Business organization structures, An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization.
These activities can include rules, roles, and responsibilities. The organizational structure also determines how information flows between levels within the company
Types of Business Organizational Structures
Large or small, every organization should operate with a defined organizational structure.
A well thought out and strategic business configuration clarifies reporting relationships and supports good communication resulting in efficient and effective work process flow.
The board and senior leadership should be the group that determines the type of organizational structure that would best support the internal operations, how work is carried out, and the chain-of-command.
Determining the best structure is done by answering the questions:
- What are the functional groupings of work processes?
- Are there natural groupings of teams, workgroups, or units?
Senior leadership looks at all functions and determines how they would like work activities to be organized and carried out.
This process also identifies natural reporting relationships and chain-of-command. Reporting relationships can be both vertical as well as horizontal.
6 Common Businesses Organizational Structures
- Hierarchical Organizational Structure
Organizations that use a traditional hierarchical structure rely on a vertical chain of command as the prime method of organizing employees and their responsibilities.
Military, government, and other very large organizations use a hierarchy to determine the level of control employees have over their work as well as their rank relative to others.
Hierarchical structures typically feature multiple layers of management and are therefore prone to bureaucracy and the creation of silos that prevent cross-team collaboration.
- Matrix Organizational Structure
A matrix structure provides for reporting levels both horizontally as well as vertically.
Employees may be part of a functional group such as an engineer but may serve on a team that supports new product development.
This kind of structure may have members of different groups working together to develop a new product line.
For example, a recording engineer who works for a music publisher may have engineers who report to him but may also use his expertise and work with teams to develop new music albums.
The advantage of a matrix organizational structure is that employees have the responsibility not only for their department but for organizational projects.
A challenge with this type of structure presents itself when employees are given direction from two different managers and they need to prioritize their work responsibilities.
- Functional Organizational Structure
Functional organizational structures are the most common. A structure of this type groups individuals by specific functions performed.
Common departments such as human resources, accounting, and purchasing are organized by separating each of these areas and managing them independently of the others.
For example, managers of different functional areas all report up to one director or vice president who has responsibility for all of the operational areas.
The advantage of this type of structure is that functions are separated by expertise but the challenges come in when different functional areas turn into silos that focus only on their area of responsibility and don’t support the function of other departments.
The Advantages of an Organizational Structure
The old adage “failing to plan is planning to fail” is most applicable to the organizational structure you implement at your business.
This structure creates a system by which you can delegate decisions, identify roles and responsibilities, and define the chain-of-command.
In other words, an organizational structure is a framework that helps your employees achieve their goals and do their jobs in the most efficient and productive way.
A sound company structure can benefit your organization in several ways, including making it easier to delegate responsibility and affecting change throughout the workplace. To benefit from a strong framework, it is important to understand the advantages of organizational structure.
Unify Your Marketing Message
Your company can present a unified front to customers, vendors, and investors when a common marketing message is used throughout your organization.
A unified marketing message can help the entire company better understand its marketing goals, and then work together to achieve them.
When multiple departments are involved in a single endeavor, a unified marketing message can be essential to project success.
For example, if your social media marketing department identifies an untapped customer base, your structure should make it easy for the head of that department to communicate this discovery to senior management and the sales team.
This can be true even if you have a top-down structure in which authority rests in the hands of your senior management team.
In that instance, you should create an “open-door policy” that allows your employees to make suggestions or deliver ideas in a timely manner so that senior management can act upon it.
Promote Upward Mobility
A strong organizational structure is better able to prepare qualified employees for management.
When the company operates under a strong structure, a comprehensive management training plan is easier to create and execute to help maintain a strong managerial core.
Departments can work together on a developmental plan to help encourage the training of managerial candidates within any department.
Organizational structure also allows employees to clearly understand the divisions between lower, middle and senior management.
With this operational framework in mind, your workers are empowered to meet and exceed performance standards that can help them climb the upward ladder in their career trajectory.
Ease Strategic Planning
Using a strong organizational structure allows a company to better focus on a single set of goals instead of each group working toward its own agenda.
This is the result of the flow of communication that an organizational structure offers, as well as the establishment of responsibility and respect for the company hierarchy that comes from strong structure.
It helps the company to use resources wisely in the pursuit of company goals as opposed to doubling efforts or experimenting with options perhaps not in the company’s best interests.
Improve Employee Training
A good organizational structure makes employee training easier to administer. And it allows training to remain flexible based on the changes within the organization.
When organizational structure regulates the flow of information, then changes in information are easier to monitor and update in a company-wide training program.
Refine the Decision Making Process
Regardless of the type of organizational structure you choose, there will always be a reporting channel that ends with a final decision-maker.
For example, in a flat structure in which employees are given wide latitude to make suggestions and take ownership of their work process, decisions are made based on the consensus of employees working in a team.
In a top-down structure, decision-making occurs at the senior management level and is then clearly communicated to the rank-and-file to implement.
When a defined hierarchy is in place, your company is better equipped to make important decisions and adjust practices to meet the demands of competition.