Companies must structure their management to make it as efficient as possible. This allows companies to better respond to their customers' needs and the ever-changing dynamics of the marketplace. However, a number of things should be consideed when developing an organizational structure. Size is one factor, as is experience of the management team. Other determining factors are the types of products the company sells and customers. Different types of organizational structures work best in certain types of companies.
Small companies usually have more horizontal or flat organizational structures. Companies do not really need to consider an organizational structure when they have less than 15 employees, according to The-Business-Plan.com, an online business reference site. With less than 15 employees, most managers likely have diverse functions. For example, you may have accounting, finance, marketing and research and development managers or directors all on the same level, one step down from the top executive or company owner. Each manager or director may be performing work himself or doling projects out to vendors. Hence, they have no employees reporting to them. Therefore, there is no need for an organizational structure. Everyone knows their responsibilities and reports to the top executive.
Functional Organizational Structure
In a functional organizational structure, management teams are divided into various functions like marketing research, product management, business development and sales. Heads of these functional areas, such as directors, have managers, associates and clerical people reporting to them in a department setting. That way work can be dispersed and shared based on people's expertise. Departments with shared skills and expertise to varying degrees enable companies to work more efficiently. The synergism of the department management team can make better management decisions and get more done. A disadvantage of the functional organization structure is that company goals may be sacrificed somewhat for department goals.
Sales Organizational Structure
In some companies, many functional areas report to the sales department. For example, the marketing manager may report to the senior vice president of sales. Additionally, accounting, finance and other managers may also report to the senior vice president of sales. Sales organizational structures are used when a company's sales department is the major thrust of the company. Companies using sales organizational structure often have hundreds of salespeople working for them. Additionally, sales representatives report to sales managers. And sales managers may, in turn, report to area sales managers. A regional sales manager may oversee each division. An advantage of a sales organizational structure is that all managers and employees support the selling efforts of the company. On the downside, creativity and talents of other functional areas can be sacrificed to some degree.
Matrix Organizational Structure
A matrix organizational structure is a type of hybrid organizational structure. For example, a company that uses a functional organizational structure may temporarily create a product organizational structure, another type of structure that emphasizes products. Hence, managers from different functional areas may work together to research, develop and introduce a new line of products to the market. Companies that use matrix organizational structures take advantage of the efficiencies of functional teams and the product expertise of product teams. However, matrix structures are more ad hoc in nature. They may last six months to a year or two. Companies will then disassemble them once the project is completed.