Which of the following are characteristics of simple organizational structure?

The types of organizational structures in business are just as important as its products, marketing plan and long-term strategy. Businesses need a sturdy structure to attract and retain talented employees, as well as create a workable organizational hierarchy.

Typically, businesses choose from four types of organizational structure. Each comes with its own set of advantages and disadvantages. Choosing the right one for your business is imperative because poor organizational structure leads to confusion among employees, poor decision-making among managers and, ultimately, less than ideal results for a business.

Students in Point Park University’s online Bachelor of Arts in Organizational Leadership  classes learn about management strategies and approaches to organizational design as part of a curriculum that prepares them for success as business leaders.

Picking The Right Organizational Structure

While there are variations, most companies are created based on one of the following four organizational structures. The goal for business leaders is picking the structure that works best for their particular situation.

Functional

A functional structure is the most traditional approach. It calls for grouping together people who do similar tasks based on their area of specialty. In other words, you’ll find all the accountants in finance and all the marketers in marketing. Managers led each area and report up to a director or executive who may oversee multiple departments.

The advantage here is clear: it provides those with similar abilities the ability to easily communicate and work on projects together. That’s also the reason this is the most popular business structure. The disadvantage is that teams may get “siloed,” unaware of what is happening in other areas of a company.

Divisional

In a divisional structure, people are grouped together based on the product or service they provide, not the work they do. For example, a large corporation such as General Electric has divisions for electronics, transportation, and aviation, each with its own team of accountants, marketers, etc. Global corporations may have divisions based on different geographic areas. On a smaller scale, a restaurant that also provides catering services may have separate divisions to oversee weddings, corporate events and business within the main restaurant.

Matrix

A matrix structure is a hybrid of the functional and divisional structures. It may involve employees reporting to different bosses depending on their current assignment. For example, a software design specialist may report to her boss in IT, but she’s also brought onto specific projects because of her expertise. When that happens, she will report to a different boss as long as that project continues.

The disadvantage is that employees may find it confusing to report to multiple bosses. But clear communication on priorities at all levels can eliminate these issues. The matrix structure requires a great deal of planning but can allow for the creation of the best possible teams to tackle the biggest challenges.

Flat

The flat structure dispenses with the usual hierarchy of a functional structure, decentralizing management and doing away with the need for middle manager bosses. Employees essentially act as their own boss, giving them the ability to communicate directly with peers on ideas and projects.

The advantage is a lot more freedom for employees, which requires a group of self-starters who don’t need managers checking up daily on their work. A flat structure is common in incubators and startups where the focus is on product and services design, not production or top-down management structures.

All four types of organizational structures in business can work well in the right situations. While most companies will choose from the functional or divisional approaches, a flat approach is becoming increasingly popular with modern companies.

Hiring skillful employees is only the first step towards building a high-performing organization. You need to make every team member fit in. You need a clear organizational structure.

Large enterprises require an established, organized structure to coordinate large numbers of employees and avoid chaos. But smaller businesses and startups rarely think of designing an organizational structure in the first place.

This lack of structure leads to miscommunication, work delays, poor process flows, low morale, and other serious consequences that stunt business growth. In contrast, a strong organizational structure helps to coordinate teamwork, reduce conflicts, and boost productivity. 

A simple organizational structure is the default operating system used by most small businesses, because it centralizes decision-making with the owner. Unlike other organizational structures, the simple, or flat, structure doesn’t have formal departments and layers of management. This method of running a company has advantages and disadvantages, and understanding them will help you operate under this system more effectively, so that you can prepare for a transition to a more formal structure.

Evolving Organizational Structures

Businesses must have some form of leadership to be successful, as they will eventually create hierarchies of executives, managers, coordinators and staff members. A simple organizational structure usually consists of an owner who delegates tasks to individual employees who report to her. As the company grows, staff members begin to specialize. The owner might give Bob all of the company’s marketing tasks; she might give Liu all of the office management responsibilities; and she might give Maria the job of keeping the business’s computers up and running.

As a company grows and has more frequent need for specific activities, it creates a functional organizational structure, with marketing, accounting, sales, administration, human resources and information technology departments. If a company has multiple product lines or brands, it might develop a divisional structure, with overhead functions that are centralized in a corporate office, but the production functions are handled at each division. A matrix structure enables each product line to have its own, independent departments.

Strengths of a Simple Organizational Structure

The strength of a simple organizational structure is that it enables a business owner to have tight control over her company’s operation. No decisions are made without her approval, and she is aware of every important decision made. There is no hesitation on the part of employees in a simple structure because their orders come directly from the top, not a department head or mid-level manager a subordinate might question. Companies make decisions quicker with a simple structure because there are no layers of management that ideas or requests need to climb before approval.

Weaknesses of a Simple Organizational Structure

Many of the problems of using a simple organizational structure revolve around the workload of the owner, or that of the person at the top. An owner might become swamped with work, if he has to approve every decision at a company. Companies that use simple organizational structures, even after they’ve added many employees with specialized jobs often do so because the owner can’t bring himself to delegate, making staff members wait for approval on actions they are qualified to take themselves. If an owner is sick, in a meeting or on a business trip, the entire company can become paralyzed, because no one can move forward to take advantage of an opportunity or to solve a problem until the owner is available again.

Leaving a Simple Organizational Structure

Business owners should set benchmarks so that they know when it’s time to move to a functional structure. This might include the workload in specific areas; the expertise developed by staff; budgets that allow hiring experts; and, customer service needs. For example, a small business might do fine having the boss recruit, interview and hire employees, with the help of her administrative assistant when the business is very small.

As the company begins hiring employees on a regular basis, and provides benefits and adds layers of management, it might be time to add a dedicated human resources person who heads an HR department. If a business is spending more on hiring contract marketing services than it would if it had an in-house marketing manager, then that’s a sign that the company should add that function.

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