The lack of a proper structure within an organization can result in poor communications and inefficient workflows. As business owners, you need to implement the right organizational structure to guide your employees accordingly. This will help them recognize their respective roles and official relationships in the company.
You might already have an idea of what an organization chart of a company and its functions are. However, there are different types of business structures to take note of. All of which have their respective advantages and disadvantages. Hence, you must take the time to know more about each one to determine which is most compatible to your organization.
With that, here are the major types of business organizational structures and how to implement them into your org chart.
1. Hierarchical structure
The hierarchical organizational structure adheres to a vertical chain of command that clearly identifies the leader and their respective subordinates. This organizational chart for business looks similar to a pyramid that shows the level of control from the top (e.g. CEO or managers) to bottom (e.g. low-level employees and entry-level employees.
Those who use this type of organizational structure are often military, government, and other very large companies. While this is great in defining the levels of authority and responsibility within the organizations, it can also make you prone to bureaucracy. Hence, it is not ideal for small businesses.
2. Functional structure
Another common type is the functional organizational structure. Similar to the hierarchical structure, it also shows the level of control within the organization. However, it also groups individuals based on the specific functions they perform within the company. These are what you would know as departments. Some examples are human resource, finance and accounting, and marketing and sales.
These groups work independently from one another and are headed by their respective managers. But at the end, each manager reports to one director who is responsible for all operational areas. Using functional structure allows employees to focus on their role and specialization. However, this can also create silos within your organization and hamper interdepartmental communication.
3. Divisional structure
Much like functional structure, divisional structure organizes your business into specific groups. Their main difference is that the latter has control over their own resources. This allows them to operate independently from the larger organization and manage their own individual teams. Meaning, each division has its own marketing team, sales team, IT teams, and even human resource.
Large companies who often plan to expand geographically use this type of organizational structure. There are also those who create market-based divisions and product-based ones. This helps them stay flexible as they branch out and promote autonomy for each group. The downside is that this can result in duplicate resources if you’re not too careful.
4. Matrix structure
The chart for the matrix structure looks like a grid. Unlike the previous ones, it showcases both horizontal and vertical chains of command. Doing so decentralizes decision making and encourages greater flexibility among departments. Moreover, it can also create specialized and cross-functional teams for certain projects.
For example, an engineer might already belong to a specific functional group, but they can also work on a temporary project led by an entirely different project manager. This structure provides a more dynamic view of the organization. Likewise, it encourages employees to branch out in various skills and capacities beyond their original roles. Nonetheless, this can also create conflicts between department managers and project managers.
5. Network structure
With network structure, you would disperse certain functions and roles to other organizations outside your own. You may employ freelance writers or artists, consultants, or subcontractors to accomplish specific tasks. This allows you to spread out your resources and reduce overhead costs. Moreover, it gives power to all your employees to take initiative and make decisions on their projects.
However, network organizational structure can quickly become overly complex in the long run. Hence, communication plays a critical role in this type of organizational structure. You need the right tools to encourage employees to collaborate with the rest of your network. You can check out this article where FinancesOnline lists some productivity suite software examples.
Laying out the foundations
According to The Economist, 56% of employees experience low morale and missed performances due to poor communication. You can avoid this by implementing the right organization structure for your organization. There are many types to choose from. Hence, you must first have a deeper understanding of how each one works.
The functions of organizational chart go beyond determining the hierarchy of your company. It also dictates your business’ general workflows and processes. Hence, you must choose carefully on which one to use. You can check out softwares like OrgEngine to help you map out an effective organizational chart for your business.
Alexander the Great once said: He is not afraid of an army of lions led by a sheep. However, he is afraid of an army of sheep led by a lion. Thus, what can you do to achieve that lion status? When it comes to leading a team or a company, not only do you have to manage their roles and responsibilities, you will also have to help and inspire them to develop as individuals.
Leadership is one of the most evergreens of all business topics. However, it is still deemed quite tricky for everyone to master. As years pass by, you can see more and more authors play their part to give fresh perspectives on the topic. The most challenging part of it all is that there is no one-size-fits-all recipe for becoming an extraordinary leader. The right approach truly depends on the overall personality, skill set, and composition of you and your team. However, that is no excuse not to try.
Here is my selection of 5 key lessons you can learn from the most insightful leadership books that have stood the test of time to educate people on how to thrive as a leader of an organization or a team.
1. "Trust is knowing that when a team member does push you, they're doing it because they care about the team." ― Patrick Lencioni, The Five Dysfunctions of a Team: A Leadership Fable
According to Patrick Lencioni, success and results come from the success of a team as a whole, not just the leader. However, to achieve the said result, the leader must have the ability to get the most out of every member, and this begins with productive discussions and, most importantly, trust. This book provides you a fable on situations that you as a leader will encounter and how they can be dealt with in the most morally and effective way.
2. "Most people do not listen with the intent to understand; they listen with the intent to reply."
― Stephen R. Covey, The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change
A classic read that I'm sure many of you have heard of. This book was first published in 1990, and to this day, it is still one of the bestselling business books. Stephen R. Covey has inspired presidents, CEOs, and people of all occupations with his approach to solving personal and professional challenges. This step-by-step guide includes habits such as "Seek First to Understand, Then to Be Understood," "Put First Things First," and "Begin with the End in Mind." Covey shows how a principle-centered and character-based life will help you build healthy relationships and will lead you from dependence to independence to interdependence.
3. "In most cases, no matter what it is, if you measure it and reward it, people will try to excel at it." ― Marcus Buckingham, First, Break All the Rules: What the World's Greatest Managers Do Differently
From his remarkable study of more than 80,000 managers, this longtime management bestseller reveals data that despite differences in sex, race, age, and working style, great managers share one common trait, they are not scared to break sacred business rules. We were always told as children that to be the best, we must improve our weaknesses. However, Buckingham argues that most managers agree that we should instead be focusing on our strengths. In First, Break All the Rules, you'll discover vital performance and career lessons for managers and learn how to apply them to your current situation.
4. "Leadership is about making others better as a result of your presence and making sure that impact lasts in your absence." ― Sheryl Sandberg, Lean In: Women, Work, and the Will to Lead
As Facebook's Chief Operating Officer, Sheryl Sandberg's sharing in Lean In has become a prime source of motivation for women entrepreneurs. This book highlights what women can do rather than what they're not supposed to be able to do, due to the nature of gender roles that are still present in today's world. Her position as a leader in a massive corporation proves that women can lead and that you can too if you persevere and care more about succeeding than being well-liked. With Sandberg's Lean In, she hopes for a future with no female leaders, but just leaders.
5. "The moment you feel the need to tightly manage someone, you've made a hiring mistake." ― James C. Collins, Good to Great: Why Some Companies Make the Leap... and Others Don't
Good to Great results from over five years' worth of research that included 21 people and more than 2,000 pages of interview transcripts. Collins shares the strategies that good companies do to become great companies and the mistakes that other companies have made to fail that transition. Additionally, Collins introduces the concept of a level 5 leader, which includes "Excellent team members and managers," "Single-mindedly ambitious for the company," and "Modest yet self-driven for results." This leadership book explores a total of 28 companies to identify their success and compare them with other companies that failed to do so.
Leadership is never easy.
Regardless, these five wonders of advice will certainly help you to avoid the most common pitfalls. However, never stop learning. Remember, even those born with great, innate leadership skills are continually developing themselves through management books.
If you are a novice business leader and have no clue where to start, start by creating an organizational chart detailing your business's entire structure, such as users, contact details, and roles. However, designing an organizational chart from scratch can be daunting, which is why OrgEngine will be your best friend. This free org chart builder is user-friendly, and it will aid you throughout the whole process, making it perfect for those who are less tech-savvy.
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