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written by | April 21, 2022

Organisational Structure and Its Types

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The organisational structure of a company is essential to the success of any business or organisation, as it dictates how a company carries out specific processes. Rules, roles and responsibilities, to name just a few, are all included in this activity. The organisational structure affects the flow of information within and across divisions and levels of the company. There are numerous instances of architecture that combine centralisation with decentralisation in the literature. Individuals have a great degree of personal agency in decentralised organisations, while the chain of command is established in centralised institutions. Functional, divisional, futarchy and matrix systems are all types of organisational structures.

Did you know?

An organisational structure also determines the flow of information at different levels in an organisation.

What is an Organisational Structure in Management?

Also Read: Why Do You Need Financial Management in Business?

What is an Organisational Structure?

The organisation structure establishes how a company divides responsibilities to meet the company's goals. It outlines a worker's tasks and responsibilities in a firm. The more power an employee possesses, the more likely they can advance in a business's ranks. Additionally, when a business's structure is well-organised, production increases. Four types of organisational structure exist functional, futarchy, matrix and divisional.

What Are the Benefits of Organisational Structures?

There are numerous advantages to having an organisational structure, even if your company doesn't use one. Implementing an organisational structure has the following advantages for your business:

• Faster decision making

• Multiple business locations

• Improved operating efficiency

• Greater employee performance

• Eliminates duplication of work

• Reduced employee conflict

• Better communication

Faster Decision Making

If the various teams within your organisational structure can communicate more effectively, it will enhance the overall efficacy of your company's communication. Because of this, you can make judgements more rapidly in the future. In other words, a company uses the flow of information throughout an organisation to accelerate decision-making processes.

Multiple Business Locations

For business owners, having a defined organisational structure simplifies ensuring that all of your sites operate similarly and adhere to the same policies and procedures. Since owners cannot constantly be present at all locations, having a well-organised organisational structure can provide peace of mind. This is critical to consider if your business begins to expand in size.

Improved Operating Efficiency

Following the segmentation of businesses into various teams or branches, an organisation forms organisational structures to maximise the efficiency and effectiveness with which all related actions and obligations are carried out and fulfilled. When employees are aware of the tasks, it is significantly easier to fulfil them on time. A well-organised organisational structure enables establishing an efficient and streamlined system.

Greater Employee Performance

Employees can perform better when their tasks and responsibilities are delineated and dispersed. Employees can put forth their utmost effort daily when under the supervision of a well-defined organisational structure. A positive work environment where employees' efforts are recognised and appreciated can increase their morale and self-esteem.

Eliminates Duplication of Work

When a company separates personnel into teams according to their talents and competence, you reduce the possibility of overlapping job assignments. For example, if one team gets a project, the other groups know it's not their obligation to take it on because they have their tasks specified.

Reduced Employee Conflict

A company can reduce employee conflict through the use of organisational structure. There are many variables to consider in this situation, but if employees are aware of their responsibilities, they will be more focused on their work. This is an excellent method to keep conflicts between coworkers to a bare minimum.

Better Communication

A firm's organisational hierarchy varies from company to company and can affect how well different divisions and teams within a company communicate with one another. Others in the office will know who to approach for specific difficulties once they split tasks among several teams and individuals. Should an issue arise, you'll know who to contact in the event of a group setting. Additionally, if someone in marketing has a query about a project design, they are referred to the art department for answers.

Also Read: Know the Basics of Managerial Accounting

Types of Organisational Structures

In the realm of business, there are four different types of organisational structure. There are several considerations when deciding whether or not to use them in your industry. The four types are as follows:

1. Functional Structure

2. Divisional Structure

3. Flatarchy

4. Matrix Structure

1. Functional Structure

Organisations with a functional structure are segmented into specialised units, each with its responsibilities. A bureaucratic organisational structure, also known as a functional structure, is a prevalent feature of small and medium-sized organisations. The majority of people in the workforce have had prior experience working in hierarchies like this. Many firms, for example, divide their organisation into various divisions, such as finance, marketing and human resources. A manager oversees each of these divisions. In contrast, an administrator or an executive is in charge of several different company areas.

Here are some advantages of this structure:

• Employees grouped by skill

• Greater sense of teamwork

Here are some disadvantages of this structure:

• Lack of communication with other departments

• Unhealthy competition

• Management issues

2. Divisional Structure

When an organisational structure is organised into divisions, different teams work together toward a single purpose. A separate executive for each division is in charge of the branch's operations, budgeting and resource allocation. Large corporations use this organisational structure. A car manufacturer might include SUVs, electric vehicles and sedans divisions. Even though each branch serves a distinct purpose, they all work toward the same goal: a sale. The multi-divisional structure is another name for this.

Here are some advantages of this structure:

• Focus on a single good or service

• More centralised leadership

Here are some disadvantages of this structure:

• Poor integration with other divisions

• Competition between divisions

• Lack of communication between divisions

• Potential tax implications

3. Flatarchy

There are no or few tiers of management in a flat organisational structure. A corporation employing this structure could have only one manager between its executive and the rest of its workforce. As a result, it's known as a flat arch, a hybrid of the two. As a result of their smaller workforces, small businesses are more likely to adopt this form of organisational structure, but businesses of any size can use it. Some companies eventually develop from this structure, but others stick with it.

Here are some advantages of this structure:

• Cost-efficient

• Fosters good communication

• Higher employee morale

• Faster decision making

Here are some disadvantages of this structure:

• Potential employee conflict

• Leadership confusion

4. Matrix Structure

There are two types of managers in a matrix organisation: a project or product manager and a functional manager. This structure encourages duality and resource sharing because of two supervisors on each team. People who work for firms with a matrix structure are assigned to various tasks requiring varying degrees of competence and expertise. Matrix structures are a collection of many organisational structure systems combined into one.

Here are some advantages of this structure:

• Fosters open dialogue

• Flexible workplace environment

Here are some disadvantages of this structure:

• Leadership confusion

• Conflicting leadership loyalties

• Potentially more costly

• May not clearly define roles

• Potentially heavy employee workload

Conclusion

An organisational structure lays out how a company organises its activities to achieve goals. There are four types of organisational structure - functional, futarchy, matrix and divisional. Implementing an organisational structure has the following advantages for your business:

  • Faster decision making
  • Reduced employee conflict
  • Improved operating efficiency
  • Greater employee performance.

For business owners, having a well-organised organisation can provide peace of mind. There are no or few tiers of management in a flat organisation. Small businesses are more likely to adopt this form of organisational structure. Matrix structures are a collection of many types of organisational systems combined into one. Some companies eventually develop from this structure, but others stick with it. Organisational charts help allocate responsibilities, streamline the workflow and ensure the completion of critical activities on time.
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FAQs

Q: How does the structure of an organisation influence leadership?

Ans:

You are responsible for ensuring that all of your employees understand their roles and duties and how they are assigned, controlled and coordinated. When it comes to providing commercial success, organisational structures rely on leadership frameworks to spell out their executives' expectations.

Q: How does the structure of an organisation influence management?

Ans:

The structure of a project might impact the management process, even if the organisation is essential. The organisational structure of a company can significantly impact a project's degree of management, one who makes final project decisions, how project objectives and duties are communicated and how the project manager interacts with his team.

Q: What effect does the organisation's structure have on the company's performance?

Ans:

According to the study's findings, an organisational structure directly impacts employee performance. Poorly organised structures lead to a lack of delegation and uncentralised decision-making.

Q: In a nutshell, what are the various kinds of organisational structures?

Ans:

Various organisational structures are functional, divisional, futarchy and matrix. The aims of the firm, the industry in which it operates, and the company's culture determine which style of organisation is ideal for a specific company.

Q: What are the advantages of having a well-defined organisational structure?

Ans:

Employees will have more clarity, expectations will be better managed, better decisions will be made, and there will be consistency. Additionally, organisational charts help allocate responsibilities, streamline the workflow and ensure the completion of critical activities on time.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.