Why Go Horizontal?

Three years ago, Liz Claiborne´s Special Markets Business was in trouble. This operating division, which produced several brands of apparel, was underperforming. According to Lisa Piovano Machacek, director of HR for Liz Claiborne, Inc., the organization was disconnected from its customers, suffered from conflicting priorities, and had no clear goals. Turnover was high, morale low. And it wasn´t making the numbers.

A year and a half later, recounts Machacek, the organization had gone from underachiever to top performer. Sales volume, revenue, and operating profits were all up, while turnover had dropped significantly. Product development time had been slashed and partnerships with retailers improved. The results were so dramatic that the division became a model for the rest of the Claiborne organization.  

How did the Special Markets Business come so far in so short a time? By "going horizontal." It moved from the traditional hierarchical business model-divided into functional silos and requiring multiple levels of approval before decisions could be made-to a flatter, faster-moving operation, where cross-functional teams took responsibility for resolving business issues-and raised the performance bar to an unprecedented level. Figure 1 overviews horizontal versus hierarchical organizations. While reality rarely comes so cleanly delineated, the illustration highlights the basic differences between the two models.

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Howard M. Guttman is the principal of Guttman Development Strategies, Inc., a Ledgewood, NJ-based management consulting firm specializing in executive development, management development, and organization development.