A 5-Step Guide To Designing A Business Organizational Structure

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November 9, 2022 Business

A business organizational structure is a model of the structure of a business. The purpose of this structure is to divide labor into specific functions, which in turn facilitates the effective management and coordination of these functions.

However, the challenge in developing an organizational structure design is to ensure alignment of all the company functions. In addition, the plan must also be flexible enough to allow for changes in the environment and future growth.

This article discusses five steps to building an effective organizational structure.

1. Deciding On The Type Of Structure

There are six different types of organizational structures that your business can use, such as:

Hierarchical: In this type of structure, employees work together in teams or groups on projects related to specific organizational tasks or functions. For example, each department may have its finance, marketing, and sales teams; these teams work together under their respective department heads to achieve goals set by senior management.
Matrix: An alternative to functional hierarchies, this type of organization combines two or more types of management systems into one structure. For example, a matrix structure might have managers responsible for multiple functions rather than just one, or teams might report directly to managers without any middle management between them and their boss.
Project-Based: This type separates a company into divisions based on product lines or geographical areas served by each. Medium-sized organizations commonly use this type of structure with multiple product lines or large geographic areas served by each division.
Network: This structure intends to enable employees to have the necessary resources for their jobs through various networks within the organization. Instead of going through direct reporting processes, they can hold those resources within their teams. As a result, they can make sound decisions in their functions that might contribute to the company’s productivity.
Flat: This type of organizational structure can be suitable for startups because it allows everyone to be more involved in decision-making processes. Aside from that, this option can foster teamwork among employees who report directly to each other. This alternative can make your workers feel like they’re working together towards shared goals.

Given the types above, study which will work best with your plans.

2. Assigning Job Descriptions

Job descriptions are essential in developing an organizational chart. You need to know all the roles that need to be filled in your company to figure out which employees will be responsible for each one.

As you assign job descriptions, you may create a list of duties or list the qualifications for each job. Your list should include what the employee will do, how they’ll do it, and when. For example, suppose you’re hiring someone to sell products over the phone. In that case, you’ll want to ensure that their knowledge of sales techniques is documented and that their ability to work independently is stated clearly.

3. Designing An Organizational Chart

You can use an organizational chart to illustrate the hierarchical structure of your company. This visual diagram describes the roles and responsibilities of each position within the organization’s hierarchy and the relationships between them. This pictorial representation can help you highlight gaps in knowledge or skills or highlight areas where you should place new hires to ensure that you’re using their expertise correctly.

One thing you need to do when designing an organizational chart is to decide on who will be included in it and what tasks they should be assigned. You must include all management positions and any job titles that entail supervision over others in the organization. For instance, a head chef at a restaurant or a supervisor at a retail store might not be considered management positions but still have some authority over workers’ schedules or performance reviews.

4. Providing Guidelines For Cross-Organizational Communication

When designing an organizational structure for your business, you want to ensure that it supports cross-organizational communication. This approach means that it should be easy for employees at all levels of the company to reach one another and work together on projects. This way, you can eliminate cross-functional barriers which might affect the productivity of business processes.

One way to follow this approach is by creating groups within each department or division of your business. These groups should include employees from different departments within your organization to collaborate more efficiently on projects and initiatives across departments.

Another way to design an organizational structure that supports cross-organizational communication is by creating communication channels among different departments within your business. For example, if you have salespeople, customer service representatives, and accountants working together on a project, they need some way to talk with one another about what they’re doing. You could set up a weekly meeting where these employees meet as a group to discuss their progress on projects.

5. Developing An Implementation Plan

For an organization’s business structure to be effective, you must execute it properly. The professionals within the organization must have the skills necessary to perform their jobs effectively. Additionally, this concept means they need to have clear communication channels with other employees to work together effectively.

The implementation plan includes the following elements:

Performance Appraisal System: Conducting a regular performance appraisal can ensure the success of your organizational structure. This way, you can determine how well your employees are performing their duties and if they’re fulfilling their responsibilities. By having this information at your disposal, you can make necessary changes before it’s too late.
Training Programs: You should also consider developing your business with training programs for all positions in the organization so that everyone knows precisely what’s expected of them and how best to carry out these expectations. These programs allow employees to learn new skills to help them perform better at their jobs and make more money. This way, there’ll be no confusion about what needs to be done and how it needs to be done.
Personnel Procedures: These courses of action include policies and procedures related to employee hiring, firing, promotions, and other issues that affect the day-to-day operations of the organization.

Ensure these elements are present to keep your structure functional.

Key Takeaway

As you run your company, you must establish an organizational structure to ensure that your employees can deliver their roles. Therefore, you must consider following this five-step guide in designing your organizational structure.