Understanding Organizational Structure

5 mins read

This is a BIG topic, however this particular article focuses on what an organizational structure is, as well as what it isn’t.

Within a company, how do we know who can make a specific decision? How do we know who to go to when we need help, who to report to, or where our role fits within a company? These questions only scratch the surface of what can be solved by having a proper organizational structure in place. Let’s skip the “fluff” and get right into building your understanding of the nuts and bolts of organizational structure!

What is an organizational structure?

An organizational structure is a system that provides the foundation for how activities are directed within the company to achieve the goals of the organization. It is a road map for organizational activities such as rules, roles, responsibilities, and task allocation. The organizational structure also determines the flow of information between the different levels of the company. Put simply, an organizational structure lays out who’s who in the zoo so the company can achieve its objectives.

Businesses of all shapes and sizes use organizational structures. The “design” of the structure will vary depending on the type of business, the industry, the company culture, and what the company is setting out to achieve. How a business is designed determines how it performs. A successful organizational structure will define each employee’s role, along with how it fits within the overall system. Most commonly the organizational structure is displayed in a flowchart or diagram that is a pyramid shape. The person that has the most decision-making power resides at the top of the organizational structure, while the people with the least amount of decision-making power are at the bottom of the organizational structure. The interconnecting lines between the different positions or titles displayed in an organizational structure showcase who each person should be in communication with. The people that they are connected to on higher levels than themselves are who they would answer to and who they would go to for decisions they are unauthorized or unable to make.

Here is an example of an organizational structure:

This is considered a reporting structure, which shows who the main reporting manager is, as well as the department or division each staff member is a part of. The top position (CEO) has the most decision-making power, while the employees on the lowest level have the least decision-making capabilities. Each employee can see who they should report to by following the arrow connecting their position to the next position above them.

What an organizational structure is not

As an organizational structure is at the foundation of a business’s operations, it is not something to be set and forgotten about. An organizational structure is a document that will be re-evaluated time and time again throughout the course of business. From conception, to inception, and every wrench that is thrown your way after that, your organizational structure should be revisited and revised; especially when making decisions that may affect the company structure.

An organizational structure is not:

  • Created in 5 minutes: It requires thought and planning
  • In contrast with your business strategy – it should match and encompass your strategy!
  • A replica of another company’s organizational structure
  • Set in stone – changes happen!
  • To be forgotten: It will help guide many company decisions
  • In contrast with the company culture
  • To be used as an excuse to not complete a task. “That’s not my job!”
  • A tool to be used to threaten someone’s power over someone else in the company
  • A productivity reducer – quite the opposite!
  • Negative: It’s a very positive tool that sets the foundation for a business’s operations

Does Your Organization Have Structure?

We hope this article has built on your understanding of organizational structure. As stated right in the word, an organizational structure helps to organize the structure of roles within a company. While the explanation of the structure may be somewhat simple, we understand it is the creation of an organizational structure that requires a great deal of forethought and planning. Now that you have an idea of what an organizational structure is, as well as what it isn’t, perhaps it’s time to consider the following question: “Does your organization have structure?”

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