Did you know that poor communication can cost a company of about 100 employees over $400,000 per year? One common cause of inefficient communication in businesses is lacking structure.
Failing to define roles and create a system makes it difficult to determine leadership hierarchy. It also affects the flow of information and interferes with employee relationships.
As an entrepreneur, it’s vital to include an organizational structure in the business plan. Still, the most suitable one may differ depending on the nature of your venture and the employees you’ll have.
Here, we help you determine the best business organizational structure by discussing the most common types. We’ll also mention their pros, cons, and the businesses they suit to guide you in the selection process.
A hierarchical or line organization is the most common type of structure for businesses. This one involves creating a chain of command whereby power flows from the directors.
It then goes down to the CEO, managers, and eventually the rest of the company. When planning to operate your business with this structure, it’s crucial to define all roles clearly.
This way, each employee can understand what their job entails and avoid overstepping. Besides, consider getting a registered agent service to handle legal matters.
A hierarchical type of business organization structure is suitable for large firms. Its main benefit is that it clearly defines authorities and roles. This aspect creates reporting relationships and streamlines assigning tasks.
Besides, it allows each employee to specialize in particular areas or tasks. Due to these features, the system is also an ideal family business organizational structure.
Despite these pros, a hierarchical structure can make it hard to engage all staff in decision-making. In some cases, it creates division within the brand when every employee focuses on growing their departments.
A flat organizational structure is the complete opposite of the hierarchical one. When you adopt this system, most if not all employees will have equal power.
This type of small business organizational structure is prevalent among startups that don’t have many employees. It’s also common in brands that don’t take a modern working approach.
The main benefit of the flat system is that it improves employees’ relationships. In the long run, this allows them to focus on achieving common business goals. Further, it encourages communication and makes it easier to execute new projects.
When using a flat organization structure, it’s crucial to outline reporting duties. This way, you can avoid the issues caused by the lack of enough supervision.
Once the company grows, consider adopting other types of business organizational structures. Taking this step will encourage specialization and make it easier to track staff performance.
Matrix systems are a flexible form of hierarchical business operations organizational structures. Each employee reports to two bosses, one for the tasks they are working on and a general one. This system is the most suitable one for brands that handle many projects simultaneously.
It gives supervisors the freedom to choose team members based on their expertise. Still, the roles of each employee change often, making it hard to build long-lasting working relationships.
Determine the Best Business Organizational Structure
The most suitable business organizational structure may vary based on your brand’s size and needs. Learning more about different types allows you to identify the ideal one.
It also simplifies picking a system to streamline workflow while allowing you to engage all employees. If you would like to read other posts about business operations, browse this page now.