Issues With Organizational Structure
No one thinks about an organization's structure until something goes wrong and profits plummet or customers complain. That's when reporting relationships, operational metrics and business culture come under scrutiny. Proactive business leaders take the time to analyze the organizational structure from the start and make sure it facilitates efficient decision making.
In a matrix structure, people report to two different managers -- a functional manager and a divisional manager. For example, a human resources employee functions as an expert in recruiting, hiring and training personnel. He reports to the HR manager and also reports to the division head of the department he supports, such as sales, manufacturing or customer service. This approach makes the best use of specially trained employees. However, when deadlines and budgets cause competition among departments, conflicts and power struggles occur, making it difficult for employees to know which direction to go. Effective coordination and collaboration can prevent a true crisis.
When each department functions independently, inconsistency may result. Company policies and procedures may not be enforced, causing employee dissension and confusion. Employees who transition to other jobs in the company run into problems when they behave as they did in their old roles. Approvals take longer because no one knows who is in charge when multiple departments interact. For example, if some customers complain that no one responds to problems, a small business can restructure support so each customer gets paired with a company representative.
As a small business grows, organizational structures that worked before no longer function productively. For example, relying on informal meetings for planning tends to become less effective. Lack of structure or an inflexible structure can impede the work force from achieving desired results. Additionally, poor communication among department leaders could filter down into the rest of the organization. Establishing good communication mechanisms -- such as print, email and presentations -- alleviates organizational problems that stem from rapid growth. Implementing good project management practices can also formalize procedures that ensure good communication.
To enable agility, each organization may set its own goals. This minimizes the levels of approval. However, when each department sets its own goals, the whole company lacks a cohesive direction. Infighting results when limited resources must be shared. Setting a clear company strategy and having each department align its individual goals to the company's helps minimize the problems. In a divisional organizational structure, each employee works to meet the division's needs. This works well when each division works separately. However, when divisions need to interact, this works less effectively.