Organizational Structure

In an organization of any size or complexity, employees’ responsibilities typically are defined by what they do, and who they report to. Over time these definitions are assigned to positions in the organization rather than to specific individuals.

In business organization structure (OS) means the relationship between positions and people who hold the positions. Organization struc­ture is very important because it provides an efficient work system as well as a system of communication.

An effective organizational structure shall facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units.

There are multiple structural variations that organizations can take on, but there are a few basic principles that apply and a small number of common patterns.

The best organizational structure for any organization depends on many factors including the work it does; its size in terms of employees, revenue, and the geographic dispersion of its facilities; and the range of its businesses (the degree to which it is diversified across markets).

In a typical case, a company is run by the Board of Directors; each Director is in charge of a department. However, the Chairman of the Board is in overall control and may not be the head of any one department. The Board is responsible for policy decisions and strategy. The Managing Director (sometimes called the Chief Executive, or President in the USA) is the head of the company, who has real responsibility for the running of the business.

Most companies have Finance, Sales, Marketing, Production, Research and Development (R&D), and Personnel Departments. These are the most common departments, but some companies have others as well.

Most departments have a manager, who is in charge of its day-to­-day running, and who reports to the Director; the Director is responsible for strategic planning and for making decisions. Various personnel in each department report to the manager.

People at the head of an organization are often called senior executives or senior managers, top executives or top managers.

Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today’s post-industrial structures.

In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual.

One of the newest organizational structures developed in the 20^th century is team. In small businesses, the team structure can define the entire organization. Teams can be both horizontal and vertical.

Another modern structure is network. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means.

A special form of boundaryless organization is virtual. It works in a network of external alliances, using the Internet. This means while the core of the organization can be small but still the company can operate globally and be a market leader in its niche.