Business organizations follow a variety of structures and models. Unlike a physical structure which is usually static, an organizational structure is a dynamic system. It outlines how activities are directed in order to achieve the business goals of an organization. Activities can include rules, roles and responsibilities. The structure also determines information flow, as well as workflow from level to level.
Most business organizations are set up either vertically or horizontally. A vertical, or centralized, business structure, for example, make decisions that flow from top to bottom. In contrast, in a horizontal, or decentralized structure, decisions are made at various levels. The type of structure also directs how an organization manages projects and get results.
Traditional businesses are usually vertical organizations that have a well-defined leadership structure at the top. Their influence flows down to middle managers and department heads. In turn, middle managers assign tasks to employees within their departments. When an employee completes a task, it is presented back up the hierarchy, until a manager with sufficient authority approves (or rejects) the work. The approved work is then moved out of the originating department, and to other areas of the business for further testing or for production.
Command and Control Project Management
In the past, vertical organizations usually follow a command and control style of project management. Like the business hierarchy, this project management method involves a senior-ranked professional who assigns tasks with specific guidelines. Employees who received the work have to comply exactly as directed, with very little room for deviation. The reason for this strictness is that the project manager is usually an expert, with ample experience and higher levels of education. He or she is competent in the tasks that employees do on a daily basis, and has already determined the best way to complete the task. Another reason is to prevent scope creep, which can delay the project, and/or blow up the budget.
Drawback and Challenges of Vertical PM
When the global economy transitioned to a knowledge economy in the late 1900-2000’s, startups began to outperform organizations that utilize command and control project management. Innovation rivaled production capability as a key competitive edge, allowing newcomers with flatter organizations to directly compete against veteran companies with vertical organizations. In response, vertical organizations developed and follow a waterfall methodology, where workflows through different departments until it reaches an endpoint. Work takes place sequentially, and tasks are dependent on prerequisites that needs to be completed first. It has more room for deviation, but allows for limited collaboration between different types of workers.
Horizontal organizations focus on skill proficiency rather than a management hierarchy. Fewer divisions exist between executives in senior positions and the staff. In smaller companies, a CEO with industry experience might work directly with a software development team. However, in technical questions and situations, he or she will usually defer to the most senior software engineer. Horizontal organizations are seen in startups, with a priority for project delivery rather than traditional management. All employees across the organization are given more or less the same trust and opportunity for input into project decisions. Productivity and achievement of goals are higher concerns, so the ability to solve problems creatively is encouraged.
Agile Project Management
Because of the flatter and more fluid structure of horizontal organizations, a more agile style of project management works better. It allows work to be completed iteratively rather than sequentially. The project team completes various portions of the project. They test their product together with end users, and then gather feedback from customers to keep the requirements of the project relevant and defined. The iterative testing used in this project management style allows teams to continuously gather updates and make adjustments accordingly. Agile project management works well with horizontal organizations because the completion of the various portions of the project do not have to be dependent. Team members can also work in a cross-functional capacity, which results in greater value.
Drawback and Challenges of Horizontal PM
Scaling, however, is difficult in agile, as is in horizontal organizational structure. As a team grows, as the company gets bigger, decision making becomes more difficult and slower, because everyone can make an input regarding the project. Scaling magnifies any dysfunction present at the team level. A greater number of teams will have more complicated cross-team dependencies, which are difficult to track and visualize. Integration of work also becomes more challenging.
Both vertical and horizontal organization structures have pros and cons. The project management method best suited for each type of organization also have their strengths and weaknesses. To increase the advantages and benefits of a specific method of project management, it will require the right set of tools, such as the right project management software. Vertical organizations that use a waterfall approach will need PM software with powerful Gantt charts and forecasting features. Horizontal organizations using agile methods will need more collaboration features. In the end, every company is unique, with unique business needs. Structures and methods exist to help users achieve their goals, and it is up to them to determine what works best.