8 Types of Organisational Structures to Consider for Business
Being a small business owner means you need to delegate tasks. As your business grows it becomes harder to handle everything yourself. Having an organisational structure helps outline tasks and responsibilities.
You might already have a structure in place but want to restructure. This doesn’t have to be a headache or challenge to do. Several businesses can do this and continue to operate.
Let’s take a closer look at some of the common types of organisational structures for you to consider.
Here’s What We’ll Cover:
What Is an Organisational Structure?
How you set up your business operations defines company culture and key decision-makers. It’s a way for you to define roles and responsibilities and determine how the information will flow.
No formal structure leads to confusion, lack of accountability and bad decision making. But how do you know which organisational structure is going to fit your needs best? There are a few different ones that you can choose from.
8 Types of Organisational Structures to Consider for Business
At its heart, organisational structures outline what your business does. Plus, you know who you can rely on to complete tasks and how those tasks should get performed. Organisational structures don't have to be hierarchical in nature. They can be mechanistic or organic, for example. And they can get used by large companies or small businesses.
A mechanistic structure is more central and follows strict guidelines for employee roles. An organic business structure will have a higher focus on performance and capabilities. Each business structure serves a purpose, yet, each of them helps establish the chain of command.
There are four key elements in the mechanistic model. They are Hybrid, Divisional, Matrix and Functional.
Organisational Structures in the Mechanistic Model
The mechanistic approach works well for any type of business. Here are the four different types of structures within the mechanistic model.
The main goal of a functional structure is to put all your team members into departments. This gets done based on their skill sets and accountabilities. It helps to improve things like decision making and communication.
It can be more common for accounting-based organisations and IT businesses.
- Great for supporting team specialties
- Provides employees with the time to focus on getting better in their roles
- Simplifies data management, reporting and financial analysis
- Doesn’t contribute to team collaboration and innovation
- Organisational costs can increase with the number of products you create
- Can create an inefficient work environment and make it hard to complete tasks
A divisional structure lets your team collaborate based on their shared organisational goals. Yet, they still have a focus on their own specific goals while doing this. Divisional structures revolve around certain types of groups.
These groups range from goods and services, customer demographics and your market. A perfect example is if your business is product-based. Team members get involved in a specific group that focuses on a single product.
- Lets you develop and produce new products
- Creates an environment that allows employees to adapt to changing consumer behaviours
- Makes reporting and financial analysis more simple
- Can make it difficult to scale your business efforts
- Limited team collaboration and communication
- Might encourage competition among team members
Organisational flow gets organized by combining functional and divisional structures. It does this by outlining different roles and titles. Then, it's separated into divisions, like having a project manager look after all your projects.
Using the matrix structure helps to improve cross-functional collaboration. And when this happens, it can lead to better productivity and problem-solving.
- Allows for a more flexible level of collaboration and decision making
- Increases the amount of direct communication and shared resources across different divisions
- Can promote a higher level of creativity and innovation
- Having to report to many people can make things more complex
- Since reporting can be vague, it can be difficult to understand financial forecasts
The hybrid structure is like a matrix structure. But, it uses more of a hierarchical setup to organize all your business activities. And this gets done based on either a divisional or functional purpose.
One of the best things about a hybrid structure is that it allows for a high level of collaboration. Employees get encouraged to share resources and data while staying within their specializations.
- It can be an ideal solution for small businesses where team members take on many roles
- Creates more opportunities to innovate and grow when it comes to market disruptions
- Makes for a very scalable and versatile organisational structure
- There might be a need for extra management and oversight when it comes to the workload of your employees
- It can be hard to resolve issues, which can lead to conflicts
Organisational Structures in the Organic Model
With the organic model, there are also four different types. They are Process, Circular, Flat and Network.
This type of structure focuses on specific processes and their end-to-end workflows. The idea is to optimize your policies and procedures based on business activities. This gets done by tracking how each activity interacts with other activities.
Plus, the process structure helps track exactly how each process gets conducted. You can gain more flexibility to help adapt to market conditions and changing demand.
- By tracking the interactions of activities, you can gain in-depth analysis and data
- Workflows can get streamlined to help improve your business processes
- Can lead to lower productivity levels and less efficiency
- There can be a need to have extra resources to make sure you’re able to optimize your processes
A circular structure works in a very hierarchical way. But, instead of having everything be vertical, it focuses on more of a circle approach. Higher-level employees, such as executives, get placed in the middle. Lower-level employees, like the sales team, get included on the outer rings of the circle.
The main goal of the circular structure is to help make sharing information as easy as possible. This helps inspire the outer rings of the circle to be part of your business goals.
- Leadership becomes more centralized, and the vision of your business becomes clearer
- Resource sharing and decision making get improved to help increase collaboration and communication
- With less-frequent changes in staff, there can be fewer disruptions
- It can be confusing if an employee is more accustomed to a regular hierarchy
- Extra training and resources might get needed to ensure optimal performance
The flat structure helps limit the levels of management within your organisation. And it doesn’t use a typical hierarchical approach. Flat structures help limit the discourse between your business functions and employee roles.
In this case, higher-level employees like executives get encouraged to collaborate. This is instead of having them in more of a supervisory role. It can lead to better communication and collaboration with all employees.
- Allows for a high level of detail without being too confusing
- Stress can get limited which can improve collaboration and spirit among your employees
- There can be disagreements which can cause disruptions and damage performance
- You need a high degree of planning to be as effective as possible
This approach gets used to collaborate and share resources with another business. It could be your business working with another. Or, it could be a larger organisation that has several divisions in various locations. This usually happens when each divisional location has its own procedures and leadership.
A network structure can be pretty similar compared to a divisional structure. But you would instead focus on business activities.
- Creates an opportunity to be scalable, versatile and adaptable
- You can outsource certain business activities to focus on higher-value tasks
- Allows for businesses with many locations to work together
- If it’s not managed well it can lead to confusion and difficulties
- There can be duplicate effort if there isn’t a high level of oversight with employee tasks
Having an organisational structure for your business is important. You can define all the roles and responsibilities of all your employees. This allows for higher productivity and defined guidelines.
Without an organisational structure, employees could get left confused since there's no accountability. That said, the type of business that you operate and the industry that you’re in will impact your structure.
Your corporate structure can be either mechanistic or more of an organic approach. Use the 8 types of flexible structures outlined above. You can determine what suits your needs best and define roles. Plus, you can make better business decisions and reach your business goals.
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