For companies of any size, it is important to have a management system in place. Then it will be clear to whom the development department employees report or what is included in the HR director’s responsibilities.
To ensure that all team members understand how the company works, an organizational structure is created. Let’s consider how to choose the appropriate type of organizational structure and how to form it correctly.
What is the organizational structure of a company
An organizational structure is a diagram that describes how a company distributes responsibilities and resources, who reports to whom, and who makes decisions. It is a system that provides a clear hierarchy and determines how the work process in the company will be structured.
For example, an organization has a founder, two directors, department heads, and regular employees. The organizational structure describes who the employees, department heads, and directors report to.
Goals and objectives of the organizational structure
The purpose of the company’s organizational structure is to increase business efficiency, since this is the tool that allows you to align the work of different departments. The organizational structure of the enterprise is also important for achieving the company’s strategic goals.
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What tasks does it perform:
- Helps define functions and roles. Separation of duties allows employees to understand their tasks and helps them perform their work more efficiently .
- Improves communications. A clear structure provides opportunities for quick communication between different management levels and departments. Additionally, programs and other tools are used for this, such as a corporate messenger .
- Synchronizes teams. The structure helps to successfully synchronize the actions of different departments so that they work as a single mechanism. This contributes to the achievement of the company’s overall goals .
- Optimizes resource management. Creating an organizational structure is necessary to distribute resources as efficiently as possible and avoid duplication of work .
- Helps prevent conflicts. The organizational structure helps prevent conflicts within the company, since everyone knows their authority.
In addition, organizational structures are needed to quickly respond to changes in the external environment, increase productivity and employee loyalty.
Types of organizational structures
In a horizontal structure, there is only one manager, the rest of the employees are performers. For example, an entrepreneur opens a clothing store and hires salespeople. All salespeople report only to the business owner, they have no other managers. This is how a horizontal structure works.
Functional
The functional structure involves division into departments or divisions that have managers. The main differences from the linear structure are:
- decisions are made by department heads, not the founder;
- Communication occurs horizontally – between departments, and not from top to bottom, as in linear communication.
Let’s say a company has a sales director and a production director. The first is responsible for the sales department, the second for the workshop and production department. Due to this, all employees understand the chain of command. At the same time, production department specialists can request information from the sales department, since all departments in the functional structure interact with each other.
This option is suitable for small and medium businesses, it is used even in factories. The founder has less responsibility, since the bulk of the work is on the heads of departments and divisions. Therefore, the functional structure can relieve the founder.
Linear-functional
Linear-functional structure is a combination of the two previous methods of company management. Here, as in the functional structure, there are divisions into departments and directions, and each has its own management. Only additional line managers also appear.
For example, the director develops a marketing strategy and plans its implementation together with the head of the department. Then the head of the marketing department sets tasks for subordinates and monitors the results.
The advantage of the organizational structure is that there is a clear hierarchy and distribution of responsibilities. Directors and heads of departments share the workload, which allows for better planning and control of the work process.
Matrix
The matrix structure is a linear-functional management ppc as a tool for increasing sales system, which is supplemented by project managers. That is, employees have several bosses at the same time.
For example, a company has a development department. Team A reports to the head of the department Oleg and the project manager Alexey. There is team B, which reports to the head of the department Oleg and the project manager Anna.
Developers perform their tasks, their implementation and deadlines are controlled by the project manager. The project manager is engaged in administrative tasks: creates documents, reports and other materials, provides comfortable working conditions.
Divisional
The divisional organizational structure is neither horizontal nor vertical. It is a management model in which the organization is divided into separate, independent units or divisions. Each branch operates as a separate unit with its own budget, resources, and goals, but still reports to a common control center.
For example, the large multinational corporation General Electric has companies in the fields of healthcare, energy, aviation, etc. Each organization operates as a separate business, but they all follow a common corporate strategy.
How to choose an organizational structure
To understand what organizational management structure is suitable for a business, you need to assess your capabilities. For example, a company consists of eight people. You should not complicate the lives of employees and build a divisional structure. Most likely, in this case, a horizontal structure would be ideal.
While the company has few employees, this is the best option. Just draw up a reporting chart, describe the duties of the team members. This will be enough for the first time.
As soon as the team starts to grow and the business needs change, you can build a new management scheme. To do this, describe:
- How many team members and managers are there now and who are you planning to hire in the near future? What are the plans for the career growth of employees?
- What teams and managers are needed to organize the work.
- The founder’s duties and tasks that will be under his control. The method of managing the enterprise depends primarily on this. Let’s say the structure is chosen to relieve the management. Then it should be a functional, not a linear management scheme.
- Features of the company, plans for its scaling in accordance with the business strategy.
How to Develop an Organizational Structure: A Step-by-Step Guide
Let’s imagine that you have chosen the type of organizational structure. Now you should build it correctly and describe it. You should not copy a template from the Internet, it is important to take into account the specifics of the business. To create an organizational structure, you need to follow a step-by-step algorithm.
Step 1: Define a strategy
The creation of an organizational structure can begin with the development of a strategy , if there is none yet. A company’s development strategy is a long-term my numbers list action plan that is needed to achieve the main goals. It determines in which direction the organization is developing and how this will be achieved.
To build a strategy, you need to:
- Study the market, competitors and general industry trends. Use research tools. For example, PEST analysis – an assessment of political, economic, social, technological factors. You can conduct a SWOT analysis – assess the strengths and weaknesses of the enterprise, internal and external opportunities and threats.
- Determine what place you want to occupy in the market.
- Choose a mission. It describes the main role of the company in society, its goals, and ways to achieve them.
- Describe values— corporate principles and norms that determine employee behavior and shape corporate culture.
Step 2: Identify core business processes
Building an organizational structure is impossible without structuring business processes. Business processes are a certain sequence of actions that lead to the desired result.
To describe the main business processes, you need to:
- List all the activities that take place in your company, from sales and marketing to production and delivery.
Step 3. Define areas of responsibility and ways of interaction between employees
In order for the organizational structure of the company to always be effective, it is necessary to clearly define the areas of responsibility of each employee and the ways of their interaction. Then all team members will understand their tasks – this contributes to effective communication and coordination of actions in the company.
