All companies, irrespective of their size and scale, need an organizational structure to be effective. This structure is used to define the company's hierarchical alignment and work flow. Using the structure, the company's management frames its policies and procedures and lines of authority. Companies that have very few levels of hierarchies between the top management and the employees use the horizontal organizational structure. Companies that have many chains of command between employees and management use a vertical organizational structure.
Fixing Authority and Responsibility
Once the company decides its organizational structure, its authority-responsibility diagrams are very clearly drawn. Every manager in the company relegates and delegates to his subordinates and explains the manner in which the task(s) must be accomplished and sets time frames for them. Every time a subordinate has any doubts, he approaches the manager for clarification. At the end of the stipulated time period, the manager reviews whether or not his subordinates were able to meet their set targets.
Evaluating Staffing Levels
The organizational structure helps the company in analyzing the prevailing staffing conditions. Management is able to contrast the present levels of staff across all the departments in the organization with the most adequate levels. The HR department then takes measures to transfer employees from the departments that are over-staffed to under-staffed departments. The HR department tabulates the skill requirements for each job in the organization. It then attempts to match each employee to the most perfect job as per his skills and aptitudes.
Choice of Structure Based on Business Type
Organizations make their choice of the organizational structure based on their trade type, long-term vision and the products they manufacture. A clothes manufacturing company may not need many hierarchical levels. It can manage its operations by the owners maintaining the supreme command whereas a computer manufacturer might need several intermediary levels of command between top management and the employees involved in the production processes.
The design of the organizational structure is such that every employee in the company works toward attaining organizational goals. Every employee is apprised of the organization's vision and objectives. All the employees are motivated and driven to perform to the best of their abilities. Management praises all the employees who perform well and trains and develops those who need extra assistance.