“Without a solid foundation, you’ll have trouble creating anything of value.”
Organizational structure is the framework of an organization. It clarifies how certain activities are to be executed to achieve goals and ensure future growth. It outlines the hierarchy within an organization by identifying each role, its function and responsibilities, and where each job fits within the organization, i.e. who reports to whom.
It’s Not Important…Until It Is
Despite being a mainstay in business basics, organizational structure is not something thought about very often. For many businesses, organizational structure is something that develops organically over time without much strategic planning.
However, during a time of crisis, it is essential in ensuring business continuity and should be taken into consideration when creating a business continuity plan.
Organizational structure defines the chain of command in which information is to be communicated and how decisions are to be made, two challenges employers faced during the height of the pandemic.
With the persistence of remote work, communication and decision-making will continue to be areas for concern for business leaders. There is no better time to assess your organizational structure.
Who’s Calling The Shots?
There are two basic types of organizational structures: centralized and decentralized. The difference is who is responsible for making decisions that are in the company’s best interest. Centralized structure relies on one individual, or a limited number of individuals at the executive level, to make decisions and provide direction.
With decentralized structure, decision-making is shared by multiple individuals in a team environment who are closer to the problem.
During the COVID-19 pandemic, organizations had to pivot quickly to adapt. While there are pros and cons to both, those with a decentralized structure were at an advantage since less bureaucracy meant they were quicker to react.
As we move beyond the current health crisis, organizations will look to reinvent their structure for speed and flexibility.
Why Organizational Structure Is Important
Here are 5 compelling reasons to assess and strengthen your organizational structure.
It serves as a management planning tool.
Organizational structure is important for any growing company to provide guidance and clarity on responsibilities and reporting relationships. It can serve as a road map for hiring employees and future expansion.
It can improve decision making and communication.
Organizational structure can be designed to promote the flow of information from employees to managers responsible for making business decisions. Executive level management can use organizational structure channels for sending information to managers or employees responsible for completing business functions.
It can help with employee engagement.
It allows employees to better understand how their work fits into the organization’s vision and mission. It gives them more clarity, helps manage expectations, and enables teamwork.
It provides a visual directory.
Organizational structure is commonly communicated through the use of an organizational or org chart. These diagrams can be used as a management tool—for planning purposes, or as a personnel directory.
It can help future-proof your business.
Your structure affects your organization’s ability to carry out your strategy and objectives. As you look to further your business, your structure will act as the backbone to guide you through.