Due to changes in markets, competition and corporate culture, the organizational structure of many companies has become increasingly horizontal. This shift has dramatically changed traditional concepts of leadership. This article discusses leadership dynamics in horizontal organizations, how firms can promote leadership abilities and how all people can become stronger leaders in flatter work environments.

The Rise of the Horizontal Company

One significant development in recent economic history is the tilting of companies from vertical to flat organizational structures. This shift has transformed organizational grids and infrastructure from closed, hierarchical structures to increasingly open organizational architecture characterized by decentralized information storage, problem definition, solution building and decision-making.

Companies have increasingly tilted from vertical to flat organizational structures.

Vertical Corporations. Vertical corporate structures are often characterized by several key elements:

• a clearly defined corporate hierarchy with multiple, stacked organizational levels;
• a strong, vertically structured chain of command;
• highly defined roles that tend to remain stable over time, independent of external business circumstances;
• a defined decision-making process; and
• decisions are taken based on organizational position rather than individual expertise.

Horizontal Corporations. Horizontal corporate structures, on the other hand, are defined by very different factors and dynamics. Critical elements of horizontal corporate structures are:

• a more open-ended corporate structure with fewer organizational levels;
• fluid organizational structures that shift to include people of different levels and roles;
• high levels of decentralization where decisions can be taken at many organizational levels;
• loosely defined roles where people can wear multiple functional hats depending on circumstances;
• shifting roles based on organizational circumstances and objectives;
• decisions based on expertise rather than position;
• more flexible, often situation-driven reporting responsibilities; and
• greater room for improvisation.

Several factors have driven the tilt from vertical to horizontal organizational structures.

Information Age Technological Advances. Technology has been one of the critical factors driving the flattening of organizational structures. Some key technological advances responsible for driving company structural changes include:

• Advances in communication technology. The advent of many communication tools, such as Slack, has made it much easier for people across organizations to communicate directly without passing through multiple, gated vertical communication channels.
• Collaborative tools. Cloud-based platforms, such as Asana and Microsoft Teams, that foster cross-departmental work and collaboration.
• Information storage decentralization. Information necessary to make decisions has been made increasingly accessible throughout organizations. Key information to make decisions can be fed into information storage areas from all corporate levels.

Technology has been a major factor in flattening corporate structures.

Flattening Markets. Another key factor in the change in organizational structures has been flattening markets. Falling competitive barriers due to digital commerce, high internet penetration rates, and smartphones have made it far easier for companies to compete across multiple markets, often simultaneously. The breadth of market opportunity has created pressure on organizations to decentralize decision-making so they can move faster and respond to opportunities and threats more effectively.

Information Age Economy and Business Cycles. The Information Age has given birth to many new business models and business model cycles. Many of these business model cycles are designed to be agile and permit rapid business model iteration, adjustment and, if necessary, dismantling. Horizontal organizational structures are typically better suited to these business model shifts.

Information Age economy business model cycles are often designed to be flexible, adaptive and permit rapid adjustment.

Client-Centric Focus. Another factor that has had a significant role in flattening companies is that one of the consequences of increased global economic opportunity has been greater levels of competition. This has required companies to become increasingly focused on the customer experience and provide high levels of customer specialization. Given the wide differences between customers, customer journeys and situations, increasing customer specialization often requires delegating authority to a wider set of people throughout companies so they can make faster decisions based on client needs.

Workplace Culture Changes. Workplace culture changes have also influenced corporate structure modifications. One important one has been the increase in more flexible work arrangements, such as remote work options, flextime and freelancing. These changes have made organizational structures flatter.

Leadership Challenges in Flat Companies

Horizontal organizations often simultaneously face with significant leadership challenges as well as opportunities. Challenges often found in flat companies are:

Competing Leadership Visions. One significant challenge in horizontal corporations is competing leadership visions. People in different departments, and even within departments, can have very different ideas about what direction a company should take, what issues are important and how those issues should be prioritized. Differences in these visions that cannot be resolved with the framework of a company’s horizontal structure and dynamics can cause corporate gridlock.

Competing visions in flat companies can cause significant organizational gridlock.

Lack of Role Clarity. Role flexibility in flatter organizations is a two-edged sword. While it permits rapid and often effective corporate adjustment, it can also create confusion among employees regarding what they should be focused on and how they should carry out their work. This can also present career path and continuing education challenges.

Role flexibility in flat companies is often a two-edged sword.

Responsibility and Follow-Up. Different groups can align in flat organizations to solve multiple and multifaceted issues. However, these groups can disband quickly and be reassembled to address other issues that increase in priority. This fast-moving and highly malleable organizational human resource dynamic can create significant follow-up issues regarding necessary action items, internally and concerning clients.

Scalability Challenges. Business model scalability is another critical challenge in flat companies. While a horizontal structure can often move in multiple directions very quickly, its adaptability tends to generate dynamics that are hard to replicate on a larger scale. Replicability often tends to be a cornerstone of scalability.

Strengthening Flat Company Leadership

Companies can take the following steps to reduce the risk that horizontal work environments become dysfunctional and cause business value to be lost.

Company Values Reinforcement. While values are important in all companies, they are essential in flat organizations. In vertical companies, processes tend to be so well defined and repeated that a business can function effectively even if their core values are not continually emphasized. In a horizontal organization, however, if firm values are not internalized people will lack principles to guide them in different situations, particularly those they have not faced before. Because of this, horizontal companies should strive to clearly define their values and continually reinforce them.

Even in flat organizations, company leadership plays a critical role in not only articulating and highlighting examples of company values but also serving as examples of those values every day. By recognizing the challenges to the implementation of values, being sensitive to different organizational viewpoints and restrictions, and continually striving to meet the complexity of those challenges with creativity, flexibility and perseverance, all firm leaders can participate in building a wide base of organizational empathy as well as a strong and resilient culture.

Values reinforcement is a critical factor in flat companies.

Supporting Processes and Procedures. Decision-making in horizontal organizations can often become gridlocked. To reduce this risk, companies should implement policies and procedures to support horizontal organizational dynamics without overly restricting their flexibility and adaptability. These policies and procedures should include guidance regarding:

• defining issues;
• forming groups to address them;
• horizontal work processes and communication channels;
• when issues should be escalated for resolution; and
• issue and action plan follow-up.

Active Empowerment. Finally, one of the most critical factors in building a successful horizontal organization is that people understand that they are not expected to blindly follow the directions of others but they can also be leaders. This comes, first of all, from making it clear to all employees that their views matter and that they will be supported to propose courses of action to make the firm better.

A second component of decentralized leadership empowerment is education and training. While some people naturally have more leadership skills than others, leadership can be taught. Firms should strive to give employees the tools they need to strengthen their leadership capability, regardless of their title. This includes guidance regarding:

• firm strategy;
• the capabilities of different firm teams;
• seeing leadership opportunities;
• working within and across departments to build solutions;
• creating follow-up procedures so that selected courses of action are successfully implemented; and
• creating review mechanisms and feedback loops so leadership abilities and approaches can be constantly improved.

Conclusion

The shift in many companies from vertical to horizontal structures will likely continue to accelerate. This shift will significantly alter firm organizational dynamics and create many leadership opportunities and challenges. By remaining conscious of these dynamics and helping all firm employees see and take advantage of leadership opportunities, firms can strengthen employee engagement, increase their competitive ability and build corporate value.

Special thanks to Felipe Custer for the excellent input on this article and for providing the photo.