How to Develop an Organization Structure

Your corporate structure equips your company to play out its strategic purpose.

Developing an organization's structure can be exciting as well as daunting. When starting "from scratch," company leaders need to decide initial size and corporate structure based upon factors such as strategic goals, available resources, competitive environment, internal politics, and the leaders' work style and the culture they wish to create. When reconfiguring an existing organization, consider the reasons it must change from its existing format and then assess how much of the structure must change to be effective.

Things You'll Need

• Your strategic business plan
• Financial statements
• Key leadership members
• Your corporate board of directors
• Financial adviser
• Accountant
• Anyone else with a voice in the organization framework

Instructions

Structure Follows Purpose

1. Review your strategic purpose to make sure it is clearly defined. The first rule of structure is that the organization created must be able to accomplish the organization's primary purpose.

   If your organization has been created to direct-distribute computer hardware and software, it will require a dynamic direct sales force, a strong technical support team and likely an efficient call center to connect prospects and current customers with sales force support. Your organization structure will focus on the sales/support functions.

   If your company makes and sells herbal bath products for retail, your structure is likely manufacturing-oriented. This focus requires creation of operational departments such as production, quality control and shipping as well as an in-bound order/inventory center. If your brand is a start-up, the roles of marketing and sales may become important considerations as well.

2. 

   What functions must exist for your organization to operate?

   List the key organization functions (think of them as "mission-critical") that must exist for your organization to operate. Below each functional area, define its scope and responsibilities.

   These may be operational areas or product business units.

3. Determine the resources available to fund the minimum organizational structure.

   If resources don't match the need, two options exist: either adjust the structure or adjust the budget. If you can afford only a few employees, place them according to the structural purpose of your organization, ensuring they are assigned where their efforts will be most productive and will make the most difference in the success of your business.

Flat or Matrixed Structure

1. 

   Flat organizations keep the levels of managment to a minimum.

   Based on your preferred management style, determine whether your organization will ultimately be a flat or matrixed structure.

   A matrixed management system incorporates layers of management responsibility. A flat organization keeps the levels of management to a minimum and tends to have few layers between the top and the bottom of the company.

   If you are building a new organization, unless you have major investment or venture-capital funding, the first structure you create will likely be rather flat, since funds for staff depth may not be available.

   Whether the business you are structuring is a start-up or a revamp of an existing company, productivity is a guiding principle: fewer people are doing more work. When staff numbers are low or have been reduced, it is likely that many employees are wearing dual hats as they fill multiple roles. The more this occurs in an organization, generally the more flat it becomes.

2. Determine whether your organization structure will be formal or informal.

   Company structures often match the personality of the company owner or the leadership team of a company. The more flat an organization is, the less formal it is likely to be, since there are few management levels to shield upper management from the rank and file. Informal organizations tend to operate on a first-name basis, and invite both individual performers and team participation in problem-solving and goal setting. Communications can be more casual and company leadership may find it easy to gain rapid, company-wide input. Gregarious, extroverted leader personality types tend to enjoy this structure.

   With every level of management added to the structure, formality increases. Added layers can make it harder to get broad input to solve problems, but offer more people who can make things happen. Communications can become more structured and less direct. Quieter, more introverted people can feel more comfortable in this type of setting because it may allow an organized communications process, either to present ideas or to listen to and filter communications.

3. Build the corporate structure around the functions you have identified as mission-critical.

   Anything that is not mission-critical either must await adequate resources, or should be considered an outsourcing candidate rather than an Internal structure.

References

• Reference for Business: Organizational Structure
• Organizational Structure
• ManagerWise: High Performance Organization Structures and Characteristics
• Angperegrino: Organizational Structure & Strategy