Describing a business as a traditional organization may not be a compliment. "Traditional" means the company employs one of the oldest types of organizational structure: the hierarchy. Although hierarchical structure is still common in the 21st century, business theorists and consultants see it as a suboptimal way to run a company.
TL;DR (Too Long; Didn't Read)
A traditional organization is hierarchical, with power concentrated at the top.
History of the Traditional Organization
The hierarchical traditional structure developed as manufacturing shifted from small shops to mass production and assembly lines. As industry became increasingly mechanized, analysts and theorists saw the corporation itself as a machine.
- Low-ranked individuals were simply cogs in the machine, trained to do their job as efficiently and routinely as possible.
- Each human cog had one function in the overall machine. Employees were job specialists.
- Managers and executives are still part of the machine. They wield power and authority because of their positions, not their personal attributes or leadership.
- An efficient machine requires rules, regulations and a tight chain of command.
The result? Large, bureaucratic corporations where power and decision making are located at the top. Decisions percolate down through several layers of management, and front-line employees have to send complaints or suggestions upward and wait for a response.
Traditional Structure in Decline
By the mid century, as the United States economy boomed and corporations grew massive, traditional hierarchy seemed perfectly suited for powerful conglomerates that wanted to preserve the status quo.
By the end of the 20th century, the traditional hierarchy no longer seemed like the ideal structure. The military is a real-life example of functional organizational structure of this type – big and powerful and good at what it does. As the century reached its end, though, that structure no longer worked as effectively in the business world.
- Employees get little say about their jobs, and they can't be sure their suggestions even reach upper management.
- Decisions and change only flow from the top to the bottom, which can kill innovation.
- Change happens slowly because in a traditional structure, it has to work through so many layers of management.
- When the business environment changes quickly, or the company faces new challenges, it may not be able to respond quickly enough.
Even the military has to struggle to stay lean and not become top heavy in management.
Traditional Structure Survives
Despite its flaws, the traditional organization continued into the 21st century. Some of that is inertia. It's easier for established organizations to stick with the types of organizational structure they have than to change.
Some organizations have tried to revamp the traditional structure. Flattening the hierarchy so there are fewer layers of managements is one approach. Eliminating middle management makes it easier for employees to collaborate with the boss and speeds up change.
Structure From the Ground Up
If you're just starting to grow your business, you can choose between the types of organizational structures. Even if you don't make a conscious choice, you may make one without thinking. Business pressures can then lead you to reproduce a traditional structure:
- Work needs to be divided into specific jobs.
- As the company grows, it seems more efficient to group jobs together, which creates departments.
- As your staff grows, you may want a layer of middle management so you don't have every employee reporting to you.
- You may find it easier to retain most of the decision-making authority than to consult with employees.
If you want a flatter, more flexible organization, it may take effort to avoid falling into a traditional structure.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com