advent of information technology. In this structure, there is little to no hierarchy of management, and all parts of the system interact with each other. The behavior of this sort of organization is likely more anarchic, as more people feel individual autonomy and independence. Culture is more important than formal rules.
Centralized organizations concentrate more power in fewer hands. This often allows the management of an organization to be more flexible and dynamic as there are fewer dissenting voices that matter. This sort of management has less need of consensus when implementing change. This does not always result in a more dynamic company, however, as centralized management can often become set in its ways and less responsive to the overall knowledge possessed within an organization.
Decentralized organizational structures diffuse decision-making throughout an organization. This makes top-down management a more difficult matter, as to implement any strategy or change there must be a fair amount of consensus. These sorts of organizations can produce dynamic companies, however, as the different parts of an organization all implement their own policies and changes based on their local knowledge.