Good Organizational Structure, Development in Organizations

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What is Organization structure?

Organizational structure is the foundation for the development of any organization, it refers to both the formal and informal frameworks that shape how a business is operated and without the proper organization, we can’t expect the growth in any organization. Even in SME’s, we require a well-defined structure.

Organizational structure is the chain of hierarchy, which divides entire employees of an organization based on their level, roles, and responsibilities. Companies adopt organizational structures in order to minimize confusion over job expectations. Having an organizational structure helps them coordinate activities by clearly identifying which individuals are responsible for which tasks. The structure of an organization can affects the efficiency of its operations and its ability to adapt to its environment when conditions change. Some organizational structures are good at ensuring that work is carried out according to regulations and procedures. Other are better at handling change. A well-structured organization balances the effort required to coordinate work between departments with control of the work and with the flexibility to react to external events.

To form a good organizational structure company should consider number of employees, size, revenue, geographic location. Organizations can be structured by vertical management hierarchies or line structures, by divisions and departments, by functions, procedures or goals, by geography, or by temporary committees and task forces depending on nature of business.

Traditional structure:

This structure is followed by Small business where employees often interact directly with the president or CEO and people fulfill multiple functions–a single line of command that includes everyone from top to bottom in order.

Department structure:

As a company grows, there develops a need to organize various departments to increase efficiency and performance. It is up to management to decide how to group functions in ways that make sense to operations or personnel. Grouping jobs that require the same skills and knowledge together tends to increase efficiency.

Functional structure:

Company can tend to have various Functions based on department structure and activity involved to carry out task such as marketing, accounting, IT, Customer service etc. It classifies people according to function they form in organization

Divisional structure:

Divisional structures group employees are based on other factors like product, geographic location and customer base. It is a type of organizational configuration that groups together those employees who are responsible for particular prduct type or market service accorindg to work flow. 

For instance, let us say that division A makes widgets. In a divisional structure, division A will have its own marketing, customer service, maintenance, communications and other departments relating to its widgets. All resources used to make widgets will run through division A. Because functions are decentralized, divisional structures are somewhat more flexible and adaptable to change.

Matrix structure:

Matrix structures is a combination of function and product structure, it combines two or more of the structures described above, sometimes on a temporary basis and sometimes long-term. Firms that engage in projects of limited duration often use a matrix structure where employees can be put on different teams to maximize creativity and idea flow.The main advantage of a matrix is that it is somewhat flexible, yet can promote efficient use of specialized staff and resources.

What are the Functions of Organizational Structure?

company hierarchy:

The basic function of an organizational structure is to provide a clear chain of command and define which employees report to which managers. When something goes wrong within a company, the management structure allows the executive team to determine who was accountable for the issue, and then the company can set out to solve the problem. By the same token, a hierarchy structure also allows the company to see where productive ideas are coming from and work to encourage that flow of positive information.

Growth and expansion:

Companies that grow rapidly are those that make the best use of their resources, including management talent and as the company grows, the organization structure must evolve with it. Many times, more layers of management are created, when one department head has too many individuals reporting to him at one time to give each employee the attention and direction needed for the employee to succeed.

Efficient Task Completion:

A well-designed organization structure facilitates the completion of projects. Project managers can better identify the right resource available given that the responsibility and scope of task is clear with each individual in particular department. A project to develop a new product would require market research, for instance. The project manager needs to know who in the organization can provide this research, and whose permission must be obtained for the research to be done.

Encourage more Growth:

An organization structure provides the framework within which an enterprise functions. If it is flexible it will help in meeting challenges and creating opportunities for growth. A sound organization structure facilitates growth of the enterprise by increasing its capacity to handle increased level of activity.

When to develop a structure for your organization?

Organization structure development starts from the commencing of the company and it must be flexible and adaptive as per new development or technology advancements. It must be done in the presence and mutual decision of all HOD and committee members of the organization. The best structure of organization will depend upon proper planning and analysis how far the organization has come in its development and what are they planning ahead.

What are the benefits of designing an organizational structure?

  • A good organizational structure facilitates to meet business objectives
  • Enhance coordination and understanding within different departments/Functions.
  • It helps in growth and diversification of the activities in an organization.
  •  It prevents duplication of functions and makes it possible to achieve maximum production with minimum efforts.
  • Organizational structure lays down both channels and the patterns of communication. It facilitates proper administration.
  • Workers, participation in organization increases their cooperation and improves their will to work. It stimulates initiation and creative thinking.
  • It results in improved cooperation and a sense of pride among members of the organization.

Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company’s hierarchy, bu also makes operations more efficient and much more effective. By separating employees and functions into different departments, the company can perform different operations at once seamlessly to move rapidly towards company goals.

Shraddh Shikhare
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Freelance Content Writer @ Mega HR Consultant

MBA in Human Resource from Indian Institute of Management Studies with a work experience of 7+ years into HR Functions. With rich experience in HR And Recruitment, Performance Management, Strategy Development and Implementation, Policy Development, Attrition Management and Creative Retention Strategy

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