In the early days of many small businesses, it can be unusual to find an organizational chart that spells out the business' structure. Usually, the absence can be explained not so much by a lack of time but rather, necessity. With often only a handful of people to manage, a small-business owner is the boss and everybody reports to them directly. Employees may work or without titles — executive assistant, director of operations, sales manager — but they largely keep track of who's who in the hierarchy of the business based on seniority.
Such casual structures often work while a business is small, but as it grows, so too does the recognition that a formal organizational structure could pay big dividends to the business and particularly the owner. If you're uncertain, consider the four functions of organizational structure. For now, time is on your side. But you'll definitely want to use the time to “file away” information so that you're ready to make strategic moves as your business grows in the weeks and months ahead.
Consider Forms and Functions of an Organization
Business News Daily likens an organizational structure to “a set of rules, roles, relationships and responsibilities.” Together, these elements:
- Spell out how a business' activities should support efforts to achieve its goals.
- Clarify reporting relationships among employees.
- Show how information should flow throughout a business.
For a manager or business owner, an organizational structure can do so much more by aligning the organization, its leadership, employees and the roles they fill into one cohesive whole, the Society of Human Resource Management says.
Day-to-day, an organizational structure can assist managers and business owners with four key functions. And if it helps cement your decision to create an organizational structure for your business, these functions are time-tested, having been promoted by the late motivational theorist Henri Fayol as far back as the turn of the last century— meaning the 20th, not the 21st.
The 4 Functions of Organizational Structure
- Planning, or the all-important ability to allocate resources, set deadlines, recalibrate when necessary and do “the vision thing” on both a short- and long-term basis. It may help you to know that as a group, entrepreneurs tend to be doers, not planners. But you can upend this paradigm — starting right now — by committing all your good ideas to paper, a Word document or a spreadsheet.
- Organizing, or when the time comes to translate all those ideas into an action plan, complete with procedures and protocols and the delegation of tasks to the people best suited to carry them out.
- Leading, or providing the direction, assistance and support most employees need, in tandem with the motivational prowess they tend to admire.
- Controlling, which Fayol might well call “monitoring” today. Someone has to keep their finger on the pulse of the business to ensure that everything is being done — efficiently, expeditiously and to the satisfaction of customers who have all new ways of sounding off since Fayol's day. In many small businesses, the boss is the “pulse taker.”
Watch Symmetry Develop
At this point, you may already have a particular structure in mind for your small business. Arguably the four most common types of organizational structures are the hierarchical, functional, divisional and flat structures. But even if you don’t — and you can always change your mind, and the structure, at a later date — you probably will need (or want) an organizational chart for your small business. Expect to be asked for one if you apply for a loan or seek to work with a large, reputable vendor. To them and other people, an organizational chart conveys order and efficiency.
You and your team may well find other symmetrical benefits. OrgChartPro says an organizational chart can:
- Clarify employee responsibilities.
- Clearly define relationships between employees.
- Make analyzing and allocating resources much easier.
- Help managers (and employees) plan employees’ career trajectory.
- Show where gaps or weak spots are or could develop.
The last reason alone is reason enough to select an organizational structure as soon as you’re able, knowing that you can always abandon it in favor of another, more suitable structure as your business grows. And in a world filled with uncertainty, it’s probably good to know that with all the planning you’re doing, your business will, in fact, grow.
FAQs
An organizational structure is a system that outlines how certain activities are directed to achieve the goals of an organization. These activities can include rules, roles, and responsibilities. The organizational structure also determines how information flows between levels within the company.
What are the functions of organizational structure? ›
Organisational structures define each employee's role and how they contribute to the organisation. Developing an organisational structure gives employees an understanding of their team structure and who to communicate with about specific concerns, which can help streamline operations.
What are organizational functions? ›
The intricacies of organizational function are paramount in laying the foundation for business efficiency. At its core, organizational function encompasses the systematic methods through which a company orchestrates its resources to achieve strategic objectives.
What are the basic organizational structures and how do they function? ›
Five elements create an organizational structure: job design, departmentation, delegation, span of control and chain of command. These elements comprise an organizational chart and create the organizational structure itself. "Departmentation" refers to the way an organization structures its jobs to coordinate work.
What is a functional organizational structure example? ›
What is an example of functional structure? A functional structure is headed by managers with technical expertise. An example is Starbucks' structure, which comprises a vice president who heads three divisions. The vice president is supported by departmental managers.
What are the 4 main functions involved in an organization? ›
Originally identified by Henri Fayol as five elements, there are now four commonly accepted functions of management that encompass these necessary skills: planning, organizing, leading, and controlling. 1 Consider what each of these functions entails, as well as how each may look in action.
What is the 5 basic functions of an organization? ›
At the most fundamental level, management is a discipline that consists of a set of five general functions: planning, organizing, staffing, leading and controlling. These five functions are part of a body of practices and theories on how to be a successful manager.
What are the three 3 basic functions of an organization? ›
Every business is managed through three major functions: finance, marketing, and operations management.
What are the key functions of an organization? ›
The success or decline of an organization often roots in the effectiveness of its management. Managers shoulder various key functions. These include planning, organizing, leading, and controlling. Each function bears significance.
What is the main function of organizing? ›
Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives.
A functional organization is a vertical hierarchy. The company is divided into different functional departments with employees who specialize in specific tasks. Functional departments usually operate in silos because each group has its own independent vertical management structure.
What is the purpose of organization? ›
Purpose of Organizing
Every organization strives to achieve its targets and its structure only facilitates this. The main purpose of such a structure is to help the organization work towards its goals. It brings members of the organization together and demarcates functions between them.
What are the three main organizational structures? ›
Types of Organizational Structure
- Functional Structure. Under this structure, employees are grouped into the same departments based on similarity in their skill sets, tasks, and accountabilities. ...
- Divisional Structure. ...
- Matrix Structure. ...
- Hybrid Structure.
Types of organizational structures include functional, divisional, flatarchy, and matrix structures. Senior leaders should consider a variety of factors including the business's goals, industry, and culture before deciding which type of organization is best for their businesses.
What are the key characteristics of a functional organizational structure? ›
Such organizations have a clear demarcation of departments. Each team has a specific purpose and every personnel in the team works towards a commonly planned objective. Communication barely goes out of the team, and their success is measured in what they are told to do.
What are the types of organization and explain its functions? ›
There are three main types of organization structure. 1) Line organization 2) Functional organization 3) Line and Staff organization. In this type of organization, the line of authority flows directly from top to bottom and the line of responsibility flows from bottom to top in opposite direction.
What are the functions of organization of management? ›
There are four generally accepted functions of management: planning, organizing, leading and controlling. These functions work together in the creation, execution and realization of organizational goals.
What are the 5 best types of organizational structure? ›
5 Types of Organizational Structures for Small Business
- Functional reporting structure. The functional reporting structure is one of the most common types of org structures. ...
- Divisional or product reporting structure. ...
- Process-based structure. ...
- Matrix structure. ...
- Flat structure.
Organization Design is a process for shaping the way your organization operates, to help you to pursue your strategies and meet your goals. It involves setting up structures and systems, as well as helping people to adapt to new ways of working.
In what organizational structure do you function best? ›
Functional Structure:
In functional structures, departments are organized by their function, such as marketing, finance, or operations. While this approach can lead to more efficient operations, it can also create silos and hinder collaboration between departments, which can make it difficult to innovate.
