INTERNATIONAL INSTITUTE FOR ORGANIZATION RESEARCH
http://www.anarchy.no/iifor.html - IIFOR P.B. 4777 Sofienberg N- 0506 Oslo - Norway


HORIZONTAL ORGANIZATION

A brief survey

by IIFOR - ISSN 0800-0220

http://www.anarchy.no/horizon1.html


I. INTRODUCTION

Briefly defined anarchy and anarchism are coordination on equal footing, without superiors and subordinates, i.e. horizontal organization and co-operation without coercion. This means practically or ideally, i.e. ordinary vs perfect horizontal organization respectively. Anarchy and anarchism mean "system and management without ruler(s), i.e. co-operation without repression, tyranny and slavery". In short an-arch-y = [(an = without - arch = ruler(s)) - y = system (included optimal order and law) and management, as, say, in monarch-y]. Anarchy and anarchism are efficient and fair system and management without top heavy societal pyramid economical and/or political/administrative - in income and/or rank, i.e. significant horizontal organization. Thus, anarchy and anarchism mean real democracy, economical and political/administrative, in private and public sector. And thus, the concept of horizontal organization is essential to the concepts of anarchy and anarchism, and here we will give a brief survey of the research front on horizontal organization.

The horizontal organization is a more appropriate model for the knowledge age. Companies increasingly find this structure more effective. The most well known book on this item of today's research front is "The horizontal organization" by Frank Ostroff (1999). He emphasizes the need to start with an understanding of your organization’s core competencies and to develop a horizontal structure from there. His fairly academic book advances a trend that is already well documented. Horizontal organizations have been covered in numerous other books, which, like this one, promote more decentralized, downsized -- especially the bureaucracy, team-oriented organizations with empowered workers. Management by objectives (MBO) or aspirations as Ostroff calls it, instead of by bureaucratic ruling, is another key-factor. Despite a leaden, pedantic writing style, Ostroff distinguishes his theoretical discussion with several detailed examples of how the horizontal organization works and how you can apply it to your company.

An earlier famous work on horizontal organization written in Norwegian language is "Alternativ til hierarkisk organisasjon" by Philip G. Herbst, Tanum-Norli Oslo 1977 -- and this book is rooted back to a.o.t. Herbst, Philip G. (1962): Autonomous Group Functioning. Tavistock, Publ., London and Emery, F.E. & Thorsrud E. (1976): Democracy at Work. Martinus Nijhoff, Social Science Division, Leiden, Holland. In the preface of Herbst (1977) it is stated: "Et av spørsmålene som er blitt stilt under samtaler om emnet for denne boka, var: "Det du sikter til, er vel flate hierarkier". Dette tror jeg illustrerer hvor vanskelig det kan være å forestille seg organisasjoner som ikke har en hierarkisk struktur... Man skulle tro det ville være vanskelig å si noe særlig nytt om byråkrati, men ut fra en sosioteknisk tilnærming blir det mulig å identifisere designprinsippene for byråkratiske hierarkier på en enkel måte. Så snart dette er gjort blir det mulig å identifisere de grunnleggende egenskapene ved et stort antall alternative, ikke-hierarkiske organisasjonsformer. Ved siden av autonome, sammensatte grupper omfatter dette matrise- og nettverksorganisasjoner. Hver av disse vil være egnet for spesielle typer oppgaver og ulike miljøbetingelser. De to siste former synes å representere nye alternativer innenfor store organisasjoner."

This statement indicates that horizontal organization may be 100% non-hierarchical or more or less flat, dependent on the situation and purpose of the organization, i.e. what is optimal horizontal organization. A studycircle may very well be 100% flat organized, but not a police corps. Also a police corps or defense corps may however be organized with relatively small rank and income differences and still be efficient, i.e. significantly flat organized, see International Journal of Anarchism 2 (38).

Horizontal organization, a bottom up approach as opposed to a top down approach, economically and political/administrative, means organization without ruler(s) - arch(s), i. e. not without management, but 1. organization with significant small income and rank differences, 2. empowered workers with significant influence and freedom within a framework, and 3. real democratic control one way or the other. It is not a system where the management takes orders from the workers, unless the case with 100% flat organization. A horizontal organization has a degree of flatness, an anarchy degree, between 50 % and 100 %, the anarchist ideal. Workers mean the frontline in an organization.

Here we will only discuss horizontal organization for firms within private and public sector. Also a country seen all in all may however be horizontally organized, be real democratic, i.e. anarchy. Today there are three significantly horizontally organized countries in the world, Norway, the Swiss Confederation and Iceland, see Norway and Switzerland: Anarchies ... and Anarchism in Iceland. Also relevant in this context is an IIFOR research report about horizontal industrial organization, where decentralization, also geographically, autogestion and to avoid concentration of market power are among the key-factors.

Experience shows that external consultants who are specialists in horizontal organization often are necessary for optimal development.

Ostroff discusses the typical horizontal organization and this is not 100% flat or close to, but still has a significant degree of flatness, so it is of course horizontal and not vertically organized. He also discusses mixes of horizontal with vertical, hierarchical organizations. We will take a closer look at Ostroff's work:

II. THE HORIZONTAL ORGANIZATION

What the Organization of the Future Actually Looks Like and How It Delivers Value to Customers

A review and comment to the book by Frank Ostroff (1999).

The vertical/functional hierarchy has been the mainstay of business since the industrial revolution. But it has its problems. In fact, the vertical design all but guarantees fragmented tasks, overspecialization, fiefdoms, turf wars, the urge to control from the top -- all the negatives that foster organizational paralysis. In The Horizontal Organization, Frank Ostroff provides companies with the first truly viable alternative to the age-old vertical alignment. Indeed, he offers nothing less than the first full view of what the organization of the future looks like and how it works.

The concept of horizontal organization has been hailed in Fortune as "a model corporation for the next fifty years" and in a Business Week cover story as "the real thing." But until now, management books have offered only piecemeal accounts of what the organization of the future might look like. Ostroff, a key developer of the concept of the horizontal organization, offers the first workable road map. He describes what the horizontal organization is, what it looks like, why it is important, how it helps improve performance, where it is appropriate, and how to develop it. The book contains real case examples that show how major international corporations (and one federal agency) have used Ostroff's concepts to meet their competitive goals. For instance, we see how Ford Motor Company's Customer Service Division turned to the horizontal organization to meet a highly ambitious goal -- to get the customer's car fixed right, on time, the first time, at a competitive price, in convenient locations.

We see how a horizontal design radically improved the performance of OSHA (the federal agency that oversees occupational safety), transforming it from a bureaucratic enforcer of regulations to a proactive problem-solver in a concerted effort to improve working conditions and save lives. And we see how Xerox combined both vertical and horizontal designs successfully, a case that underscores when a firm can best use the horizontal organization to achieve their goals. Ostroff also looks at a General Electric plant in North Carolina, Motorola's Space and Systems Technology Group, and the home finance division of Barclays Bank, highlighting how these major corporations have also used the horizontal organization to radically improve productivity.

Many successful business books, such as Reengineering the Corporation and Beyond Reengineering, have given managers only a piece of the puzzle. Ostroff gives us the complete picture. The Horizontal Organization offers the first usable roadmap to the twenty-first-century firm. It is a book everyone who desires to radically improve the performance of their organization will want to read.

Frank Ostroff is a key developer of the "Horizontal Organization" concept which has been featured in such publications as Business Week (cover story), Financial Times, Fortune, and Information Week (cover story). He has as mentioned worked directly with leading organizations in the high-technology, industrial goods, and financial services industries as well as the public sector to dramatically improve their performance. He has been a keynote speaker at leading business conferences and academic institutions worldwide. Considered one of the world's leading new thinkers on business issues, he lives with his wife and children in Washington, DC. (1999)

When the home finance division (HFD) of Barclays Bank conducted market research, it found that moving ranked just behind death and divorce in terms of stress. To relieve customers from some of the anxiety that accompanies home-buying, Barclays' HFD concentrated on delivering end-to-end mortgage services. Today, in addition to traditional mortgage offerings, Barclays' HFD customers can get legal and relocation assistance.

The market research Barclays' HFD conducted led to more than the creation of innovative product offerings. To actually provide such products, the division reorganized itself as a fast-moving, cross-functional entity comprising teams grouped by region rather than by functions. In The Horizontal Organization, Frank Ostroff uses Barclays' HFD and other examples to argue compellingly against the vertical, function-based orientations that exist in most businesses. While Ostroff acknowledges that vertical organizations can and do perform well, he insists that horizontal organizations work better. Where function-based companies experience fragmented processes, overspecialization and top-down control, horizontal companies boast of the ability to respond fast to market forces, empowered and committed employees, and improved productivity.

Using the case studies of organizations as Xerox Corp., the Occupational Safety and Health Administration, and Ford Motor Co., etc, Ostroff elaborates on the nuances of horizontal organizations. For example, each of the aforementioned organizations still clings to vestiges of its function-based heritage to one degree or another. At Xerox, for example, the chief executive is the final arbiter of strategic decisions made by every business group. And though the organizations Ostroff profiles embrace the horizontal concept in different ways, there are shared characteristics: Teams constitute the fundamental operating unit, and process owners (either a team or an individual) are responsible for an entire core process. Above all, horizontal organizations focus on customers-internal metrics have no relevance unless they contribute to the "value proposition" delivered to customers.

In the quest for flatness Ostroff considers information technology central yet largely supportive. When implemented correctly, Ostroff argues, IT should accommodate a more horizontal structure by making information available on a real-time basis, supplying tools to identify and track problems, creating best-practice knowledge bases and enabling effective collaboration. In and of itself, writes Ostroff, IT will not engender an intense customer focus if business processes are not organized accordingly.

Books about reorganizing businesses into flatter, less bureaucratic animals abound. But Ostroff's book is refreshing because of front-line, firsthand employee accounts. At a General Electric plant in Salisbury, N.C., for example, automated equipment operator Harold Driver tells how teams must often train new managers in coaching and listening skills.

Ostroff is also brutally candid about the difficulty of transitioning to a more horizontal structure. The real challenge is to convince employees that they can personally benefit from the change. Getting employees to do that is always a task of Herculean proportions. While Ostroff presents visions of what organizations can be like once they become horizontal, he offers no specific prescriptions for winning the hearts and minds of employees. Perhaps a complementary book to this one is Dale Carnegie's How to Win Friends and Influence People, Megan Santosus writes in a review of Ostroff's book.

Ostroff’s "Horizontal Organization" is structurally opposed to the classic "Vertical Organization," the backbone of corporate America and Europe. The central premise: the inflexibility and fragmentation inherent to the vertical system can be avoided by collapsing middle- and lower- managers and frontline workers into problem-oriented, synergistic teams.

Claiming that most companies are not ready for horizontalization, Ostroff suggests a transition period, during which a steering committee is in constant assessment of objectives met and missed. Ostroff clearly states that the task is both a top-bottom and bottom-top process. "Both the change effort itself and the new organization born from the old must have full top-down, bottom-up, and cross-functional commitment." Ostroff (1999). This mixed approach of change is somewhat similar to the industrial collectives in the Spanish Revolution 1936-39 where the engineers joined the frontline workers in syndicalistically managed factories, but Ostroff's approach is not limited to syndicalistically run firms. His organizational principles are rather general and may be used for several purposes including autogestion.

This new approach implies that workers, like managers, will need to become more flexible, tackling shifting responsibilities and undertaking a certain amount of re-education and retraining. Probably the shift brings a certain amount of workers empowerment. Taking a vertical/hierarchical organization and eliminating middle management does not make a horizontal organization. The skills possessed by middle management, to collect and analyze, to ensure corporate vision is met and referral to the most relevant decision makers are required in any organization. In a true horizontal organization, these are performed either by front line personnel or senior management, depending on appropriateness. None of these skills come naturally. They require, talent, education, training and practice. In a horizontal organization, attention is paid to making sure that these skills are present. This takes time, planning and work.

There is an insistence on "teamwork," but Ostroff never clarifies the immediate relationship between the middle management and the workers in the teams. Ostroff’s horizontal world is populated by satisfied customers, fulfilled middle managers, and happy workers, his thesis made evident by his (mildly generalist) case studies. The reader would have difficulty arguing that a horizontal system isn’t more "humane" (Ostroff’s descriptor) than a vertical one, and some of Ostroff’s ideas do have a vaguely socialist flavor. But the reader is left wondering how success is measured in the horizontal organization. By its feel-good humanity or its bottom-line profitability? The keyword in this context is increased productivity, a main aim also in anarchist systems. Ostroff's models of horizontal organization in private and public sector may be a libertarian element within liberalistical as well as marxian systems, as well as a part of anarchist systems, also of a high degree of anarchy.

The Horizontal Organization, by institutional-change specialist Frank Ostroff, is a blueprint for the future development of public and private infrastructures that have outgrown the vertical, or "top-down," hierarchy that has been standard in the business community since the onset of the Industrial Revolution. "It is increasingly apparent that the long-favored vertical model is, by itself, no longer capable of meeting all the different needs of business," Ostroff writes. "It has been rendered inadequate for today's demanding competitive, technological, and workforce environments by its inherent shortcomings." The time is therefore right, he continues, completely to overhaul this outdated corporate structure and prepare for the next 50 years as some major establishments -- such as Ford Motor Company's Customer Service Division, Xerox, and the federal Occupational Safety and Health Administration (OSHA) -- already have done.

Through well-reasoned arguments and the help of these and other real-world examples, Ostroff convincingly shows how his concepts might be employed to eliminate bureaucracy, improve productivity, and solve common long-term organizational problems. And by presenting the entire picture where only small pieces have previously been revealed, he makes a compelling case for radical change in the corporate world as well as in the public sector and non-profit universe, says Howard Rothman in a book review. Ostroff provides firms with the first truly viable alternative to the age-old vertical alignment of businesses, and presents a view of what the organization of the future looks like and how it will work.

III. KEY CONCEPTS OF HORIZONTAL ORGANIZATION

In this chapter we will present the key concepts in Ostroff (1999). In the book Ostroff uses the word "authority", mainly meaning "mandate" and "competence" in anarchist theory. Thus, when reading the book in an anarchist context, the word "authority" should be replaced by "mandate" and "competence".

  Fundamental Principles of the Horizontal Organization

"Exactly what are the fundamental principles of the horizontal organization?"

The twelve fundamental guiding principles for creating horizontal organizations according to Ostroff are the following:  

The first five principles concern the design of the organization:

  1. Organize around cross-functional core processes.
  2. Install process owners
  3. Make teams, not individuals, the cornerstone of organizational design and performance.
  4. Integrate with customers and suppliers.
  5. Decrease hierarchy by eliminating non-value-added work and by giving team members the authority to make decisions.

 The next seven principles concern the institutionalization of the change:

  1. Build a corporate culture of openness, cooperation, and collaboration, a culture that focuses on continuous performance improvement and values employee empowerment, responsibility, and well-being.
  2. Empower people by giving them the tools, skills, motivation and authority they need.
  3. Use information technology to help people reach performance objectives and deliver the value proposition to the customer.
  4. Measure for end-of-process performance objectives as well as customer satisfaction, employee satisfaction, and financial contribution.
  5. Redesign functional departments or areas to work as partners in process performance with core process groups.
  6. Emphasize multiple competencies and train people to handle issues and work productively in cross-functional areas.
  7. Promote multi-skilling, the ability to think creatively and respond flexibly to challenges that arise in the work that teams do.

  All core processes lead to one end objective: Creating and delivering something of value to the customer.

 

Characteristics of Horizontal Organizations

"No two horizontal structures are ever exactly alike because each is designed to deliver a distinctive value proposition, but certain characteristics that are not found in a vertical organization are common to every horizontally structured one."

 

The Function of Core Process Groups in Horizontal Organizations

"Each organization's core processes are unique to that entity because they are designed specifically to deliver the organization's value proposition."

  Three Phases of Horizontal Reorganization

"Transformation often falls apart because of a breakdown along one or more of the three axes of change."

  Assessing the Competitive Environment

"Your organization needs to be so well integrated internally that it can innovate in order to stay ahead of the competition, not just react to it."

  Articulating Aspirations

"To envision the organization's future, management must identify bold stretch goals, then articulate vivid descriptions of what achieving them will mean."

  Checklist for Setting Direction

"Build a strong line of communication to all stakeholders so that everyone is aware of objectives, overall progress, and tangible successes."

  Formulating a Horizontal Design

"All horizontal organizational charts have in common several important features, some of which are carried over from the traditional hierarchy or bureaucracy."

  Oversight of Core Process Groups - Owners

"There must remain a level of managerial responsibility even in the smallest and simplest core process group."

  Oversight of Core Process Groups - Teams

"With few exceptions, the complexity of the core process requires highly-skilled teams with strong expertise and the confidence to be self-starters."

  Institutionalizing the Horizontal Ideology

"Information is the indispensable fuel that drives the value proposition and empowers people to do their best work."

  Building an Open and Responsive Corporate Culture

"It makes no sense to ask frontline people to take on extra responsibilities if the company does not or cannot provide the adequate technology, resources, and incentives to facilitate and reward their work."

  Commitment to the Future

"Both the change effort itself and the new organization born from the old must have full top-down, bottom-up, and cross-functional commitment."

   

IV. ADDITIONAL LITERATURE

A horizontal, rather than pyramid, structure not only allows greater worker empowerment, but also makes communicating vision throughout the organization an easier task. A flattened organization requires fewer managers, is less bureaucratic, and can produce more cross-functional employees. Achieving such an organizational structure is not always a simple task, as several of the cited articles cover in their case studies. But it is the organization for businesses and public sector for the future...

Alvesson, Mats. "A Flat Pyramid: A Symbolic Processing of Organizational Structure." International Studies of Management & Organization. 19 #4 (Winter 1989/1990):5-23.

Byrne, John A. "The Horizontal Corporation." Business Week. #3351 (December 20, 1993):76-81.

Denton, D. Keith. Horizontal Management: Beyond Total Customer Service. New York: Free Press, 1991.

Donath, Bob. "Going Flat Out for Flat Organizations Isn't Easy." Marketing News. 26 #25 (December 7, 1992):7-8.

"Farewell to the Pyramid Chart." Business Week. # 3351 (December 20, 1993):122.

Flander, Gail and Milan Moravec. "Out of Chaos, Opportunity." Personnel Journal. 73 #3 (March 1994):83-88.

Graham, Morris A. and Melvin J. LeBaron. "The Horizontal Revolution: Reengineering Your Organization Through Teams." November 1994.

James, Graham. "State-of-the Art Technology and Organisational Culture." Management Decision. 29 #2 (1991):18-31.

Klaus, Gunther. "Horizontal Organization." Executive Excellence. 6 #11 (November 1989):3-5.

Krackhardt, David and Jeffrey R. Hanson. "Informal Networks: The Company Behind the Chart." Harvard Business Review. 71 #4 (July/August 1993):104- 111.

Kurstedt, H.A., Jr. and others. Experience in Designing and Using a Flat Structure in a Multi-Project Research Organization. Blacksburg, VA: VPI&SU, 1990.

Lammers, Teri. "The New, Improved Organization Chart." Inc. 14 #10 (October 1992):147-149.

Lester, Tom. "A Structure for Europe." Management Today. (January 1991):76-78.

McLaughlin, Mark. "Flat and Happy at the Top." New England Business. 12 #3 (March 1990):19-20.

Mapes, James J. "Learning from Each Other." Training & Development. 47 #11 (November 1993):6,8.

Ostroff, Frank and Douglas Smith. "The Horizontal Organization." McKinsey Quarterly. #1 (1992):148-168.

Peters, Tom. "Going 'Horizontal' in Your Career." Industry Week. 242 #1 (January 4, 1993):47-50.

Quinn, James Brian and Penny C. Paquette. "Technology in Services: Creating Organizational Revolutions." Sloan Management Review. 31 #2 (Winter 1990):67-78.

Tomasko, Robert M. "Structure Horizontally" [Chapter 7] Rethinking the Corporation: the Architecture of Change. New York: AMACOM, 1993.

Weixel, Suzanne. "Flat Management Requires Juggling." Computerworld. 24 #34 (August 20, 1990):70-71.


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