As an entrepreneur, it might appear petty to form a proper work structure during your business development phase. However, while expanding and growing your business, filling up every role in your ever-growing company becomes impossible, which is why an organizational structure is essential.
The essence of building this organizational structure will help create a gush for every business activity while defining the layout under the hierarchy of the industry.
You need several employees who report to you and understand whom they are answering to, along with their pivotal roles in achieving business objectives and goals.
These might appear interesting to you while creating this organizational structure; however, the process is complex. It is completely on you to decide the type of structure that best fits your business, although there is no single model for every business.
Picking the incorrect one can suppress the originality of your team or obstruct instead of offering a streamlined workflow.
To assist you in avoiding such issues, we have laid out a comprehensive guide to assist you in knowing about the organizational structures and their implications to benefit your business strategy.
Overview of an Organizational Structure
The organizational structures are mainly patterns of your business operations, defining how your employees conduct activities and communicate within your firm. It is the operational pattern to assist the employees in achieving their objectives and goals uniquely in your organization.
It even offers the visual framework for the hierarchy in the organization that gets achieved mainly with the benefit of diagrams.
The structure helps in better communication with whom you report.
Main Elements Involved in Organizational Structures
Let us now check out the various key components involved in structuring an organization.
Span of Control
Under the organizational structure, which is in hierarchical kind, the workers work under the managers, not the VPs or the CEOs, irrespective of the number of workers present.
Therefore, if ten employees are appointed to a single manager, then the span of control for the manager is ten. Identically, if four employees report to the manager, then the span control is 4.
Several factors influence the span of control, and they include:
- The nature and size of the company: Larger MNCs or companies need several hands-on. Generally, more employees are involved in managing the higher span of control.
- Routine of employees or the job type: The employees’ roles are complex and involve more supervision. In businesses, there are more critical roles than petty ones, and there is a reduced span of control. In this manner, the managers oversee their employees closely to enhance the quality of the output of employees.
- Skill level of the employee and manager: The managers with greater experience and expertise in communication and directing their employees are in the best position to handle more employees. Therefore, the higher skills of the managers have a greater span of control.
It is the process that deals with the division of labor involved. It implies that the company divides its employees and activities into departments to meet the requirements and resolve issues. Every department specializes in varied functionalities.
For instance, in a law firm, there are marketing departments, and they are in charge of laying out strategies for attracting potential clients. There is also the IT team who handles the company’s technological requirements.
Chain of Command
It is the facet in the organizational structure referring to the hierarchical arrangements. The ones in higher or superior positions, such as the CEO or the board of directors, rank at the top of the chain, while the supervisors and managers lie in the middle. Similarly, lower-level management experts are ranked at the bottom of the pyramid.
The CEOs are responsible for the decision-making process and the company’s entire performance. The higher-level management develops the objectives and goals supporting the company’s mission. These managers execute their objectives and goals by mapping while structuring them through discrete employee activities.
Supervisors lie at the bottom of the pyramid for management. Their job profile involves monitoring and coordinating employees regularly while striving towards achieving their company’s goals and objectives to ensure they perform adequately.
Centralization & Decentralization
Centralized organizational structures, like hierarchical structures, focus on the authorities under a single CEO figure.
The CEO conducts the vital decisions that concern the company, so there are fewer autonomies involved. Under such hierarchical structures, lower-level employees cannot vote against their company policies or get involved in making any decisions.
Alternatively, these decentralized structures, like the flat organizational structure, emphasize the team’s operations more. There is greater freedom for the employees regarding making suggestions or raising voice concerns regarding important matters within this company.
Types of Organizational Structures
Let us now find out about the different types of organizational structures:
You can decide for the hierarchical structure of your organization to be tall, narrow, or wide. The structure grows taller as the organization keeps evolving and growing over time. And every time, there will be requirements for leaders, employees, and managers, also increasing as the company grows.
And since centralization is the core of this structure, you need leaders to keep things intact. The head of the organization holds the most power. So even while other levels of the organization are expanding, the CEO remains the same.
The hierarchical structure of your company can either get taller, wider, or narrower. As your company grows, the structure becomes further tall. There is a greater need for employees and managers increasingly.
The reason involved here is the theme of this centralized structure. The head of the structure grasps greater potential; therefore, while the other phases of the company expand, the CEO stays constant.
Pros of a hierarchical structure
- The company leaders effectively define the organizational structure’s levels of responsibility and authority.
- It assists the employees in focusing more on achieving the objectives of the company faster,
- There is greater room for the employees in terms of elevating to higher levels in the hierarchical pyramid, and it would motivate them to perform in the best way.
Functional Organizational Structure
It is often used in malls and medium-sized businesses based on hierarchical structures. Beneath it, the employees are grouped based on departments that suit their specialties, such as the marketing, sales, and IT departments. The supervisor or the manager gets placed in the department head position after such segregation.
This structure aims to make sure that there is greater uniformity in the company. Whenever employees with identical skills get grouped under a single department, it creates a constant repetitive environment. It appears that the employees are continuously handling tasks that involve specific skill sets.
Pros of a functional organizational structure
- You can accomplish your business objectives faster. Major tasks get broken down and assigned to varied employees with the skillset and experience in handling them.
- It removes any kind of duplication of the work results that reduce the cost of business. At the same time, every employee team member is different and cannot generate the same results.
- The work pressure on the employees is reduced.
It is the structure that works almost similar to the functional structure. Both are involved in dividing the employees into different units where they aim to achieve their company goals. However, there is a distinctive difference. Under the divisional structure, it works ideally for the MNCs. It is a company that sells several lines of products.
Pros of divisional structures
- It creates separate space for accountabilities as the employees are divided for handling the production of the specific service or products. It is easier to trace the inconsistencies lying under this process.
- It offers the company a competitive edge mainly across geographical divisions.
- It emphasizes teamwork since this division’s employees communicate and interact freely to attain objectives and goals.
If your company picks to run this structure, it implies that you will attain a hybrid structure with combined features of the functional structure and perks of departmentalization of products.
The structure is temporary and ideal for employees who might have to work on projects outside their unit. You might wonder why they have to leave their department when their only departmentalized aim is to divide and achieve the objectives.
However, one challenge lying under departmentalization is that the employees are forced to aim only at their assigned departments. There is no collaboration of inter-department for handling such tasks.
Pros of matrix structures
- The organizational structure has greater flexibility than any other hierarchical model as it allows the employees to communicate rapidly.
- It assists in outside perspective approaches to solve issues resulting in uncovering the hidden pain points of the company faster.
- It also supports cross-interactions between employees, which reduces rivalry of any kind. This way, productivity increases while the team works with greater focus.
- It improves the gathering of resources while the equipment and employees required for the projects are picked from varied departments.
In a flat organizational structure, there is very little management between the lowest-ranking employees and the CEO. The structure creates space for an autonomous environment where the employees are deeply engrossed in making decisions under the company.
The structure gets characterized by small or no management levels. Due to this, they might not involve the hierarchical structure. But, the chain of command here is massive as there are about ten or more employees under a single manager since there are a limited number of managers.
Pros of a flat structure
- It is a restrictive bureaucracy where employees can contribute their work inputs in making decisions.
- There are informal communications and flows across every direction, while there is little to no authoritative middle figure that they would report.
- The cost for the company is less in terms of maintaining the chain of command.
Creating the organizational structure involves fluidity once you have the business understanding. Knowing about your business is the key to picking a structure allowing greater transparency, accountability, and better communication, along with tracking projects at a greater pace under the management processes.
Always make sure to consider the resources and the size of your business, along with your employees who are aware of the goals of the company and the role they are playing in achieving them!
How do you study an organizational structure?
One of the easiest ways to analyze your company’s structure is by creating an organizational chart layout if you do not have one. Identify the positions in the organizational hierarchy and plan out every block on the chart. The next step is to connect the profiles showing who will report to whom and which supervision positions.
How many types of organizational structures are there?
There are four main kinds of organizational structures: functional, matrix, multi-divisional, and flat.
What are the main five components contributing to the right organizational structure?
The organizational structures consist of five components: departmentation, job design, a span of control, delegation, and chain of command.
Which is the highly essential organizational structure?
The most common organizational structure is the hierarchical one, also called the line organization. It consists of the chain of command that most likely strikes our mind whenever we consider the organization.
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