Organizational Structure and It's Importance

Figure 1- Organizational Structure

Introduction

An organizational structure is the way that a company, organization, or team is set up. It can be hierarchical, or divisional with different levels of management or product lines. This structure provides a company with a visual representation of how it is shaped. Every company and team have its own formal organizational structure. These activities can include rules, roles, and responsibilities.

'Organizational structure is a set of methods dividing the task. to determined duties and coordinates them' (Monavarian, Asgari, & Ashna, 2007).

The organizational structure also determines how information flows between levels within the company. And normally illustrated in some sort of chart or diagram like a pyramid, where the most powerful members of the organization sit at the top. It can be a centralized structure or a decentralized structure. A successful organizational structure defines each employee’s job and how it fits within the organization. At the same time, it remains efficient and focused which helps them to achieve goals and objectives easily.

Why it is important?

The organizational structure is important because it clearly defines how responsibilities are divided among the employees and how it is coordinated. When this system is in place employees are motivated to work more efficiently as it defines who is responsible for the relevant tasks. Normally most companies use to display their organizational structure in a common place. It helps everyone to understand the process and the workflow of the organization.

Key Elements of Organizational Structure

Work Specialization – It outlines how the operation is divided among the employees of the organization, from the highest position to the smallest position how the roles and responsibilities are divided, and who is responsible for each task.

Departmentalization – Organizational structures are designed as departments based on their functions like HR, Accounts, Sales and marketing, and purchasing. Each department is led by a supervisor or a team leader.

Chain of command – It is the line of authority that comes from top to bottom in each department. This gives clear information to the employees and clients as to where they should reach out for support.

A span of Control - Usually in a department number of employees is subdivided into small groups. For each group, there is a supervisor or a team leader. He is the one who is reporting to the particular department head, on behalf of all the employees. This indicates the number of employees that can be managed by one manager

Formalization - Formalization determines how much standardizing there is across the organization and it is the creation of processes relationships which outline the duties and responsibilities of individual employees.

Types of Organizational structures

There are various types of organizational structures each with their own advantages and disadvantages. This structure is different from company to company based on their functional system and their capacity. Some of the common structures are...

Hierarchical Structure

This is the most common traditional type of structure which is organized as a pyramid shape including directors, managers, executives, and employees in order from the highest to the lowest level of the chain.

Figure 2-Hierachichal Structure

Functional Structure

This is known as a bureaucratic organizational structure. In this structure, employees are grouped together according to their roles. This is common in small to medium size businesses.

                                                                     Figure 3 -Functional Organizational Structure 

Divisional Structure

This type of structure is fit for a large business unit because they have more specifications and specializations like leadership teams, products, or subsidiaries they operate. So, this gives a detailed summary of the organization.

                                                                    Figure 4 - Divisional Organizational Structure

Matrix Structure

Some companies use this structure where employees report to different superiors, and managers or work for different departments. Ex – Employees who perform their duties for both sales and customer service.

   

                                                                       Figure 5 - Matrix Organizational Structure

Circular Structure

This is quite different than the other structure. Here, the reporting hierarchy is structured in a circular way, where the higher-level members represent the inner circle and the lower-level members represent the outer circle. This way of organizing follows open communication and collaboration among the different levels.

   

                                                                  Figure 6 - Circular Organizational Structure

Network Structure

In a network structure, the organization has a decentralized network of interconnected entities, both internal and external individual freelancers, groups, or associations, that collaborate to achieve common goals.

                                                                  Figure 7 - Network Organizational Structure

Flat Structure

This is known as horizontal structure, In this structure authority and decision making are minimize to empower employees. The lack of hierarchy motivates employees to make decisions, take ownership and problem solving.

                                            

                                                                       Figure 8 - Flat Organizational Structure
                                                           

Conclusion

Bloisi et al. (2007, p. 710) defines 'organizational structure as a grouping of people and tasks into different units to boost coordination of communication, decisions, and actions'. Having a clear organizational structure is very important to an organizational success. When employees have a clear idea about their job roles responsibilities and reporting authority they can move confidently and efficiently. It will help them to achieve their goals and objectives easily.

References

The Economics Times. (2023) What is organizational matters?. 'Definition of Organizational Structure, Organizational Structure Meaning' [online]. Available at  https://economictimes.indiatimes.com/definition/organizational-structure. Accessed on November 2023.

Campbell, A. (2022) Organizational Structure [online]. Available at https://www.betterup.com/blog/organizational-structure. Accessed on November 2023.

Kenton, W. (2023). Organizational Structure with examples and benefits [online]. Available at https://www.investopedia.com/terms/o/organizational-structure.asp. Accessed on November 2023.

Ang, A. (2022). What is an Organizational Structure? [online]. Available at https://venngage.com/blog/what-is-organizational-structure/. Accessed on November 2023.

Divaney, E. (2023). 9 types of Organizational Structures Every Company Should Consider [online]. Available at https://blog.hubspot.com/marketing/team-structure-diagrams, Accessed on November 2023.