Organisational structure is the hierarchical set-up within a business where-by lines of authority exist which dictate paths of communication, levels of power, and creates transparency to ones duties.
The organisational structure is usually represented by an organisational chart. Smaller businesses do not usually have such a process as there is no need and the owner is normally the key decision maker for all business activities.
The purpose of having an organisational structure is that it determines how the employees within the organisation are coordinated and controlled. It also creates visibility into how the organisation communicates through the different levels of management by its employees.
There are mainly two types or organisational structure and those are tall and flat. These can then be defined further into functional, divisional and matrix structures. Within a functional structure employees are split into functions where-by they are specialised to carry out that particular task. Within a divisional structure each function in the organisation is grouped into a division and within a matrix structure the layout of a functional structure is present but with allocated project teams where the employees work across the team as well as within the assigned function.
By having an organisational structure in place brings advantages to the business. Operations are streamlined and due to this operations are carried out more efficiently and more effectively, which in turn saves time and money hence creating more profit. As departments have assigned managers, decision making becomes more valuable. A manager is solely responsible for that area within a business and should therefore have first-hand knowledge of what needs to be communicated up to executive level management. The communication paths are clearly set and allow information to be transferred in an appropriate way. As the organisational structure assigns managers to oversee departments the efficiency of employees tend to increase, this is due to greater direction being present. Employees have a contact within the business also to advise of any training requirements or concerns they may have or business improvements they may well suggest. As the operational functions in the business tend to run better where an organisational structure is present it allows increased focus to be put upon the customer and the customer service an organisation can offer.
There are also disadvantages to having an organisational structure in place and one of the main disadvantages is that once a structure has been put in place it becomes a very costly and timely process to change that structure. As a structure becomes more embedded into an organisation it can make the business less flexible in terms of reacting to the market environment and the external demands of products or services.