The impact of organizational structure on employees depends on more than just the structure. Flat structures, matrixes and other organizational forms can all motivate employees to excel. They can just as easily leave employees floundering and dispirited. The relationship between organizational structure and its effect on workers' performance is complex.
Types of Organizational Structure
Business owners can structure the company in multiple different ways, for example:
- Hierarchical structure. Every employee has one clear supervisor who has a supervisor over them and so on up the chain of command. The hierarchy is divided into several silos based on department, geography or product lines.
- Matrix structure. A matrix is a hierarchy where project managers can recruit employees from different departments for the project team. The team members answer to two managers, their superior in the hierarchy and the team leader.
- Flat structure. This structure eliminates most or all middle management, leaving employees free to decide for themselves how to use their work day.
An organization may try any or all of these over the course of its life cycle. A small start-up with a committed team may do very well with a flat structure. As it grows, a hierarchy or matrix may become necessary to manage the larger number of employees efficiently.
Impact of Organizational Structure on Employees
Different business structures affect employees in different ways. It's not a direct cause and effect between organizational structure and its effect on workers' performance.
Consider a flat structure. Employees can launch a project without asking a superior to greenlight it, but they have to recruit a team and find project funding on their own too. For creative self-starters, that's intensely motivating, but other employees lose their drive without someone to give them direction.
A matrix structure can inspire employees by putting them on teams where they have a chance to shine. Employees in matrixed organizations say they receive much more feedback and praise because they have two managers to report to. However, the matrix can also leave them confused and uncertain about who to report to and what their responsibilities are.
Centralization and Formalization
While the impact of organizational structure on employees isn't always obvious, social scientists have studied the question and found some broad trends. Centralizing authority so that the head office has all the power and makes the decisions discourages employees from unleashing their creativity. "Formalized" organizations, where job roles are rigid and precisely defined, also dampen employees' creativity.
The studies found that while organizational structure plays a large role in influencing employees, employee attitudes, commitment to the company and rewards and bonuses for good work also play an important role.
What Your Company Needs
When thinking about organizational structure and its effect on workers' performance, it might be worth asking what effect you want or need it to have. Hierarchical organizations, for instance, are slow and bureaucratic. Employees at the lower levels have little say about anything, which can leave them with little enthusiasm for their job.
That may not be entirely bad. If the work your frontline employees do is routine, requiring little creativity, you may not mind if the corporate structure reduces them to drones. In hierarchical companies, everyone knows their job and the lines of authority are clear, which can be advantageous to some businesses.
If you want more creativity and commitment, the hierarchy needs shaking up. Flattening the layers of management or giving employees new opportunities with a matrix of projects might motivate them effectively. Changing an established structure is often a challenge, so you'll have to be sure the end is worth it.
- Creately: Types of Organizational Charts (Organizational Structure Types) for Different Scenarios
- Forbes: The 5 Types Of Organizational Structures: Part 3, Flat Organizations
- Researchgate: The Impact of Organizational Structure on Employees’ Creativity: A Sector Based Study
- Academia: Impact of Organisational Structure on Employee Engagement: Evidence from North Central Nigeria
- Forbes: The 5 Types Of Organizational Structures: Part 1, The Hierarchy
- Orgcharting: Advantages and Disadvantages of Hierarchical Organization 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