What is the ​organizational structure and why it is useful?

When hiring large numbers of employees, effective organization of people becomes essential. This means that all the employees understand their roles and duties in the firm, and the best way to achieve this is to use an organizational structure. This structure defines the roles, responsibilities, communication lines, line managers and levels within the hierarchy of staff in an organization. In this article, I discuss the organizational structures and factors influencing organizing people in the business.

What is the organizational structure?

An organizational chart shows the structure and hierarchy of a company and defines how a business is structured and managed. It shows the functions, roles and responsibilities of the staff and the level within the hierarchy, the communication matrix, and how the varying roles relate to each other. For example, the manager can identify his/her subordinates and line managers. A business needs to organize its staff to improve productivity and efficiency, and as the business grows and hires more staff, managers need to ensure that employees perform their roles and achieve the firm’s plans. For example, a firm may structure itself into departments to manage finance, human resources or marketing. There are many types of organizational structures which vary from one organization to another depending on the business nature and its targets. Structures include the hierarchal organizations, i.e. functional, project, product, geography-based or balanced structures, and horizontal or vertical organizations including tall and flat structures. The tall structure comprises many management levels and fewer employees, and management control is intense, and communication is vertical and long. Whilst, the flat organization has fewer management levels but more employees. Unlike in the tall structure, employees of the flat structure are more powerful and autonomous, and decision making is easy and fast.

What are the key influences of an organizational structure?

The following is a list of influences that affect the choices of deciding and running an organizational structure:-

Technology: The level of technological advancement determines the organizational structure used by firms. For example, technological firms tend to use a flat as opposed to a tall structure because the technology makes it easy for line managers to communicate with their subordinates. This technological advantage enables firms to delayer and reduces staff costs.

Control and cost: an organizational structure helps managers to control the operation. Managers who want to control the operation themselves tend to use a tall structure, while the flat structure enables decentralization. The organization type is strongly correlated to the cost of staff. A structure that has many levels of hierarchy and large numbers of employees is more costly.

Nature of business and planning: this includes the size of the firm, business type and ownership type, and it can influence the organization type. For example, a sole trader uses the simplest structure, while a limited liability firm uses a structure that contains hierarchical levels. Firms that are determined to achieve particular plans and targets usually craft the organizational structure to facilitate achieving these goals.

Final note

This article is extracted from my new book- Mastering Enterprise Skills for Potential Entrepreneurs, which can be found in The Book. If you want to receive more information about the book and our activities, you can register in our newsletter by using this link.

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Munther Al Dawood

Enterprise Expert

Grow Enterprise 

http://www.growenterprise.co.uk

maldawood@growenterprise.co.uk

Reading, UK

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