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Importance of Organizational Structure

Small businesses should implement a formal organizational structure as they grow to provide clarity on reporting relationships and responsibilities. Organizational structure outlines official reporting lines to guide workflow and make it easier to add new positions. Without a clear structure, employees may be unclear on who they report to and who has final responsibility for different tasks. Two common structures are flat structures with few management layers that empower employees, and tall structures with many layers where decisions require approval from higher managers. As businesses grow, an unstructured workforce can become unwieldy, so it is important to establish an organizational structure beforehand.

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Shivank Kala
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181 views2 pages

Importance of Organizational Structure

Small businesses should implement a formal organizational structure as they grow to provide clarity on reporting relationships and responsibilities. Organizational structure outlines official reporting lines to guide workflow and make it easier to add new positions. Without a clear structure, employees may be unclear on who they report to and who has final responsibility for different tasks. Two common structures are flat structures with few management layers that empower employees, and tall structures with many layers where decisions require approval from higher managers. As businesses grow, an unstructured workforce can become unwieldy, so it is important to establish an organizational structure beforehand.

Uploaded by

Shivank Kala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
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There are a number of factors that differentiate small-business operations from

large-business operations, one of which is the implementation of a formal


organizational structure. Organizational structure is important for any growing
company to provide guidance and clarity on specific human resource issues, such as
managerial authority. Small-business owners should begin thinking about a formal
structure early in the growth stage of their business.
Guidance from Organizational Purpose
Organizational structure provides guidance to all employees by laying out the
official reporting relationships that govern the workflow of the company. A formal
outline of a company's structure makes it easier to add new positions in the
company, as well, providing a flexible and ready means for growth.

Significance of Formal Structure


Without a formal organizational structure, employees may find it difficult to know
who they officially report to in different situations, and it may become unclear
exactly who has the final responsibility for what. Organizational structure
improves operational efficiency by providing clarity to employees at all levels of
a company. By paying mind to the organizational structure, departments can work
more like well-oiled machines, focusing time and energy on productive tasks. A
thoroughly outlined structure can also provide a roadmap for internal promotions,
allowing companies to create solid employee advancement tracks for entry-level
workers.

Flat Organizational Structure


There are relatively few layers of management in what is termed a flat
organizational structure. In a flat structure, front-line employees are empowered
to make a range of decisions on their own. Information flows from the top down and
from the bottom up in a flat structure, meaning communication flows from top-level
management to front-line employees and from front-line employees back to top
management.

Tall Organizational Structure


There are numerous layers of management in a tall organizational structure, and
often inefficient bureaucracies. In a tall structure, managers make most
operational decisions, and authority must be gained from several layers up before
taking action. Information flows are generally one-way in a tall structure – from
the top down.

Other Organizational Considerations


It is common for small businesses to lack a solid organizational structure. All
employees in startup companies can be required to perform a range of tasks outside
of their official job descriptions, and a good number of employees in startups have
generous leeway in making decisions. Aside from that, all employees in a startup
generally know who they report to, since it is usually a single person or group –
the owner or partners. It is very important to have a formal organizational
structure in place before your company grows so large that your unstructured
workforce becomes unwieldy.

Structure

Creating a structure is not an exact science. During the diagnosis phase, one have
to arrive at the evaluation criteria that any proposed structure should meet. An
operating model is first agreed upon depending on the competitive advantage that
the organization wants to maintain.

Governance

The layers of governance and number of managers are determined depending upon the
extent of centralization in decision making that suits the organization’s operating
model and employee profile. Span of control for managers are determined based on
the complexity of tasks being supervised and review processes and recommended to
ensure proper management control.

Performance

Any organization design should be supported by sound processes which manage


employee performance, ensure organizational capability is continuously enhanced and
right behaviors are encouraged through suitable rewards. Designing a suitable
Performance Management System for organizations that is guides by the governance
principles and sustains the structure.

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