Business organisations follow a variety of structures and models. Unlike a physical structure which is usually static, an organisational structure is a dynamic system. It outlines how activities are directed in order to achieve the business goals of an organisation. Activities can include rules, roles and responsibilities. The structure also determines information flow, as well as workflow from level to level.
Most business organisations 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 organisation manages projects and get results.
Traditional businesses are usually vertical organisations 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 organisations 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, start-ups began to outperform organisations that utilize command and control project management. Innovation rivalled production capability as a key competitive edge, allowing newcomers with flatter organisations to directly compete against veteran companies with vertical organisations. In response, vertical organisations developed and follow a waterfall methodology, where work flows through different departments until it reaches an endpoint. Work takes place sequentially, and tasks are dependent on prerequisites that need to be completed first. It has more room for deviation, but allows for limited collaboration between different types of workers.
Horizontal organisations focus on skill proficiency rather than 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 organisations are seen in start-ups, with a priority for project delivery rather than traditional management. All employees across the organisation 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 organisations, 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 organisations 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 organisational 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 organisation structures have pros and cons. The project management method best suited for each type of organisation 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 organisations that use a waterfall approach will need PM software with powerful Gantt charts and forecasting features. Horizontal organisations 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.
Article by: Jose Maria Delos Santos