Have you ever come across the term Blueprints? I am sure you must have. Now organizational structures are quite similar to blueprints. They incorporate different ways regarding how the company will operate and manage. Basically an organization structure can be categorized into a chart or a diagram showcasing logistical organization of the company. The following post focuses on what are organization structures and what benefits or drawbacks these structures carry.
Define an Organizational Structure or Management Structure?
Organizational Structure is a system that is mainly used to showcase the hierarchy within the organization. Yes, everything is pre-defined here! In fact, such predetermined structures tend to help business owners irrespective of their size a lot in understanding how their place is being operated and managed. Not to mention these structures assist well in obtaining goals in a short span of time.
An organization structure is a simple pattern or network of a few roles and responsibilities. Here a person is allotted to perform specific tasks according to the organizational structure. Here each member is responsible for achieving a common goal. I am sure you must have heard the story that it is not easy to break a bunch of sticks together but breaking one or two is possible. Similarly, dividing responsibilities and coordinating among different people is easy to function.
The main objective of organizational structure is to achieve the target and its structure. Here each member collaborates with each other and demarcates functions between them.
Another crucial purpose of creating organizational structure is to ensure smooth and efficient functioning. So in other words, it reduces time, money and effort. Typically, an organizational structure is all about:
- What is the company doing?
- Who are the key persons who will perform the tasks
- How are those business activities conducted? Have you determined the short-term and long-term goals yet?
Types of Organizational Structures
This type of organizational structure is said when team members are bifurcated into different departments. Each one is categorized on the basis of different skills, specializations and accountabilities. According to Itesh Sharma from TatvaSoft, With the help of functional structure, both communication and decision making strategies can be improved to a great extent. For example – information technology (IT) and accounting-based organizations.
- Supports Employees Specialization
- Employees are able to dedicate their time and talent
- Simplifies and streamlines everything from managing significant amounts of data, financial analysis, etc.
- Decrease efficiency and create barriers
- Increase in cost
Another type of organization structure is divisional structure. This divisional structure focuses on attention to detail. Yes this means each and every activity happening within the organization is given equal importance. So why must one opt for such an organizational chart? This type enables teams to collaborate on board. All this is done keeping primary focus on their respective, specific goals. Some of the core examples include – geographical products, product-based, etc.
- Enables quick development and deployment of new products
- High-end versatility, cope-up with changing consumer behavior
- High customization
- Less scalability
- Create Autonomy and decentralization
Matrix is a type of organizational structure that acts as a rare combination of functional structures with divisional structures. A matrix-based organization decentralizes the power of decision-making. In simple words, different teams endeavor hard and ensure enhanced cross-functional collaboration is done. What happens by doing this? Well the organization can boost their overall productivity and encourage people to opt for numerous approaches and solve the current and potential issues seamlessly.
- This type offers nuanced collaboration
- Supports sharing of resources across different departments
- Increase collaboration and communication
- This one is quite complex in nature
- Forecasting financial aspects can be pretty difficult
- Tracking key indicators might be less accurate
Hybrid structure is quite similar to matrix structure. This type of organizational structure is a grid-style org chart. Here what happens is business activities can be categorized into two aspects – functional or divisional purpose. With the help of a Hybrid structure, it is possible to conduct collaborative sharing of data and other important resources.
- Again this one is versatile and highly scalable
- Hybrid works wonders for small businesses
- Every opportunity can be seized
- This is quite complex
- Resolving issues
- This might lead to additional oversight
If you are worried about your end-to-end workflows for conducting specific procedures? Then this type of organizational Structure is correct for you. Here all the procedures and policies ensure that every small, large business activity is performed by tracking or closely monitoring how different activities interacts with the others within the hierarchy. This surely results in increase in adaptability and flexibility. Also, the organization is able to keep up with the changing demand and market demographics.
- Fast and quickly adaptable
- Enables accurate analysis and data collection
- New opportunities can be created
- Sometimes this type can lead to delays and hinder productivity
- Additional resources are required here
Another interesting organizational structure type is circular structure. Of course this one is hierarchical. The only difference here is that this is not supposed to work in a straight ladder; instead the high or top-level employees are located in the center like a ring and lower staff surrounds them like an outer ring. This structure is a cut above since it enables different divisions to participate well and succeed as a whole.
- Strong and centralized aspects are highlighted here
- Highly supports communication and collaboration
- This type is pretty complex
- Again, this one requires additional resources
Another crucial type of organizational structure or management structure is flat structure. This one is a bit different from all those traditional and conventional hierarchies. Here you will find a more detailed and organic approach in comparison to others. By using this type in particular, professionals can easily minimize the authoritative distance between roles and functions. Not to mention here the levels of management are reduced to a great extent. The approach seems to be extremely collaborative instead of being supervisory. Every member is suppose to communicate precisely.
- Extremely detailed and descriptive
- Reduces unnecessary stress
- Lack of traditional hierarchies
- Requires extensive planning
Last but certainly not the least aspect here is network structures. Now again this one seems to be pretty different from its peers. Network structure is often recommended when an organization collaborates or shares resources seamlessly. Whether it can be two companies working together or a large enterprise featuring numerous departments, etc. Network structures are more or less like divisional structures but here there is no product line, it’s relevant business activities.
- Again this one turns out to be versatile, scalable and adaptable
- Here businesses can easily outsource activities for free
- Companies irrespective of their different geological locations can work as a whole
- Complex and confusing
- Precise information on reporting, analysis, accounting is required
- High chances of duplication
Creating an organizational structure is not difficult. Just make sure whichever type you go with, it ensures long-term viability without hindering the competitive differentiation.
And this is it! This is what an organizational structure is all about. I hope you did find the post meaningful. If so, please help in sharing and spreading the word among your peers.