Organizational Structure Benefits

Organizational structures are formal systems of relationships that exist within a business. Organizational structures allow management to monitor and control the business process while facilitating working relationships among employees from top to bottom. Different types of organizational structures include functional structure, divisional structure, matrix structure, hierarchical or tall structure, and horizontal or flat structure

Benefits

• The structure of an organization is meant to complement the company's business goals and objectives. It is also the foundation of the company's culture and as such affects employee behavior, performance, motivation and cooperation. Effective organizational structures are adaptive to process requirements and possible changes while trying to optimize the results of the input of manpower and resources. Organizational structures should allow for flexibility, encourage employee creativity and effectively utilize the skills and abilities of the workforce.

Functional Structure

• A functional organizational structure groups employees based on the positions they hold or by the tasks they perform. The benefits of structuring employees by common job titles and activities include better communication among specialists, increased teamwork and shared knowledge, and it allows for quicker decision-making.

1. Divisional Structure

   • A divisional structure can group employees by product divisions, geographic divisions or market divisions. The advantages of divisional structures include higher quality products and customer service because of specialization, facilitated communication and teamwork within divisions and encouragement of hands-on problem-solving. In addition, it is easier for upper management to evaluate and reward employees through the increased job accountability inherent in divisional organizational structures.

   Matrix Structure

   • Matrix structures group employees by a combination of positions held, tasks performed and product divisions. A matrix structure results in employees having multiple bosses, facilitates product development through innovation and creativity, improves communication and teamwork among divisions and increases responsibility and freedom of employees.

   Hierarchical and Horizontal Structures

   • Hierarchical organizational structures are common for larger, more complex companies with greater process standardization; flatter, more horizontally structured organizations are more common for smaller, start-up companies focused on creativity and innovation. Communication and decision-making is more efficient and quicker in horizontally structured organizations compared with communicating up each level of the hierarchy. Also, the decentralization of a flatter structure allows for greater job responsibility and motivation.

   Warning

   • If an organizational structure doesn't fit the company's goals and objectives, it can hinder cooperation and, therefore, the completion of tasks, resulting in slower cycle times and the inefficient use of resources.