Most Common Organizational Structure Types For Small Business

organizational-structure-types-for-small-business

An organizational structure is how a business is set up to accomplish specific goals. The set-up you choose will play a crucial part in the overall development of your company. There are many different organizational structure types that you can choose from, each with its own benefits and disadvantages. Below we have listed the top 5 most common organizational structure types that you should consider for your business.

Traditional Hierarchy

A traditional hierarchy is the most common organizational structure available today. It operates on a top-down level with one major boss followed by multiple managers, all the way to front-end employees. This type of organization is great for new businesses because it is comfortable and easy to understand. However, it may also lead to a poor employee experience if the managers and owner are not vigilant about communication. That is why management leadership training is crucial in this organizational structure. It is important to consider both of these factors when choosing the right structure for your business.

Functional Structure

A functional structure is another popular business format that divides companies into specific groups based on their function. Employing departments such as Human Resources and Accounting is a popular example of a functional structure. This management style works well for small businesses because multiple departments can rely on one another to get different tasks done.

Flatter Hierarchy

The flatter hierarchy is similar to the traditional hierarchy. However, this version seeks to open the lines of communication rather than simply following the top-down method. Instead, two-way communication is key. There are generally less layers to work through in the company, making it more functional for collaboration. This is a great, practical option for larger businesses.

Divisional Structure

Divisional structure is a strategy that is most often used by larger companies that operate in a large geographic or even global area. They often have several separate, smaller organizations that belong to one umbrella company. These smaller companies will cover different geographic areas or market types. For example, a publishing company may have one smaller organization that deals specifically in text books while another branch will publish children’s books. This divisional structure may be a bit too large-scale for small-business.

Matrix Structure

The matrix structure is one of the most complex organization types that you will find. It is the hybrid of the divisional and functional structure. This is typically used in large multinational companies. Under this structure, employees will have multiple bosses and reporting lines. These organizations often offer a lot of flexibility and balance.

Choosing the right organizational structure is important to the success of your business, alongside effective organizational change models, just in case. It is important to consider both your management style and the needs of your business when creating the outline for your organization. If you want to encourage open lines of communication, you may want to forego the traditional hierarchy for something like the functional structure or flatter hierarchy. No matter what you choose however, the most important thing is to have engaged employees, clients and customers. As long as you are mindful of your choices and focused on developing your business, you should be able to find the perfect organizational structure.

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