If you think about your average workday and add up the amount of time you spend in meetings, giving presentations, writing emails, or talking to colleagues, it turns out that the majority of your day is spent communicating. Whether this communication is effective or not can mean success or failure for a startup. As a company grows, communication needs to evolve alongside it.

Company culture shapes company communication

The two principal forms of communication within businesses — vertical and lateral — are constantly in tension with each other, with the balance between them determining a company's organizational structure. Some companies prefer vertical communication, with a hierarchical, top-down organizational structure. Others prefer lateral (or horizontal) communication, where the structure is decentralized, fluid and informal. Theo Priestley makes the valuable point that there is not one ideal communication model, rather it has to grow organically from the company’s principles and values.

The internal communication of a startup reflects the principles it embraces. Is it more disciplined? Does it encourage individual initiative? What cultural values have influenced its company values? What about the sector it caters to? These factors, and many more, impact the effectiveness of both vertical and lateral communication models.

Lateral communication

Michael J. Papa, author of Organizational Communication, defines lateral (or horizontal) communication as “the flow of messages across functional areas at a given level of organization.” Sharing information across levels is encouraged, often making processes more efficient. People on the same level can communicate directly with each other instead of having to go through several levels of organization. There are less delays when you don’t need to go through your boss, who goes through his, who contacts another department, before you finally speak with the relevant person.

Focusing on lateral communication, a company places more emphasis on facilitating cooperation than on directing work. When a company grows in size, lateral communication is a good way of keeping a feeling of unity and having all parts of it work towards the same goals.

lateral communication across managerial levels

Informal interactions are important, too

Firms that embrace lateral communication often have more flexible structures. While great emphasis is placed on its formal aspects, it’s important to also remember the informal aspects. Horizontal communication can come in the shape of meetings between departments, but also in the guise of conversations by the coffeemaker.

In fact, the conversation may not be related to your work at all. Even if you’re talking about your best friend’s cousin’s cat or the wedding you went to last weekend, such conversations can have the potential to indirectly impact your work in a positive way. If you are on friendly terms with those in and outside of your department, it is often easier to ask them for help. You will know who to turn to when you encounter a particular issue. The result? Problems are resolved faster.

Vertical communication

When vertical communication is prioritized, there is more communication between upper and lower levels than there is between team members on the same organizational level. This type of top-down, organized communication is typical of organizations with strict and visible hierarchies.


Both vertical and lateral communication is needed for an organization to work effectively; yet both also have their drawbacks. Lateral communication can result in tension between rivalrous departments, disputed leadership, or in time being wasted on informal interactions that lead team members off-topic. Vertical communication can result in ineffective team management as its strict structure discourages individual team members from taking initiative. With disconnected departments that work in a top-down, bottom-up fashion, asking for help often generates the answer “it’s not in my budget” or “it’s not in my objectives.”

Steve Denning: why lateral communication is good for tech startups

While countless factors impact the way a company communicates, one trend that Steve Denning brought to light in his Forbes article was the stark organizational difference between the creative economy and the traditional economy.

The traditional economy is made up of firms with big hierarchical bureaucracies and have a structure where vertical communication is prioritized. However, with huge technological change occurring from the 1960s onwards and the emergence of computers, the Web and mobile phones, communication has not only changed in terms of speed: greater structural changes have also occurred that have resulted in a shift from vertical value chains to horizontal value chains. These are the ones that characterize the creative economy, pioneered by giants like Google, Apple and a thousand innovative startups.

As customers gain access to instant and reliable information, their demands start to change. They want something cheaper, faster and personalized. With the growing popularity of SaaS and cloud-based software like Dropbox, Google Docs, and task management tools like Sandglaz, customers can create their own virtual meeting spaces and marketplaces. They can share ideas and products in a structure that all of a sudden has grown increasingly fluid.

Denning argues that in an environment where customers constantly demand personalized and interactive solutions, firms with rigid vertical communication structures are unable to respond quickly to customer demands. Instead, collaborative enterprises thrive. Why buy a CD when you can pick and choose the songs you want to listen to on Spotify? Why buy a bulky, expensive, soon-out-of-date copy of the Encyclopedia Britannica when you can use Wikipedia for free?

Denning argues that not only do many of these services have the perfect price - they cost little or are free - “they are also much, much better.” Constantly updated by thousands of users, they are available to anyone with an Internet connection and are accessible without physically having to seek out a store.

These services have become available as startups embrace flexible, horizontal structures. Enabling continuous innovation and fast response, this is how 21st century startups should work. Vertical hierarchies belong in the past.

Maybe Denning is wrong: the limits of lateral communication

While Denning argues that a more flexible, horizontal communication structure is the one that is suited to the demands of our time, a study in 2011 showed that lateral communication has no visible impact on the performance of a firm. In their report The Effects of Formalisation, Hierarchical Decentralisation and Lateral Communication: Strategic Decision-Making Processes on SME International Performance, Pavlos Dimitratos and his co-authors investigated 528 small and medium enterprises in the United States, the United Kingdom, Greece and Cyprus, looking at the relationship between three strategic decision-making processes and their international performance. They also looked at the role of dynamism on the process.

These three strategic decision-making processes were formalization, hierarchical decentralization and lateral communication.

What they found

Formalization and decentralization have a positive effect on international performance. Lateral communication, on the other hand, has no effect. They did however find evidence supporting that lateral communication produces positive effects in dynamic business settings.

Should you embrace or reject lateral communication? Go back to your company culture

Ultimately, each startup is unique in its structure and the effects lateral communication have on each one are also unique. If you choose to embrace lateral communication, or opt for a more vertical model, keep in mind Theo Priestley’s words about values and principles: your communication model must compliment these values, not clash with it. The same communication techniques, when applied to different startups, will produce different results. Perhaps, like Dimitratos, Thanos, Petrou and Papadikis found, lateral communication has no measurable effect on your company’s success. Or, like Denning investigated, lateral communication is what gives you the flexibility to consistently respond to changing customer demands.

We would argue that in an age where there is all the more pressure for entrepreneurs to provide solutions that are better, simpler and different, lateral communication, more than any vertical model, gives you the tools to be flexible, innovative and ultimately successful.

Has lateral communication improved the way your team works? Join the conversation and share your experiences.