Different management consultants and academics describe organizational systems using a wide variety of classifications, but most definitions refer to the structure a business uses to organize its functions and assign responsibilities to employees. Organizational systems can become increasingly complex at large corporations, but small-business owners use several common organizational models to run their companies, refining them as they grow.
Flat Organizational System
As entrepreneurs start companies, they often rely on a loose organizational structure, taking overall responsibility for most areas, but assigning different employees to different functions. For example, the owner of a landscaping company might make all of the decisions for a business but assign one employee to help with marketing, another to manage the employees and another to bid jobs and oversee the work. Employees in a flat organizational structure often do not have a manager or supervisor other than the owner of the company. This is known as a flat organizational system because there are no layers of management.
As companies grow, there is often too much work for an owner to do by himself. At this point, the owner starts appointing managers and creating a hierarchy, or totem pole. Using our landscaping company with the flat organizational structure as an example, the person in charge of marketing might become responsible for creating and managing the department’s budget, overseeing a staff member who handles promotions and hiring contractors, such as a graphic designer and webmaster. The staff who do the actual landscaping work in the field now report to the employee supervisor, instead of to the owner.
Another way to organize a business is to create an organizational system based on the different functions within a company. These functions typically include marketing, finance, office administration, human resources, information technology and production. As the company grows, it also uses a hierarchical structure, with department directors, managers and staff members. To coordinate the efforts of all the departments and keep information about them centrally located, a company might develop what is known as a “C Suite,” which consists of a chief executive officer, chief operating officer and chief financial officer.
When a company has multiple products or businesses, it might operate using a divisional system. For example, a sporting goods company might make tennis, golf and volleyball products. In this type of structure, each division might operate using its own production and marketing functions because these are unique to the type of product or service the division creates. All of the divisions might share general functions, such as human resources, accounting and information technology.