The organizational structure of an entrepreneurial company often has two central requirements based on the nature and size of the business. Because they are innovators, these businesses must develop organizational structures that promote frequent interaction and communication among their marketing, sales and production departments. Because they are often smaller businesses that aren’t able to fully departmentalize because they have large sales of one product, they must maximize their management resources through multitasking.
The theory of an entrepreneurial organizational structure was developed by McGill University professor and management expert Henry Mintzberg. He proposed theories about five different types of organizational structures, including one well suited for operating an entrepreneurial organization. Others have since expanded on his theories, first proposed in the 1970s, as markets and technologies have evolved.
Smaller businesses with few employees that continue to evolve their product development and marketing often use a flat organizational structure rather than a hierarchical one. A traditional hierarchical organizational structure organizes a company based on departments, with each department having a leader and subordinates reporting to the department head. These departments work independently, reporting to a president, chief executive officer or executive management team. A flat organizational structure consists of individuals or small groups that work collaboratively, all reporting to the owner or CEO. A flat structure can require managers to take on or participate in more than one task to maximize scarce human resources.
An entrepreneurial structure should facilitate cooperative planning rather than top-down strategic and marketing planning, which features execution of plans assigned to different departments. Marketing activities include the product development, pricing strategies, brand creation and distribution channel selection that occur before any promotions take place. For example, at a larger business with a hierarchical organizational structure, the marketing department might develop the product and then tell the production department to determine how to make it. In an entrepreneurial organization, all team members are involved in product planning so they can share their concerns or make suggestions about whether they can make the product. At large companies, marketing will know the capabilities of its production department, while at an entrepreneurial company, marketing will pitch an idea, asking production, information technology, sales and finance if they can realistically bring the idea to market.
An entrepreneurial organization holds regular team meetings to discuss ideas before a decision is made, while a more traditional organizational structure uses meetings of department heads to announce their progress and tell subordinates what has been decided. An entrepreneurial company might create an intranet or a communication system based in the Cloud to exchange project status in real time. A Cloud-based system puts information on a secure Internet site that people can access with a password from anywhere. An intranet resides on a company's servers. Using such a system, each team member will have his own responsibilities but will update his progress on a master document that all other team members can access from their computers any time of the day.