The organizational structure of any corporation requires a clearly mapped-out plan of how valuable human resources will be deployed and are deployed and utilized. This is a critical component of business strategy. A detailed structure, describing levels of management, reporting responsibilities and division of workload helps the company leadership effectively manage the company.

Creating Organizational Structure


Three office workers image by Vladimir Melnik from

Deciding who is in charge of what -- and who will report to whom -- is an essential management function. Without a solid organizational structure, a company can quickly lose sight of its vision, lose track of its goals, or lose key personnel because they are not being properly utilized. The larger the company, the more complicated the task becomes, with people separated by divisions and departments. A hierarchy of authority must be created so that these specialized tasks are monitored and managed properly.

Common Types of Organizational Structure

The Functional Organizational Structure groups employees by their specialties and abilities within the organization, with each reporting to an expert in that particular specialty, who reports to corporation leadership.The Divisional Structure has employees spread across the organization by their specialties and abilities, working in different divisions. The Matrix Structure has managers pulling employees from across the organization on a project-specific basis to achieve their goals. The Horizontally-Linked Structure has a simple straight-forward structure with employees grouped along the production chain process to create, make and sell, the product.

Making Changes to the Organizational Structure

As important as an organizational structure is to a corporation, it cannot remain static. Changes in market forces, product innovation, increased competition, or a change in key personnel can and should require a company to make changes in the way that it distributes its workload and accountability. If a company eliminates a division, acquires another company or in any other way changes its focus and/or goals, a new organizational structure must reflect that.

Organizational Structure as an Evolving Mechanism

Each organizational structure, while being strictly administered and adhered to while it is in place, must remain flexible. A part of the company leadership's role is to determine when modifications are necessary and appropriate, given the current circumstances. The organizational structure exists to make the company effective and efficient, and must change and evolve with these circumstances. A company that is quick to respond to outside market forces by responding with internal reorganization has a better chance of being successful.