How Should a Business Be Organized?
Organizational structures reflect how the company operates and how information is shared. In its simplest form, an organizational structure represents the organization’s logistical system.
It is important to consider a variety of factors when choosing the best organizational structure for a business. In choosing a business’s organizational structure, you should consider the following factors:
- Which industry does the company belong to?
- A company’s overall size
- Whether it’s financial or in terms of customer service, the company’s goals (what it hopes to accomplish)
- A company’s structure is essentially its blueprint explaining how the organization is run and how information is passed between departments.
- It is a simple yet rigid organizational structure. As each link reports to ONE direct supervisor, passing information through the company can take quite a while. Smaller companies will benefit from such a structure.
- Organizational tiers (to one another) share information horizontally (to one another) in a manner similar to line organization structures. Companies that need to meet strict deadlines and have many departments will benefit most from this structure.
Organizational Structure Types
Most companies should begin with a traditional organizational structure, especially the smaller ones who don’t have a great deal of departments or require a great deal of departments and communication links. A traditional organizational structure is illustrated in the image above.
Traditional structures are characterized by simplicity. Top-down thinking is the way to go. In this case, the CEO leads the company in terms of direction and communication. Upon reaching the director level, you are at the top of the chain. It is the person (or office) who oversees a particular department or division. Managers and employees are also present within each department.
With the traditional line organizational structure, information is narrowly focused.
It is typical for information to be passed down from one individual to another, starting at the top and working its way down. However, it is a rigid organizational structure and, since information is not shared horizontally, processing information throughout the company can be time-consuming. It is best suited to small businesses with a small number of departments and a small number of employees who follow the traditional organizational structure.
An example of a functional organizational structure can be seen in the image above. By establishing channels for horizontal information sharing and direction, it differs from traditional line structures in that it increases the number of communication channels substantially.
According to the traditional structure, each employee communicates directly with his or her immediate supervisor. It is common for employees to communicate with people whose control they don’t directly fall under because of the functional structure.
Those companies with many departments and those with short deadlines will benefit from a functional organizational structure.
The project-based organizational structure is another structure to consider. Based on the projects a company needs to complete, it divides the company into groups. As you might expect, the director is the primary leader in the organization. Each project is overseen by a manager who oversees the team.
In a project-based organization, you have the best of both worlds: a straightforward, straightforward structure, where the top tier has direct supervisory responsibility. In the final tier, the project is assigned to a team that is responsible for completing it. Getting information and assistance from other team members is easy for each member.