What is Organizational Structure?

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Posted by Allison Lynch | 05/20/2021

What is Organizational Structure

An organizational structure defines how specific components of the system like rules, roles, and responsibilities work together to achieve the organization's goal. It also describes how the activities like task allocation, coordination, and supervision are taken care of and responsible for what. Using an organization structure sets standard operating procedures and a system of command and responsibilities to make the flow of work smooth.

The major components of an organizational structure are;

  • Work Specialization
  • Departmentalization
  • Span of Control
  • Centralization and Decentralization
  • Formalization
  • History of Organizational Structure

    Organizational structures have come a long way from the records written on brick plates in ancient civilizations to the place where they are now. They have evolved from the tribal organizations that had clerical power structures to the specialized and decentralized modern forms.

    As the industry started becoming more formal, people began to see problems in the typical organizations. They could see a need for a different sort of structure where the opinions and the knowledge and conditions of the employees also contribute to how things worked. Different experts added different components to the structures to come to this point where we clearly define "what is organizational structure?".

    The organizational structure remains a matter of choice, and the most critical factor remains the acceptability of the people. Around the early 20th century, organizational structures became more structured, and people started pondering over what type of organizational structure they will follow.

    Eventually, Henri Fayol introduced a chain of command, separation of jobs, power, and authority. Then, researcher Max Weber came up with a bureaucratic approach. Frederick Winslow Taylor researched time and motion and later introduced job specialization. They all formed the idea that a structure within an organization must support efficient and effective operations.

    Why Use Organizational Structure

    Organizational structures add functionality and predictability to an organization. Everybody knows how things work, who reports to whom, and who is responsible for a particular task. You must consider that here we are talking about a well-made and well-planned structure.

    1. Proper Coordination of All Activities

      What is an organizational structure without check and balance? This essential check and balance ensure that all the activities are conducted in proper sequence at the right time with coordination.

    2. Fewer Conflicts

      A good organizational structure has a clear description of all roles in the company and the responsibility and domain of each. Thus the conflicts among the workforce are kept to a minimum. This also removes any duplication or overlapping of the work description.

    3. Effective Communication

      A detailed structure dictates the intercommunication channels and modes. Sometimes the frequency of reporting and the details are also directed in the documents. Therefore, it is not only about communication rather effective communication.

    4. Strategic Planning

      Strategic planning is focused and realistic because of organizational structure. This enables the standard workflow and communication as well as expansion and contraction planning.

    Use Case: Organizational Structure Used in What Fields or Areas

    What organizational structure is best suited for my needs? There is no definite answer to this question because various factors influence this, and finally, the choice is yours. We can discuss the major types of organizational structures and their use to make your choice easier.

    1. Hierarchical Structure (Line Structure)

    This is the most used structure. In this structure, the power pyramid starts from the board of directors going to the CEO, and then the rest of the company gets the bits of authority. This is a centralized structure.

    The hierarchical structure is best suited for medium to large companies where the authority must remain at the top tiers. It also works for family businesses where dictatorship is often a problem.

    2. Functional Structure

    This is a hierarchical model but with a focus on the functions. It also starts with the highest position of responsibility; however, the lower tiers are made according to the company's specific skills and process.

    This is best suited for businesses like manufacturing industries dealing with operations. Most small enterprises with only a few products are using this.

    3. Divisional Structure (Multidivisional Structure)

    In this structure, each division of the company has a high level of autonomy. They have their resources and can have their marketing team, sales team, IT team, etc.

    This structure works well for large companies with multiple divisions, like multinational companies with different product lines. Each product line can be a separate division.

    4. Flatarchy structure (Horizontal or Flat Structure)

    It is a decentralized organizational structure where employees have equal power. It is a preferred org structure for startups because everyone involved has to feel pride and contribution. There is no bureaucratic approach here.

    5. Matrix Structure

    In this structure, employees are grouped by both function and product. It allows employees to move across departments to share their skills or to make up for their weaknesses.

    This is also used for companies with various product lines. They may have some specialized workforce that can be shared among multiple divisions.

    Tip/consideration for Organizational Structure

    An organizational structure has a profound influence on how your company will work. Therefore, it is essential to do proper planning and research before coming up with a solution.

    1. Start With a Job List
    2. Though you might be tempted to start working with people in mind, the right approach is to think of what your company wants to achieve. Only after that will you see how many people you need and how they will function and communicate.

    3. Now Consider People
    4. When you know what you need to accomplish, now you can see how many people you already have, what they can do, and what they cannot do. You may use cross-functional teams if there are specific special skills that are needed and so on. By this time, you will know who does what? How many more employees do you need?

    5. Analyze Managers
    6. There can be work managers who can oversee the performance and efficiency. Then some people managers can handle the workforce better. You need to see how many and what type of managers you need.

    7. Keep Growth in Mind
    8. You should see where you want to take your company in the future, like in five years, twenty years or more. Start with a growth mindset and choose an organizational structure with the ability to evaluate with you.

    9. Device a Proper Reporting and Communication Structure
    10. Your organizational structure must have a well-defined plan for reporting and communication to eliminate future problems. You can even formalize the most critical communication processes using forms and perform.

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  • Learn How to Develop an Organizational Structure
  • Example

    organizational-structure

    This is an example of a flat organizational structure. Here we have a department head who has three managers under her command. Each manager, in turn, has four employees. There is almost no middle management and bureaucracy structure. This can work very well for a startup and small organizations where the workforce is limited, and people share responsibilities.

    Organizational structure is a long time commitment. Therefore, it is critical that many planning, research, and thought processes go into it before finalizing the structure. Once it is done, it must be understood that it will be updated and evaluated repeatedly to adapt to the circumstances and growth.

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