Organizational structure refers to the approach a business is arranged and how its various roles, responsibilities, and relationships are defined and coordinated. It establishes the framework for dividing and performing the work, making decisions, and flowing information within the organization. The organizational structure is a visual representation of hierarchy, departments, and reporting relationships within a company. It involves grouping staff per distinct function to achieve the company’s mission and vision. In general, business structure comes in two charts, which are tall or flat. In a tall organization, a business intends to have fewer departments but more managerial levels, and decision-making takes longer processes with tightened management control; however, a flat organization avails many departments with fewer management levels, and by this, decision-making and controlling are practical. Influencers of a business structure include the nature and size of the business, decision-making processes, and business control. The importance of organization reveals clarifying roles and responsibilities, facilitating coordination and communication among job roles vertically and horizontally, controlling costs, enhancing efficiency and productivity, supporting management control, and choosing the best way to reach the business mission, goals and plans.
Step-By-Step Process
- Clarify the business mission and vision.
- Start by understanding the strategic goals and objectives of the business.
- Clarify the previous steps on marketing and sales strategy and technical plans.
- Identify the key functions and departments required to achieve the business goals.
- Establish reporting relationships and hierarchies within the organization. Decide how different departments will interact and collaborate with each other. Determine who reports to whom and define lines of authority and accountability.
- Define the optimal span of control for each managerial position. The span of control refers to the number of subordinates that a manager can effectively supervise. It affects the number of hierarchical levels in the organization.
- There are various types of organizational structures, including functional, divisional, matrix, and hybrid structures. Assess the pros and cons of each type and choose the one that aligns best with the business’s needs and goals.
- Create job descriptions for each position in the organization. Clearly outline the roles, responsibilities, and required qualifications for each role. This step helps establish clarity and accountability within the organization.
- Decide on the level of decision-making authority and control that will be centralized at the top or delegated to lower levels. Centralization offers consistency and uniformity, while decentralization allows for greater autonomy and faster decision-making.
- Establish formal and informal communication channels within the organization. Determine how the information will flow vertically (top-down and bottom-up) and horizontally (across departments).
- Identify structure options and discuss them with your team and experts.
Example
Here is the organizational structure for a pharmaceutical manufacturing facility:
Useful Tips
- Follow up on the processes of designing an organizational structure and discuss it with your team and advisor before you finalize.
- Try to look at similar business cases and get deeper insights about the structure most suitable to your business.
- Prepare more structure options and test them.
- Share discussions with the team and experts.
Things To Avoid
- Avoid guessing works and assumptions without evidence.
Final Note
This article is sourced from my new book- Your Guide For Preparing An Industrial Feasibility Study.
For more information about the book: https://growenterprise.co.uk/book-your-guide-for-preparing-an-industrial-feasibility-study/
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The author: Munther Al Dawood- Industrial Enterprise Expert
Grow Enterprise 