All businesses are structured according to the organisation’s goals, needs and objectives. Generally speaking, the structure of a business will fall into one of two categories; a flat organisational structure or a hierarchical organisational structure. Every business will structure its organisation in such a way that they feel it will deliver the best overall results and that assist with reporting supervision and communication.
Whichever structure is chosen it should perform the following functions:
- Establish clear lines of communication between managers and employees
- Identify the allocation of accountabilities and authorities
- Determine where how and why leadership positions are placed within the organisation
- Ensure effective work management and efficient production
- Facilitate effective planning and coordination
- Allocate decision-making responsibilities
Ultimately, the choice of structure will depend upon a number of factors, including the size of the organisation, the number of staff, the use of technology, staff skill levels and external stakeholders.
Flat Organisational Structure
Sometimes called a horizontal structure the flat organisation structure has few and possibly no middle managers. It is a short wide structure, enabling ease of communication on all levels. Many small businesses utilise this structure.
The advantages of the flat organisation structure are:
- It enables the quick flow of communication in all directions
- As employees feel connected to the entire business, they are more likely to be loyal
- It facilitates rapid decision making
- Increased motivation levels as employees are more likely to feel connected to the business
- Lower organisational costs
On the other hand, flat organisational structures do have some disadvantages.
- Less opportunity for promotion of staff
- Less opportunity for staff development
- Places restrictions on the organisation’s long term growth potential
- There is a risk of little leadership as there is often no clear pathway for guidance
While staff numbers remain low this structure will work quite well. Staff tend to be capable of performing all or most functions within the business. However, as staff numbers grow and the need for specialisation increases the disadvantages associated with this structure become increasingly evident.
Hierarchical Organisational Structure
The preferred structure for most large organisations, the hierarchical structure is multi layered and is often likened to a pyramid structure. The CEO or Chairman sits at the top and the organisational structure beneath them distinct lines of responsibility are evident.
Typically, the hierarchical structure can be described as having multiple levels of responsibility, with communication flowing from top to bottom via immediate supervisor, The hierarchical structure is generally favoured by large corporate organisations.
Some key advantages of a hierarchical organisational structure are:
- More likely to generate skilled specialist operators
- Creates more opportunities for promotion
- Assists in facilitating long term natural organic growth of the structure
- Systems based structure enables clear reporting channels
On the other hand, a hierarchical structure can have the following disadvantages:
- There is a risk of silos being built within the organisation limiting loyalty to direct departments
- Different salary levels are likely to increase costs
- The nature of the command structure makes the organisation less flexible
- Employees are likely to be less connected to the overall business and may be less motivated as a result.
Except for the CEO, every employee within an organisation using a hierarchical structure is clearly answerable to a superior.
Businesses naturally evolve as they grow. Most businesses start out using a flat structure and as they grow begin to evolve into a hierarchical structure organisation.
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