The organizational structure: an essential system for companies

You have just started your first company. You have the concept, you have the starting capital, the motivation of your employees is high. But somehow the initial spark is smaller than hoped and the business doesn’t start well. What is missing? Perhaps you have forgotten to develop an organizational structure. Like any other type of organization, companies need a clear structure. It is the only way for all concerned to know where they are in the company, what they are responsible for and who has the power to issue directives. But which structure is best suited to your company?

The organizational structure

The concept of “organizational structure” derives from the theory of organization and indicates the hierarchical framework that defines the internal division of labor in the company. However the term is also used in the context of other organizations such as authorities and NGOs. An organizational structure serves to organize a company according to its individual objectives, such as increasing production, guaranteeing the future, growth, clarifying:

  • what jobs and which departments are there
  • their respective responsibilities and authorities
  • their interconnections
  • the operation of the vertical flow of information and commands

In this way, the organizational structure creates a broad framework for the fulfillment of the company’s tasks and a basis for all standard procedures and routines in daily work. These are then concretized and integrated through additional tools (in particular planning and leadership) and employee activities. Depending on the objectives pursued by the company, the organizational structure can look very different. As a guideline for both management and (new) employees, it is visually represented in the form of an organization chart.

Why is the organizational structure of a company important?

Businesses need a clear structure in order to function smoothly and grow at the same time. Without it there is no clear focus, neither for management nor for employees, because no one knows exactly what is within their competencies and to whom to refer, causing confusion and stress. Conflicts regarding responsibilities thus become practically inevitable. The resulting consequences are lack of coordination and slow decision-making processes, which can have a long-term negative impact on the efficiency of a company.

The Phases of an Organizational Structure

The organizational plan design process is divided into two phases:

  • In the analysis of tasks, all the objectives of your company are identified, translated into the main business tasks and divided into subtasks. The structure can be thought of based on performance (e.g. physical / intellectual), object (e.g. product), purpose (primary or secondary tasks), and stages of the leadership process or rank in the hierarchy.
  • The summary of the tasks in turn represents the actual organizational activity for the founders of the company. Here the sub-tasks determined in the task analysis are taken and grouped into meaningful task complexes that are assigned to the corresponding jobs. The biggest challenge is to make the best use of existing resources and thus ensure smooth cooperation between all assembly elements.

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