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From a logistics perspective, it may surprise you that many small businesses and start-ups need a sound organizational structure. How you structure your teams, company leadership, and the flow of information and communication within your organization can determine whether your business scales successfully, stunts growth, or fails entirely.
Organizational structure is important to any business. It outlines who reports and is accountable to whom, what each employee’s job is, outlines the composition of the team, and helps streamline the flow of information within the organization.
Type of organizational structure
Not all organizational structures are the same. Different types apply for different purposes. Depending on the type and size of your business, one organizational structure may work better than others.
There are seven known structures that businesses must choose from.
Hierarchical structure: This is the structure that many people think of when they hear the word “organizational structure”. This pyramidal chart is the most common structure and follows a typical top-down chain of command.
Functional structure: This is similar to a hierarchical structure, but employees are organized according to skill level instead of hierarchy.
horizontal (flat) structure: If your company has few hierarchies between employees, a flat structure may suit your needs. This is the structure many startups use before they have enough employees to have a hierarchy.
Department structure: A system in which employees are divided into departments and each department operates independently. Each division has its own team, hierarchy, and leadership level. This structure usually works well in large companies.
matrix structure: This structure is organized in a grid system. Cross-functional teams work together on projects, cross over to other teams, and apply their skills for company-wide improvement.
team-based structure: As the name suggests, this structure groups employees into teams. This structure departs from traditional hierarchies and focuses on team-based management of collaborative employees.
network structure: This structure is ideal for businesses that work with a variety of vendors, subcontractors, or freelancers. This structure increases flexibility and improves the ability of employees to make business decisions.
Related: Establish a structure for the organization to grow
start small
When a startup first hits the spotlight, it may not have an established organizational structure. This lack of formal structure is especially true when the startup team is very small or the venture operates alone. As the team grows, the need for an organizational structure arises. Strong and defined leadership becomes critical to steering the proverbial ship of business as the business grows.
Companies should take steps to implement clear leadership roles and well-communicated hierarchies. Employees participating in the organization should immediately know who to report to and who should be questioned.
Of course, the CEO is at the top of the hierarchy, but not all owners can run a team, so this could be someone other than the business owner. In such cases, personal reflection is required on the part of the business owner and leadership roles can be appropriately delegated. Owners and executives need space and time to think about the big picture of their business. If they were tasked with answering questions from all levels of the organization, scaling would stop.
Related: 3 signs that the best way for your business is to hire someone else to run it
Create structure
Once the optimal organizational structure for the size and type of business is determined, building that structure can be difficult. Especially when it comes to startups. As such, business owners should carefully consider the company’s future goals when creating a structure.
After completing the first step of choosing a structure, the next step is to create a visual representation of the chosen structure, the organizational structure chart. Once complete, this will be available to everyone involved in the business, from upper management to new hires. The chart should clarify team leaders, titles and team members. It is very important for employees to understand the organizational structure and where they fit within it.
Once your organizational structure chart is created, it should be maintained, consistently updated, and evaluated at least annually to ensure the structure you choose is still the best fit for your business. Especially for start-ups, the organizational structure can change as the business scales.
Ultimately, organizational structure is about striking the right balance between authority and responsibility. Determining the right structure and creating a clear and adaptable organizational chart often lays the foundation for the business itself.
Related: 3 reasons why promotions from the inside can help your business grow
as you grow
As a business grows in size, its organizational structure needs to be reviewed regularly. A performance review of managers and the employees they lead should reveal problems in the current structure and ways to improve the structure. When one area of the structure is not working well or not working as intended, he needs to address the issue quickly to prevent permeation of harmful elements to other departments. .
An organizational structure is a must for any company, but especially for a growing business. A robust structure helps owners and leaders scale appropriately to meet their business goals. The type of structure implemented will depend on the industry and size of the business, but most importantly, organizational structure is key to business success and should be a priority for any organization looking to grow.
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