Tuesday, April 22, 2014

Vertical Differentiation

In the last byte, we discussed about horizontal differentiation and specialization. In today's byte, we look at Vertical Differentiation. 

Vertical Differentiation is the difference in authority and responsibility in the organizational hierarchy. Two broad categories could be thought off in vertical differentiation
  1. Tall, Narrow organization
  2. Flat, Wide organization
Tall, narrow organizations have greater vertical differentiation while flat, wide organization have lesser vertical differentiation.
Two components help determine the height of the organization - the level of horizontal differentiation and the span of control.
Tall structures are often characterized by closer supervision and tighter control. This also increases communication overheads as the message has to pass through multiple layers. Flat structures on the other hand have simpler communication but have reduced opportunities for promotion.
The degree of vertical differentiation affects organizational effectiveness - but one would need to consider organizational size, job types, skills, employee's personal characteristics, degrees of freedom etc when determining organizational effectiveness.
Note: Span of control refers to the number of subordinates a manager can and should supervise.

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