Designing organizational structures

Designing organizational structures

An organasitional structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims.^[1] It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment.^[ An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions. Organizational structure is used to develop how groups and individuals are arranged or departmentalized to help meet an organization's goals. It defines a reporting structure, jobs, compensation and responsibilities for each role. Designing an organizational structure requires consideration of an organization's values, financial and business goals. It should allow for growth for the organization and the ability to add additional jobs or departments.

Step 1

Define business units or departments. Each business unit should have similar goals and responsibilities that can be overseen and directed by one or several managers. The business units or departments will then align to assist in creating an appropriate organizational structure. Depending on which type of organizational structure is used, departments may align laterally with other departments or one may oversee another.

Step 2

Determine which type of organizational structure best fits your business needs. The several types of organizational structure ensure an organization can successfully function with its reporting structure, expand if necessary and successfully meet its goals. For example, if your organization is small, it may simply require the organizational structure be broken into departments, such as production, human resources and finance. Your organization's business type, units and how it operates will determine which type of organizational structure to choose.

Step 3

Define the executive and management teams. Executives and managers are responsible for ensuring each business unit meets the organization's goals. This may include one or several top executives to oversee the entire organization and managers to direct each business unit within the organizational structure. the organization may require one supervisor to oversee all operations, or several supervisors to direct each business unit, ultimately reporting to a top executive or owner.

Step 4

Establish performance metrics and compensation. When the organizational structure is determined, job descriptions can be clearly defined and where each job fits in the hierarchy. Each job description should reflect the competencies required to do the job and the expectations of each job to meet the organization's goals. After each job within the structure is defined, compensation should be defined based on the responsibilities of each job.