The organisational structure of a company is essential to the success of any business or organisation, as it dictates how a company carries out specific processes. Rules, roles and responsibilities, to name just a few, are all included in this activity. The organisational structure affects the flow of information within and across divisions and levels of the company. There are numerous instances of architecture that combine centralisation with decentralisation in the literature. Individuals have a great degree of personal agency in decentralised organisations, while the chain of command is established in centralised institutions. Functional, divisional, futarchy and matrix systems are all types of organisational structures.
Did you know?
An organisational structure also determines the flow of information at different levels in an organisation.
What is an Organisational Structure in Management?
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What is an Organisational Structure?
The organisation structure establishes how a company divides responsibilities to meet the company’s goals. It outlines a worker’s tasks and responsibilities in a firm. The more power an employee possesses, the more likely they can advance in a business’s ranks. Additionally, when a business’s structure is well-organised, production increases. Four types of organisational structure exist functional, futarchy, matrix and divisional.
What Are the Benefits of Organisational Structures?
There are numerous advantages to having an organisational structure, even if your company doesn’t use one. Implementing an organisational structure has the following advantages for your business:
• Faster decision making
• Multiple business locations
• Improved operating efficiency
• Greater employee performance
• Eliminates duplication of work
• Reduced employee conflict
• Better communication
Faster Decision Making
If the various teams within your organisational structure can communicate more effectively, it will enhance the overall efficacy of your company’s communication. Because of this, you can make judgements more rapidly in the future. In other words, a company uses the flow of information throughout an organisation to accelerate decision-making processes.
Multiple Business Locations
For business owners, having a defined organisational structure simplifies ensuring that all of your sites operate similarly and adhere to the same policies and procedures. Since owners cannot constantly be present at all locations, having a well-organised organisational structure can provide peace of mind. This is critical to consider if your business begins to expand in size.
Improved Operating Efficiency
Following the segmentation of businesses into various teams or branches, an organisation forms organisational structures to maximise the efficiency and effectiveness with which all related actions and obligations are carried out and fulfilled. When employees are aware of the tasks, it is significantly easier to fulfil them on time. A well-organised organisational structure enables establishing an efficient and streamlined system.
Greater Employee Performance
Employees can perform better when their tasks and responsibilities are delineated and dispersed. Employees can put forth their utmost effort daily when under the supervision of a well-defined organisational structure. A positive work environment where employees’ efforts are recognised and appreciated can increase their morale and self-esteem.
Eliminates Duplication of Work
When a company separates personnel into teams according to their talents and competence, you reduce the possibility of overlapping job assignments. For example, if one team gets a project, the other groups know it’s not their obligation to take it on because they have their tasks specified.
Reduced Employee Conflict
A company can reduce employee conflict through the use of organisational structure. There are many variables to consider in this situation, but if employees are aware of their responsibilities, they will be more focused on their work. This is an excellent method to keep conflicts between coworkers to a bare minimum.
Better Communication
A firm’s organisational hierarchy varies from company to company and can affect how well different divisions and teams within a company communicate with one another. Others in the office will know who to approach for specific difficulties once they split tasks among several teams and individuals. Should an issue arise, you’ll know who to contact in the event of a group setting. Additionally, if someone in marketing has a query about a project design, they are referred to the art department for answers.
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Types of Organisational Structures
In the realm of business, there are four different types of organisational structure. There are several considerations when deciding whether or not to use them in your industry. The four types are as follows:
1. Functional Structure
2. Divisional Structure
3. Flatarchy
4. Matrix Structure
1. Functional Structure
Organisations with a functional structure are segmented into specialised units, each with its responsibilities. A bureaucratic organisational structure, also known as a functional structure, is a prevalent feature of small and medium-sized organisations. The majority of people in the workforce have had prior experience working in hierarchies like this. Many firms, for example, divide their organisation into various divisions, such as finance, marketing and human resources. A manager oversees each of these divisions. In contrast, an administrator or an executive is in charge of several different company areas.
Here are some advantages of this structure:
• Employees grouped by skill
• Greater sense of teamwork
Here are some disadvantages of this structure:
• Lack of communication with other departments
• Unhealthy competition
• Management issues
2. Divisional Structure
When an organisational structure is organised into divisions, different teams work together toward a single purpose. A separate executive for each division is in charge of the branch’s operations, budgeting and resource allocation. Large corporations use this organisational structure. A car manufacturer might include SUVs, electric vehicles and sedans divisions. Even though each branch serves a distinct purpose, they all work toward the same goal: a sale. The multi-divisional structure is another name for this.
Here are some advantages of this structure:
• Focus on a single good or service
• More centralised leadership
Here are some disadvantages of this structure:
• Poor integration with other divisions
• Competition between divisions
• Lack of communication between divisions
• Potential tax implications
3. Flatarchy
There are no or few tiers of management in a flat organisational structure. A corporation employing this structure could have only one manager between its executive and the rest of its workforce. As a result, it’s known as a flat arch, a hybrid of the two. As a result of their smaller workforces, small businesses are more likely to adopt this form of organisational structure, but businesses of any size can use it. Some companies eventually develop from this structure, but others stick with it.
Here are some advantages of this structure:
• Cost-efficient
• Fosters good communication
• Higher employee morale
• Faster decision making
Here are some disadvantages of this structure:
• Potential employee conflict
• Leadership confusion
4. Matrix Structure
There are two types of managers in a matrix organisation: a project or product manager and a functional manager. This structure encourages duality and resource sharing because of two supervisors on each team. People who work for firms with a matrix structure are assigned to various tasks requiring varying degrees of competence and expertise. Matrix structures are a collection of many organisational structure systems combined into one.
Here are some advantages of this structure:
• Fosters open dialogue
• Flexible workplace environment
Here are some disadvantages of this structure:
• Leadership confusion
• Conflicting leadership loyalties
• Potentially more costly
• May not clearly define roles
• Potentially heavy employee workload
Conclusion
An organisational structure lays out how a company organises its activities to achieve goals. There are four types of organisational structure – functional, futarchy, matrix and divisional. Implementing an organisational structure has the following advantages for your business:
- Faster decision making
- Reduced employee conflict
- Improved operating efficiency
- Greater employee performance.
For business owners, having a well-organised organisation can provide peace of mind. There are no or few tiers of management in a flat organisation. Small businesses are more likely to adopt this form of organisational structure. Matrix structures are a collection of many types of organisational systems combined into one. Some companies eventually develop from this structure, but others stick with it. Organisational charts help allocate responsibilities, streamline the workflow and ensure the completion of critical activities on time.
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