If organizational structure is not aligned with business strategy, your organization will face probable failure. Business strategy is the pursuit of new business objectives, including new products and services or new consumer markets. Although many employees focus on their work group’s structure and give little thought to their organization’s structure, existence of the appropriate organizational structure is vital to their personal success. Furthermore, the organizational structure dictates the chain of command, resulting in the reporting structure that provides accountability of those at all levels within the organization.
Types of Structure
According to Northeastern University, four common types of organizational structure exist. Using accountants as examples, you would expect to find accountants in an accounting department of a functional structure where employees are grouped by skill sets. Based upon product lines, the divisional structure would place accountants in separate departments within different divisions of the same company. For the matrix structure, accountants are assigned to projects. In the horizontally linked structure, a group of employees perform process activities and pass their output to the next group in the process. For example, a planning group passes output to the building group.
According to Northeastern University, the horizontally linked organizational structure first appeared in approximately 2003. Nevertheless, this structure is gaining momentum and becoming widely accepted, especially among IT departments and other high-tech communities. Also, the trend is to reduce middle management supervision, resulting in flattened structures, more lower-level employee access to upper management and greater employee satisfaction.
According to Charles Schwab, an organization’s structure must support its strategic vision—which defines how an organization optimizes opportunities—for the company. Most successful organizations develop deliberate organizational structure choices, not just adopting structures that feel good. These structures bring a culture that produces alignment to an organization’s strategy. This exhibits lines of authority and accountability related to decision making. Also, the structure must balance the span of control, produce a minimal hierarchy, provide scalability and incorporate the succession of key employees—whose loss would negatively impact the organization’s success.
In order to determine the appropriate organizational structure, your organization must establish a strategic plan, according to Charles Schwab. This is an ongoing process that requires your organization to revisit its plan to revise or reaffirm its organizational structure. Therefore, the strategic plan provides the structure to facilitate necessary structural change.
A firm must periodically question the current organizational structure. Therefore, professionals within the organization are asked about their needs—including support levels—to meet their responsibilities. Furthermore, the organization must revisit its organizational structure if profitability is flat or declining, service response time has increased, or client satisfaction or the organization’s strategic plan has changed.