In 2007 I decided to build a custom home on a lot I had purchased. It was a beautiful lot that backed up to greenspace and had a view of Mt. Adams. The reason to build a new house should be reserved for another story. Had I known what the economy was going to do in late 2007 and the start of 2008, I may have postponed the construction.
Part of building this new house was to find a house plan that would be a good fit for the lot and maximize the usage of the land. I spent hours in a Portland based architects office going over various options for my future house. I needed blueprints that I could provide the contractor that was going to construct my new house.
Building a house from the ground up is similar in a lot of ways to building a business. Both require a well thought out plan. In construction it’s the architectural plans. In business it’s the organizational structure.
Just like building a house requires a solid foundation for the house’s stability, a well-defined organizational structure provides a stable base for a business’s operations.
There are many different architectural plans that can used to build the house, there are also many different forms of organizational structures that refer to the manner in which a company or organization is designed and arranged when it comes to roles, responsibilities, expectations, and relationships among staff and employees.
Many companies think that organization structure refers to the organizational chart. While the organizational chart is an important aspect of organizational structure, it is not all of it.
The specific structure can vary depending on the size of the company, and the goals of the organization. There are several common types of organizational structures.
- Functional Structure: The organization is divided into functional areas or departments, such as marketing, finance, sales, operations, and human resources. Each department is responsible for its specific functions and reports to a higher-level manager. This particular structure is often used in smaller organizations or those with a singular product or service.
- Divisional Structure: The organization is divided into separate divisions, each with its own set of functions and resources. Divisions are typically organized by product, geography, customer type, or a combination of each. Each division operates somewhat autonomously and has its own management structure.
- Matrix Structure: This structure combines elements of both functional and divisional structures. In this structure, employees report to both a functional manager and a project or product manager. This structure is often used in organizations that need to be flexible and responsive to changing projects or customer demands.
- Flat Structure: A flat organizational structure has few to no layers of middle management between staff and top-level executives It promotes open communication, quick decision making, and a focus on teamwork. Often this structure is used for startups and small companies.
- Hierarchical Structure: These type of structures have multiple layers of management with each layer overseeing the one below. Decision making authority typically flows from the top down. This structure is common in larger organizations.
- Team-based Structure: The emphasis is on self-managed teams that are responsible for specific projects. Team member collaborate closely, and decision making is often decentralized.
Of course, there are other organizational structures, but these are a few of the more common ones.
All organizations have a structure in place even if they did not have the intention of creating one. Often they are poorly designed from the onset, or in many cases the organization has outgrown the original structure.
Poorly designed, no structure or one that has been outgrown can be costly to the business. They can create chaos within a business. And chaos is the enemy of efficiency.
There are several common problems and challenges associated with a poorly designed organizational structures that hinder effectiveness.
- Lack of Clarity: When organizational roles and responsibilities are not clearly defined, confusion often will arise. Employees may not know who to report to or what their specific duties are, leading to inefficiency and frustration.
- Communication Barriers: In hierarchical structures, information may not flow smoothly between different levels and individuals within the organization. This can result in miscommunication, misunderstandings, and the withholding of critical information.
- Silos and Departmentalism: Organizational structures that are too rigid or compartmentalized can lead to the development of isolated departments or teams that don’t collaborate effectively. This can hinder innovation and problem solving.
- Inflexibility: Some structures are too inflexible to adapt to changing circumstances or market conditions. This lack of adaptability can make it difficult for organizations to respond to new challenges or opportunities.
- Bureaucracy: Excessive layers of management and a complex decision-making process can result in inefficiencies. This can slow down decision making, stifle creativity, and increase operational cost.
- Power Struggles and Politics: In some organizations, power struggles and political maneuvering can become prevalent, particularly in structure with unclear lines of authority. This can undermine teamwork and the ability to achieve organizational goals.
- Overlapping Roles: Poorly designed structures may lead to overlapping roles and responsibilities, causing conflicts and duplication of efforts.
- Lack of Accountability: When responsibilities are not clearly assigned or enforced, it can be challenging to hold individuals or teams accountable for their actions and results.
- Resistance to Change: Employees and managers may resist changes to the organizational structure, even when such changes are necessary for the organization’s success. This resistance can impede progress and innovation.
- Cultural Mismatch: Organizational structures should align with the organization’s culture. A mismatch between the structure and the culture can lead to employee dissatisfaction and reduced morale.
- Complexity: Overly complex structures with many layers and reporting relationships can be difficult to navigate and manage. Simplifying the structure may be necessary to improve efficiency.
- Lack of Customer Focus: Some structures may prioritize internal processes and hierarchies over the customer. This can result in poor customer service and a loss of competitiveness.
From my experience there is a natural tendency in business to create complexity within the business. The organizational structure can help reduce complexity within your organization. Having a well-defined organizational structure creates order. This well-designed structure can reduce bottlenecks and maximize efficiencies. It defines roles, responsibilities, and communication channels. A well-designed structure can improve efficiency, decision-making, and adaptability, ultimately impacting revenue and profit positively.
The key to successfully manage and sustain growth within an organization is to have a thorough understanding of what your company looks like today and what it needs to look like in the future. It’s starts with clarity of who you are as an organization today and who do you want to be in the future.
The organization structure goes far beyond just the reporting relationships within a company. As leaders and owners or organizations, we need to consider our vision, purpose and values that will help guide the organization. We have to develop our goals that will be implemented and made operational. We have to establish the reporting relationships, communication standards, decision making procedures for not only making decisions, but also solving problems, the rules of conduct for organizational staff and employees, the accountability and reward system for goal achievement.
The organizational structure just like the structure to build a house cannot be taken for granted. It goes far beyond the organizational chart.
Stay tuned for Part-Two of Organizational Structure
Alignment Creates Momentum
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