The right organisational structure can improve performance
Every CEO wants their people to perform to the best of their abilities. Many elements impact your employees' performance, one of which is how the organisation is structured.
There are a few ways to structure your business, each with its own benefits and drawbacks, and some suit certain organisations better than others. Let's look at the aspects of an organisational structure before diving into the many possible approaches to organising your company.
Three of the main aspects to structure are:
Formal hierarchy: This is the chain of command in your organisation. It describes your management structure and reporting routes. All communication follows the lines on the organisational chart.
Informal communication: This is all communication outside your established hierarchy, for example, hallway banter and informal teams brought together for specific reasons.
Standardisation: This allows routine tasks to be coordinated. A good example is standard operating procedures (SOPs), which replace 'case-by-case' administration by providing a description of how types of work should be completed.
Difficulties arise when there is poor leadership in each function, which weakens the overall organisation because each part is inextricably linked to the others. Each of these tasks must work in sync and benefit from clear communication.
So, which structure is best for your business?
Choose a functional structure if your environment is relatively steady and straightforward, and your plan looks for economies of scale and low costs. This may suit a functioning organisation with numerous SOPs in place and in which you, as the founder, retain the majority of control.
Choose an organic structure if your environment is constantly changing and complicated, and you aim to innovate. A team-based structure is the most organic. If building a team-based structure seems too daunting, consider a matrix structure with dispersed power.
If your marketplaces are interconnected, a functional and centralised structure may work well for a single client/product/region. If your markets are diversified, a divisional structure may be more effective.
TAKEAWAY: Deciding on the right structure is a critical stage in the lifespan of a company since it needs a framework before it can successfully scale. With a functional leader in each operational area and the right structure in place, the specialisms will work as a cohesive unit, communicating with and supporting each other.