What Business Structure is Right for Your Organization?

Business Structure

When setting up your new business, one of the fundamental things you need to determine is your organizational structure. You should pick a design that will best suit your organization’s goals and work objectives and be flexible enough to customize them to cater to your needs.


  1. Functional

This a common kind of structure which is focused on job functions, like marketing, research, development, and finance. Companies typically adhere to this structure when they seek to organize their processes and employees into departments. Workers with shared skills and similar knowledge are grouped together (e.g. each department will have their own set of specialists who report to the department managers who will then report to the director).

An advantage of this type of structure is that it permits for greater efficiency and increased specialization as each group is equipped with similar-minded individuals who have complementary skill sets. On the downside, this may result in decreased communication with each department, which may lead to decreased innovation. The lack of communication, in turn, causes people to just focus on their own department’s goals thus finding it hard to view the larger picture.


  1. Flat

This is another frequently used organizational structure and its key characteristic is that it has very few levels of management between the executives and lower-level staff. This is particularly ideal for companies with a smaller group of people and it allows for less hierarchy and faster decision making.

Without the excess layers of middle management, employees are expected to be more responsible over their work. A flat structure also allows for faster communication. On the other hand, the lack of specific bosses can cause confusion and even potential power struggles. This organizational structure is probably not the most sustainable when your company becomes larger.


  1. Matrix Structure

This is where employees are grouped simultaneously by two different operational perspectives. This allows for a more dynamic and democratic structure and greater information exchange among different departments. This is considered an ideal structure to counter the “silo” tendencies of other organizational structures. Some limitations are that it can sometimes be quite complex and may cause confusion about the internal management in regards to who exactly is their direct supervisor.


4. Divisional Structure

A divisional structure type is when people are grouped into product, service or regional divisions. Each division will have all the necessary resources and functions to perform independently from other divisions. This structure is geared towards those with a considerable variation in terms of the product offerings and/or geographics.


This is an effective structure as it has a leadership structure that is geared towards supporting the group’s own objectives without having to interfere with other teams. This is particularly useful for businesses which have high competition in the market as managers can quickly respond to changes and trends. A weakness is that office politics may interfere in matters like allocation of resources. This structure may also provoke unnecessary rivalries among the divisions.


If you need help determining what business structure management is most suitable for your organization, contact Optimum Source. We have helped many business start-ups with our HR management services and consultations in other important management matters including organizational structure.




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