The Disadvantages of Tall Types of Organizational Structure

"Tall" or "vertical" describes organizational structures with several hierarchical layers. The bottom of such structures features a wide employee base. A narrower middle management layer sits above workers, each manager supervising some number of employees. Depending on a company's size, an upper management layer exists to supervise middle management. Atop the management layers sits the leader with the most power, perhaps an owner, CEO or president. On an organizational chart, the narrowing layers of increasing power form a triangle that centralizes power toward the top. Such organizational structures can offer control, economy, specialization and efficiency. There are trade-offs, though.

Tall organizational structures are the most traditional. The oldest is the functional structure, which organizes people and their jobs according to activities. Functions such as marketing, finance and accounting or human resources are grouped, becoming departments segregated from one another. Before dividing according to function, the divisional organizational structure first separates workers into separate units that function as if each were a stand-alone business. Divisional units might exist according to geography, product line or customer type. Divisions still report to a central authority and that central authority might retain some function, such as finance.

Increasing hierarchical layers means increasingly cumbersome communication. For the functional structure, communication is not only slow between layers but also difficult between functional departments. The layers also make for cumbersome decision-making because permissions must make their way up and back down the chain of command, even in small businesses. The communication and decisional disadvantages of tall structures result in a loss of agility and flexibility. In a dynamic marketplace, this is a sizable competitive disadvantage. The divisional structure is not as rigid as the functional structure. As far as its own particular concerns, each unit adapts more readily than would be possible without the divisions.

Though coordination within the functional departments of tall organizational structures is acceptable, it suffers between departments. Some of the problem is communication. Departments might speak their own lingo and have no real understanding of each other's concerns. They may even be suspicious of one another, making interdepartmental efforts difficult. In the divisional structure, the common bond that brings a unit together softens this within divisions, but coordination between divisions still suffers.

Tall organizational structures are rigid, with the functional structure the most inflexible. The chain of command means a high level of control. Jobs are strongly delineated, resulting in specialization and a mechanized approach to accomplishment. These features mean creativity, innovation and individual initiative do not find a fertile environment in vertically oriented structures.

By grouping like activities together, the functional organizational structure saves through economies of scale and efficiencies. A disadvantage of the divisional organizational structure is the duplication of functional departments among divisions. This duplication means losing one of the advantages that tall organizations ordinarily gain.