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Businesses often start with a few employees reporting to the owner. As businesses grow, they need more employees to service the customers and hire more personnel. As the company adds employees, it needs to decide what type of organizational structure to use. The organizational structure determines the number of managers, the number of management levels and the reporting structure for all employees. Companies choose between horizontal organizational structures and vertical structures.
A horizontal organizational structure uses only a few managers with many employees reporting to each one. Since each manager oversees the work of many team members, she only exercises limited control over the work of each. The employees assume a greater role in managing their own time and completing their work. Only a few levels of management exist in this structure. For example, three managers might oversee the work of60 employees. These three managers report directly to senior management.
A vertical organizational structure uses several managers with only a few employees reporting to each one. Since each manager oversees the work of only a few team members, he exercises greater control over each employee's work. The manager assumes a greater role in managing his employees' own time and ensuring that they finish their work. Several levels of management operate in this structure. In this structure, a manager might oversee the work of four employees. This manager reports to a higher-level manager who reports to another higher-level manager who reports to another manager who reports to senior management.
