What is: The organizational structure of your company, also called organization chart, is way you will organize groups, areas, departments, positions and hierarchy, in short, it is how people will group together to make their work as good as possible. Typically, we think of the simpler, more classic structure, which begins with the president, goes down to the directors, then to the managers, and so on. However, there are many decisions to make that will be explained in this post to help you think about its structure.
What is its importance: The organization of people within a company is essential and talks a lot about the culture of a business, its values and also how the results will be accompanied. Briefly, there are 4 good reasons to invest time in this tidying up:
1) Clear definition of responsibilities;
2) Clear definition of the division of results (bonuses, commissions, goals, etc);
3) Allows specialization and mastery of the activities performed (up to a certain point);
4) Facilitates the definition of positions, career plans and attractiveness at the time of hiring.
Formal Organizational Structure
a) Functional vs. Projected Structure
The first more "theoretical" way of looking at the structure of a company is to think about functional vs. projected divisions. The functional division is that which separates the business by traditional and necessary activities like financial, marketing, commercial, sales, etc. Already the projected is the opposite and aims to create cross-organizational groups to serve customers or solve business issues. Typically, we see this type of structure in companies that work with projects such as law firms, consultancies among others.
However, in most cases, companies have a mix of the two types and are never found 100% projected or 100% functional. Below is a chart explaining the characteristics of each.
b) Vertical vs. Horizontal Structure
The administrative amplitude refers to the degree of verticalization of its organizational structure. In other words, it concerns the number of hierarchical levels of your business.
In this topic, you should discuss / reflect / decide how hierarchical your business will be. In general, businesses that need more control are more vertical and more creative businesses are more horizontal. In addition, there is a general tendency for more collaboration and participation, characteristics of the flatter structures. In the table below, we try to summarize some more general points:
Informal Organizational Structure
In addition to the formal organization, consciously designed to facilitate the flow of information and decision-making, every company also ends up with the so-called Humanogram.
The Humanogram is when affinity people relationships over-write some of the relationships and flows previously planned. Of course, this is something natural and will never cease to exist in business, but that should be known and evaluated by the managers.
For example, in some companies, you'll see situations where lower-ranking employees have a greater influence over someone in the position above, or areas that work better because bosses are personal friends.
This post has clarified how to reflect on your organizational structure? Here at LUZ we offer management tools for companies, including various products on human resources!