The Importance of a Good Organizational Structure
by Brian Hill, Demand Media
Businesses require structure to grow and be profitable. Designing
an organization structure helps top management identify talent
that needs to be added to the company. Planning the structure
ensures there are enough human resources within the company
to accomplish the goals set forth in the company’s annual plan. It
is also important that responsibilities are clearly defined. Each
person has a job description that outlines duties, and each job
occupies its own position on the company organization chart.
Communication
The flow of information is essential to an organization’s success.
The organization structure should be designed to ensure that
individuals and departments that need to coordinate their efforts
have lines of communication that are built into the structure. The
financial planning and analysis department might report to the
Chief Financial Officer and the Senior Vice President of
Marketing, because both of these members of the top
management team depend on information and reports provided
by financial planning.
Reporting Relationships
Reporting relationships must be clear so all members of the
organization understand what their responsibilities are and know
to whom they are accountable. These clear relationships make it
easier for managers to supervise those in lower organization
levels. Each employee benefits by knowing whom they can turn to
for direction or help. In addition, managers are aware of who is
outside the scope of their authority, so they do not overstep their
bounds and interfere with another manager’s responsibilities.
Related Reading: Organizational Structure and Culture Change
Growth And Expansion
Companies that grow rapidly are those that make the best use of
their resources, including management talent. A sound
organization structure ensures that the company has the right
people in the right positions. The structure may suggest weak
spots or deficiencies in the company’s current management team.
As the company grows, the organization structure must evolve
with it. Many times more layers of management are created, when
one department head has too many individuals reporting to him at
one time to give each employee the attention and direction
needed for the employee to succeed.
Task Completion
A well-designed organization structure facilitates the completion
of projects. Project managers can better identify the human
resources available to them if the scope of each department’s
responsibility -- and each team member’s capabilities--are clear.
A project to develop a new product would require market
research. The project manager needs to know who in the
organization can provide this research, and whose permission
must be obtained for the research to be done.
Fits Company’s Needs
Companies in different industries require different mixes of talent
and a relatively greater emphasis on certain management
functions. A software company often has a large development
staff. Structuring the reporting relationships within the
development team so creativity and productivity are maximized,
and deadlines are met, is vital to that type of company’s success.
Companies often have to go through a reorganization phase in
which individual positions or even whole departments are
repositioned on the organization chart in an effort to better utilize
the company’s human resources and make the operation run
more smoothly.
What Can Go Wrong
Poorly structured organizations find that critical deadlines are not
met because there were not sufficient human resources in each
department to accomplish all parts of a given task, or because it
was not clear whose ultimate responsibility the project was. If
individuals are not sure whom they report to, they may find they
are given conflicting assignments by two or more managers
above them.