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Identify the main types of structural differentiation.

Horizontal Differentiation:

This is dependent on the number of job titles or departments across an organization. It involves division and grouping of work and activities. It is manifested in work roles, departments, and divisions. There are two main ways of grouping organizational activities into departments or units

  • Functional structure: Based on main functions of the organization, grouping together people on basis of shared skill (like marketing, R&D, finance, manufacturing). This structure encourages specialization (skill and capability development) and thus, promotes economies of scale. There is also peer support and supervision. Senior managers equally benefit from specialization.

  • Divisional structure: Departments represent the needs of different products, markets, or customers. This structure is useful in large organizations with product and market diversity. It also retains specialization advantages of U-form, because there are functional experts to support each division.

Vertical Differentiation:

This differentiation is concerned with the amount of ‘depth in the organization structure – tall or flat organization. The key dimension assessed is the span of control (i.e number of subordinates that a manager can direct effectively). In this regard, a narrower span control results in high vertical differentiation (a tall organization). Similarly, a wider span creates a ‘flatter organization (lower vertical differentiation).

In vertical differentiation, tall structures mean closer supervision of subordinates and hence tighter controls (centralized control). A disadvantage of this is that communication and co-ordination become more complicated due to number of levels. On the other hand, flat structures mean shorter and simpler communication (fewer levels makes communication easier). The control in this case is decentralized. A disadvantage of flat structures is that there is potential for information overload and loss of control.

What challenges to managers does differentiation pose?

Challenges of Vertical Differentiation

The vertical model requires considerable effort to maintain the power and balance. Therefore, this organizational structure rarely works without string leadership at the top. Further, departments in vertical organizations often develop a narrow view of the organization and consider singular goals of the department more important than the company’s goals. Additionally, vertical companies lack the transparency of a horizontal structure with many levels of management. On the other hand, organizational management typically find the horizontal structure much harder to implement, especially as the business grows. Project managers can also become frustrated by their lack of authority (Bass 2015).

It can take a great deal of time for top management decisions to filter down through multiple layers, thus, reducing the organization’s ability to react quickly to a rapidly changing business climate. Because of the centralized control of power, weak leadership at the top can hamper effectiveness of the entire organization (Joseph 2015).

Moreover, the time it takes for decisions to be approved means companies with vertical structures are slow moving. In an unpredictable market environment, this poses a problem for tall organizations trying to compete against more nimble competitors (Johnson 2015).

Challenges of Horizontal Differentiation.

Horizontal differentiation is supposed to enable people to specialize and become more productive. However specialization often limits communication between subunits. People develop subunit orientation. When subunit orientation occurs, communication fails and coordination becomes difficult (Jones 2015).

The decentralized structure could also lead to a “loose ship,” as the team and project leaders have high levels of responsibility for achieving results but little real authority over their team members. A resulting lack of control can lead to finger-pointing when things go awry, which can hinder productivity. Organizations attempting to convert from a vertical to a horizontal structure can face challenges, as management need to adjust to a less authoritarian and a more peer-like relationship with subordinates (Joseph 2015).

Horizontal differentiation also increases the likelihood of conflicts between departments as the responsibility of departments are interdependent. There may also be difficulty in coordinating the activities of different departments. Horizontal differentiation maximizes supervision costs, which is negative for running the organization (Management at Sight 2012).

What integration methods do successful organizations use in response to these challenges?

The key integration methods include (Jones 2015):

  • Implementing a hierarchy of authority: This assists in dictating who reports to whom

  • Direct contact: Managers meet face to face to coordinate activities

  • Liaison role: In this case, a specific manager is given responsibility for coordinating with managers from other subunits on behalf of his or her subunit.

  • Task force: Here managers meet in temporary committees to coordinate cross-functional activities.

  • Team: Managers meet regularly in permanent committees to coordinate activities.

  • Integrating role: A new role is established to coordinate the activities of two or more functions or divisions.

  • Integrating department: A new department is created to coordinate the activities of functions or divisions.

In addition to this, managers facing the challenge of deciding how and how much to integrate must (Jones 2015):

  • Carefully guide the process of differentiation so that it develops the core competencies that give the organization a competitive advantage.

  • Carefully integrate the organization by choosing appropriate integrating mechanisms that allow subunits to cooperate and that build up the organization’s core competences.


Bass, B. (2015). Advantages & disadvantages of vertical organizational design. [online] Available from: <> [3 Nov. 2015].

Johnson, S 2015, Disadvantages to a vertical organizational structure. [online] Available from: [3 Nov. 2015].

Jones, G 2015, Ch04 — Organization theory design and change Gareth Jones. [online] Available from: <> [3 Nov. 2015].

Joseph, C 2015, Advantages & disadvantages of a vertical & horizontal organization. [online] Available from: <> [3 Nov. 2015]. 2012, Principles of Management: Advantages and Disadvantages of Horizontal organizational structure. [online] Available from: <> [Accessed 3 Nov. 2015].