Organizational structure is a company's skeleton. It defines the roles and departments that make up a company's functioning and shows how everything fits together into a whole. When everyone in an organization understands their company's structure, they are better able to work together, perform their roles and feel secure in the scope and limits of their jobs. Businesses with a belief in the advantages of organization structure usually make organizational charts available to their people so that everyone has a clear picture.
Organizational structure is a way of grouping and organizing an entity's functions to make sure they all get done efficiently and well. If you take inventory of all the functions your business need to perform, you can then group these into areas of responsibility and supervision. In companies large enough, these areas are called departments or teams. For example, a company may look and see that it needs to advertise, publicize, put on events and perform sales. It may decide to group these functions together under a marketing department. Larger organizations may do so much of these activities that they separate sales into a different department than the other functions. There are many ways to organize, but the commonality is grouping functions to ensure they are overseen and performed.
Once a company has established how functions are grouped, then functions must be assigned to the people who performs them. Most organizations create roles to perform these functions. Positions with job descriptions help workers know the scope, function and limits of their roles, and for what tasks and outcomes they will be held responsible. In companies large enough to have multiple people in a department, roles help make sure that each person is taking care of key functions without duplication or neglect of tasks.
For example, in a finance department, you might have a controller, accounts payable/payroll person and an accounts receivable/collections person. Each of these people form part of a team with an overall mission to manage the company's cash flows, while each has a specific set of duties the add to the efficiency and ensure the thoroughness of the team.
Everyone answers to someone. Organizational structures help make clear who answers to whom and where they fit in the chain of command. An employee may have a director who reports to a vice president who in turn reports to a chief executive officer who reports to a board of directors or company ownership. Between bottom and top, everyone has a place. A good organizational chart helps everyone see where they fit in the hierarchy of decision making and authority.
Departments And Division Structures
Companies often have departments and teams structured vertically. An accounting department may be one piece of a larger finance department. A vice president for finance or a chief financial officer may oversee that accounting department along with other financial teams.
Similarly companies often create new lines of business or acquire businesses which run semi-independently of other company divisions. For example, if a software company acquires a smaller company which makes medical billing software, it may place the medical billing software in a division of its own. Or the new parent company may place its acquisition in a division with two other software lines under a vice president who oversees medical software products. Either way, organizational structure helps make clear where teams and departments fit into a company's overall operations.
Organizational structures aim to make sure an organization is achieving all its required and desired functions and to make sure everyone understands his part. The goal is to make sure there is someone for everything and not unnecessary overlapping or duplication of work. From time to time, companies have to revisit their organizational structures to make sure they are still working well. Particularly when companies experience growth or change, systems and therefore structures must change. Small, startup companies often avoid formal organizational structures at first, which allows them the ability to adapt quickly in early growth. However, as organizations add staff and develop, confusion and tension can set in without the clarity of an organizational structure.
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