There are a number of factors that differentiate small-business operations from large-business operations, one of which is the implementation of a formal organizational structure. Organizational structure is important for any growing company to provide guidance and clarity on specific human resource issues, such as managerial authority. Small-business owners should begin thinking about a formal structure early in the growth stage of their business.
Guidance from Organizational Purpose
Organizational structure provides guidance to all employees by laying out the official reporting relationships that govern the workflow of the company. A formal outline of a company's structure makes it easier to add new positions in the company, as well, providing a flexible and ready means for growth.
Significance of Formal Structure
Without a formal organizational structure, employees may find it difficult to know who they officially report to in different situations, and it may become unclear exactly who has the final responsibility for what. Organizational structure improves operational efficiency by providing clarity to employees at all levels of a company. By paying mind to the organizational structure, departments can work more like well-oiled machines, focusing time and energy on productive tasks. A thoroughly outlined structure can also provide a roadmap for internal promotions, allowing companies to create solid employee advancement tracks for entry-level workers.
Flat Organizational Structure
There are relatively few layers of management in what is termed a flat organizational structure. In a flat structure, front-line employees are empowered to make a range of decisions on their own. Information flows from the top down and from the bottom up in a flat structure, meaning communication flows from top-level management to front-line employees and from front-line employees back to top management.
Tall Organizational Structure
There are numerous layers of management in a tall organizational structure, and often inefficient bureaucracies. In a tall structure, managers make most operational decisions, and authority must be gained from several layers up before taking action. Information flows are generally one-way in a tall structure – from the top down.
Other Organizational Considerations
It is common for small businesses to lack a solid organizational structure. All employees in startup companies can be required to perform a range of tasks outside of their official job descriptions, and a good number of employees in startups have generous leeway in making decisions. Aside from that, all employees in a startup generally know who they report to, since it is usually a single person or group – the owner or partners. It is very important to have a formal organizational structure in place before your company grows so large that your unstructured workforce becomes unwieldy.
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