A vertical organization structure is one that relies on managers to command and control their employees' work. A business owner is typically at the top of a vertical chain of command. There are advantages and disadvantages to a vertical structure.

The main advantage is that there are clearly defined roles and responsibilities. The main disadvantage is that the roles sometimes get so set in stone that they can hamper creativity and innovation.

A small business owner should be aware of all facets of a vertical organization structure to decide if it's the right model for the company.

Top-Down Management

If an entrepreneur is on top, he gets to transmit his ideas down the chain of command. He relies on managers in the middle to communicate and implement his directives.

Vertical structures are characterized by centralized decision-making, which might not include significant input from lower-level managers and workers. Businesses can get around this problem by encouraging workers to send new ideas via email to the business owner.

Rules and Relationships

Rules typically govern the levels of authority in a vertical structure. Employees use an organizational chart to understand the reporting relationships. Managers use organizational rules, often set by the owner, to understand how much authority they have. To some degree, managers are responsible for all employees below them in the vertical structure. At the bottom, line managers supervise the work of their workers.

Relaxing the Rules

Although small businesses do not operate in a context like the military where vertical control is essential for survival, some businesses find it beneficial to find ways to keep a vertical structure and maintain their competitive advantage.

Reporting relationships might stay the same, but managers can change their approach to management.

They develop a culture in which employees feel respected and included, and where the structural boundaries do not deter the flow of ideas and communication. They set a high value on people, not products.

If employees are treated as equals and their ideas are used, they're less likely to feel hampered by their positions in the vertical hierarchy.

Surviving in Evolving Markets

Vertical structures are efficient because of their clear reporting relationships, but they often aren't flexible enough to survive in evolving markets. In these cases, a small business owner should implement an organizational change – or at least a significant shift in how the company operates – by getting the initial support of managers and technical experts to new ideas and approaches.

If managers and experts support the structural change and contribute their ideas to the planning phase, they can more effectively lead their employees through the process of the change.