Organizational Structure
Organizational structure is a way of systematizing a company’s elements and processes into a scheme, which clears out responsibilities of each element and chains of command. There are various types of possible organizational structures, and a properly chosen structure suiting the organization’s business style and working processes enhances its efficiency and productivity, helping in reaching the company’s goals more quickly for account of well-organized order of work.
Such a system also allows illustrating and properly organizing the circulation of data withing an organization, thus making an organizational structure crucial for large entities with many employees and projects at work.
What is Organizational Structure
The key function of an organizational structure is to establish and consolidate a certain system of relations and duties inside an entity, i.e. its hierarchy. In simple terms, it describes what each employee does in the company, who this person have to report to, what subdivision an employee belongs to, how this subdivision is connected to other elements of the company, and who is responsible for decision-making. Without a marked division of responsibilities and distinct order of reporting, it might be difficult for employees to work efficiently with no clear understanding of what must be done. When there’s a plainly represented structure available, it’s easier for staff to grasp these important elements of work organization. Having a formal organizational structure might turn out useful not only for newcomers and first-day employees, but also for the whole staff in general, especially in case of reorganizing and restructuring of the company.
Organizational structure is represented graphically for better visualization, normally in a form of a chart or a scheme. A design of such a chart is not essential, as far as it provides a clear and easy-to-grasp picture of a system implemented in a given company and presents all the important details.
As an organizational structure reflects hierarchy, it’s often vertically or horizontally oriented, with executives and top management on one end and lower level staff employees on the other end. It’s also usually divided into levels and departments to group the employees according to their positions and responsibilities.
Organizational Structure main features
To reflect all aspects of work correctly, it’s necessary for an organizational structure to contain information on chains of command in each subdivision and the company in general, spans of control of each manager and executive, and it’s also important to state what kind of centralization is adopted within the company. It’s worth to study these features more closely.
Centralization is a basis of organizing a company’s work, as the whole cycle of working processes depends on a fact whether there’s a single person responsible for making decisions and controlling all processes within a company, or whether each department can make decisions on its own without the need of approval. In the first case, it’s a centralized organizational structure, with a strict chain of command from up to down and a strong leadership of one or several executives. This type of organization has its own advantages, such as high subordination and a level of responsibility, well-defined ranges of duties for each individual and a comprehensible order of reporting, which aids in planning and executing long, complex continuous processes. At the same time, such a structure is quite rigid, and it sometimes takes a long time for it to react to the changes and adapt.
Another way of organizational structure, a decentralized one, implies more freedom for individuals and departments in decision-making, having personal agenda and carrying out their tasks. In this case, decisions are usually made by department managers, and staff is often provided with the possibility to solve problems and complete the tasks without following the orders strictly, thus encouraging creativity and personal realization. Decentralized structures are also easier to adapt, as they are more agile and less dependent on a single person. Although there are some disadvantages as well, occurring especially with a total lack of control, so centralization on some levels is still necessary for such structures.
Clarifications of chains of command and spans of control are other key functions of an organizational structure, as it helps to distribute duties between certain employees and appoint individuals responsible for each step and process, which is important for supervising and supporting productivity and continuity withing an entity.
Organizational Structure varieties
There are several common types of organizational structures, varying by levels of centralization and a way chains of commands are arranged.
The four most common varieties of organizational structures are the following:
- A bureaucratic structure (sometimes also called a mechanistic structure or a functional structure) is the oldest and most popular one. It implies a high level of centralization, and generally might be represented as a pyramid, with executives at the top and a gradually expanding following levels of management and staff, with each level having less responsibilities and a clearly limited set of functions. The employees are also divided by spheres, being grouped into subdivisions according to their specialization.
- A multidivisional structure (sometimes called just divisional) is often found within complex companies, consisting of many departments and having a considerable number of different products and projects in work. To organize and control such amount of work, a company is structured into a set of smaller units, each operating with a high level of independence.
- A flat (or flatarchy) structure differs from a bureaucratic one by providing employees with a broader range of responsibilities and freedoms, reducing hierarchy significantly, so every employee is close to leadership.
- A matrix structure is a rather complicated and sometimes difficult to understand way to organize processes in a company. Its notable feature is that an individual might report to several managers at the same time and be involved in different projects simultaneously, sometimes in completely different departments. To make such a structure comprehensible, it should be extremely detailed to reflect all the interconnections within an entity. For its complexity, such a structure is rarely implemented, but for some companies it might become the best fitting variant.
