As your small business hires employees, you need to determine your reporting structure. You could have everyone report directly to you. You could hire staff to be on the same management level as yourself. You could choose between a hybrid organizational method. Each of these situations delegates power across your company in a different way and results in different strategic approaches.
Horizontal Management System
By setting up a horizontal management structure, you spread power across your small business. Instead of you making all the final decisions, you put other people in charge of managing certain areas. Although it is important for you to be informed of major decisions, you play less of a role in certain departments. You can hire a communications manager to handle your marketing or a finance manager to handle your accounting. These employees would not directly report to you; instead, they would be on the same level as you on an organizational chart.
Pros and Cons of Horizontal Management
Having a horizontal management style makes your business more innovative and creative. More ideas are created because more people are involved in making decisions. This can also limit the number of mistakes you make because more people review and check for errors. A horizontal management style can also be inefficient. It takes longer to reach an agreement because the decision-making process flows through more people. You might even be unable to reach some decisions because a consensus is harder to achieve.
Vertical Management System
You can also choose to have a vertical management system. This means you are the ultimate boss and everyone reports to you. You hire people with specialties in each department, such as a marketing person to do your marketing and a finance person to do your accounting, but these people are not involved in the overall strategic planning of your company. You might use the information and feedback they provide, but the ultimate responsibility for all decisions falls on you.
Pros and Cons of Vertical Management
You can do whatever you want without many controls in a vertical management system. This is beneficial if you have a strong vision, know exactly how you want the company to perform, and do not want to give up control of your business. Because you are the only decision-maker, choices are selected faster, but you do not have other people to argue other ideas or help you push the boundaries of your company. Your employees are less likely to be as passionate about your company because they do not have a say in making decisions.
These two different management systems can be combined to form a matrix organization style. This hybrid method of management creates multiple channels of reporting where each of your employees has more than one manager. This management style is usually most suitable for larger companies working on several projects. You have several options when setting up your management style. Consider a horizontal style to maximize the communication within your company, or use the vertical style to set a clearer direction. Review your options about combining both methods. The choice you make changes the way your company approaches problems, develops ideas, and strategically plans for the future.