Vertical vs Hierarchical: Which Company Structure Drives Success?

If you have ever participated in company interviews, you have likely seen many employees from large firms who enjoy higher salaries and titles but possess only average abilities.

If their competence were genuine, companies could simply hire them directly, bypassing lengthy interview processes; however, the risk of low-quality hires is high, and new companies often doubt their capabilities, especially after recent industry turbulence.

The opposite also holds true: a professional who has spent years in a smaller market may receive a lower evaluation when returning to major cities.

Beyond personal effort, your experience at a previous company is also shaped by the position you held within its organizational structure.

Most companies adopt one of two structural approaches:

垂直化划分

(vertical division) and

层级化划分

(hierarchical division).

1. Vertical Division

Vertical division groups teams by business lines, sharing administrative resources while maintaining limited inter‑line interaction.

Each business line enjoys a degree of autonomy.

The diagram shows a company with four business lines.

Business line A includes front‑end and back‑end development; strong members mean no testing or operations roles.

Business line B promotes full‑stack skills, integrating back‑end and front‑end development.

Business line C relies on strong management, using a small in‑house R&D team plus extensive outsourcing to complete projects.

Business line D follows a traditional model with dedicated roles, hiring as needed without encouraging internal transfers.

Operating Mode

Business line A lacks staff and projects, has no relation to lines B, C, D, and does not allow secondments.

If a line thrives, it expands; members from other lines must undergo a complex process akin to re‑hiring.

If a line declines, it reduces staff or may be eliminated, with top talent redistributed to other lines.

Advantages

Competition between lines gives team members clear goals and a sense of urgency.

Failure in one line’s management or product does not affect overall company operations.

The structure facilitates a single‑direction reporting line, avoiding costly multi‑layer management.

Successful lines can be replicated, helping the company focus on growth areas.

Disadvantages

Leaders of each line face very high expectations.

Redundant technology and product development can cause staff bloat and waste.

Inter‑departmental gaps increase, making collaboration difficult and opposing productization.

Excessive autonomy may lead lines to drift out of control.

Aggressive restructuring creates many transitional issues.

Revision

To address these issues, companies often add a coordination and oversight department, assigning a liaison for each line. In practice, this coordination tends to become informal, relying on personal relationships rather than standardized processes.

Before a company clarifies its development direction, this reform is not recommended. Although the intent is to boost competition and empower strong leaders, without proven success cases it often results in splitting large lines into smaller ones without solving underlying problems.

2. Hierarchical Division

This model suits companies with defined products and the ability to sustain iterative teams.

It challenges the notion that “a project manager who can’t cook isn’t a good programmer,” promoting specialized roles.

Many internet companies have adopted this approach, which can be the most cost‑effective and dynamic organizational method because:

Each R&D function focuses on its core responsibilities, reducing task switching and communication overhead for overall optimization.

Individuals report upward in a single line; the organization is layered while teams remain flat—“taking responsibility for the leader means taking responsibility for the company.”

Every position has a clear job description, making roles interchangeable, including team leads.

The main drawback is the high demand placed on team members; both initiative and professional skills are required, necessitating rigorous interview screening.

Disadvantages

Uncertainty whether it fits project‑based companies.

Abundant technical support departments can cause public‑demand tasks to pile up.

Integration with other departments is needed to realize greater value.

Analysis

The diagram shows three layers:

Technical support: provides underlying technology and problem solving; many small groups with clear responsibilities.

Core business: flagship product teams; changes are infrequent but any modification is difficult; moderate team size.

Project evolution: pure project work, ranging from one‑off contracts to service upgrades; high turnover and the largest team.

Project‑evolution teams often handle messy or experimental work, which is appropriate.

Technical support and core business require high technical competence, offer stable careers, and have low turnover, making recruitment challenging.

Project‑evolution teams experience frequent changes, offering variable rewards and high turnover, making recruitment easier.

Successful incubated projects can evolve into products or be merged into core business groups.

From this division, a person’s career trajectory is largely predetermined at hiring, allowing candidates to assess company needs and anticipate their own path.

Many internet firms treat project‑evolution staff as expendable, yet they can also reap substantial rewards.

3. Combined Approach

Combining vertical and hierarchical models yields the following structure:

The hybrid model adopts hierarchical mode as the primary framework, applying vertical lines within the project‑evolution layer, granting limited autonomy.

Each business line is assigned a liaison to coordinate with lower‑level product or technical support teams.

Performance evaluation: upper‑level demands score lower‑level implementation; core business and technical support score the coordinating staff, aligning incentives.

End

Graduates from large companies are not automatically elite, nor are those from smaller firms necessarily mediocre; outcomes depend on the department’s role and focus. Core departments receive more benefits, while peripheral experimental units get limited resources. Stripping away the corporate halo reveals that average project experience reduces competitiveness.

This discussion applies specifically to the IT industry.