Organizational Design – What’s Best for Your Company?

Until very recently most companies utilized a hierarchical organizational structure. Well, times they are a changin’.  Companies are moving toward a more level organizational design composed of interactive teams that work in a much more collaborative manner. 

In the past most organization designs were more of a simple structure that was authority from the top down – the lower you were on the proverbial totem pole, the lower your stature in the company. This concept often lead to disgruntled lower level employees who felt their opinions didn’t matter and their needs were not met.  It was one of those, “Well this is the way we’ve always done it, why change it now?” But with our workforce changing so drastically and the diversity among the employees it may no longer be the best option.

In today’s markets the organizational design of a company needs to be much more cross-functional, combining people from multiple divisions who assume responsibility for a project/order/service for their customers. This concept will not only improve productivity but creates an environment where all employees have some skin in the game regarding the success of the company.

Key to the success of organizational design is to identify how your company is structured. 

  • Are you more products based or more service oriented?  
  • You also need to determine the chain of command. No matter what type of structure your company utilizes, there always has to be an aspect of boss/employee so that the “boss” can ensure that the job is being completed and that all involved are accountable for their part in the success of the business. 
  • What are the chief goals in creating a new design?
  • What is the best way to streamline your organization and utilize your staff? 
  • Establishing and documenting policies and procedures so all parties involved are on the same page with the design.
  • Clearly delineating each member/division’s responsibilities and the overall coordination of the organizational plan.

There are four basic organization designs that are currently being used in the workforce. 

Functional Design

The Functional Design is the most traditional type of structure and offers the least flexibility. It is a very departmentalized structure with each division clearly defined as are the tasks and responsibilities based on each division’s specialty. This is often the best design for small business. It can be advantageous because each person and department have very clearly defined tasks. The disadvantage is that when companies are departmentalized it can make it difficult to create an open line of communication and cooperation. 

Divisional Design

Divisional Design would be best utilized by a larger organization that serves a wide geographic area or large number of products developed. There is an umbrella organization that oversees the company as a whole but there are many different divisions in different geographic locations. Size and location often necessitate this type of structure but companies can also implement a sub-design (see Matrix below) that best fits the responsibilities of that division based on the products or service provided and the clientele they are serving.  The biggest benefit to this type of structure is that the division is more localized and can meet the needs of the customer more quickly. The drawbacks can be that the different divisions are not working together and are often in competition with one another. While not the most creative nor the most flexible, this has been time-proven for larger companies.

Matrix Design

The Matrix Design offers the most flexibility and creativity. Employees often have multiple bosses and reporting lines. For instance I would report the Division Manager for my branch but I would also report to a project manager or supervisor. This concept can create a more balanced level of decision making and cooperative environment.  Matrix designs can increase productivity and efficiency because of the cooperative nature of the design. The structure allows for projects to be better coordinated across departments and information flows not only from the top down, but laterally within the company. It can be prone to some confusion regarding who is ultimately in charge and to whom an employee reports. This can sometimes create a bit of a power struggle among managers. 

Flat Design

The Flatarchy Design creates a more horizontal organizational chart, rather than the traditional hierarchical chart. The fundamental concept is the communication between all employees across the board at all levels. The idea is to create a more cooperative environment by removing multiple layers of management and spreads the responsibilities and authority more evenly among the staff and helping every member of the company feel that they are an essential part of the process. This type of design is most beneficial in more creative enviornments.  Organizations can also operate a “Flatarchy” design that is not completely flat but utilizes a more unstructured hierarchy.  These structures can create some difficulties when all parties cannot come to a consensus in decision making.

Holocratic Design

This design is the newest and more controversial concept and involves a more circular practice when structuring, managing, and running the organization. It replaces the top-down ideas with a more inclusive mindset. Fundamentally the structure creates self-managed and self-organizing teams rather than a hierarchy or even a flat design. This can work well for up-start organizations and many non-profits. In many cases there are no job titles and no managers. The power, responsibility and decision making is spread evenly amongst all of the employees. This type of structure requires flexibility within the staff and a team that, by necessity, works well together and works cooperatively. The lack of structure could make it difficult for some people to function in this environment and for those who lack the discipline to take responsibility for their actions. 

Organizational design can no longer be a rigidly imposed plan, but rather must be fluid to adapt with organizational changes, workforce adjustments, and changes in the economy. Perhaps even incorporating some aspects of each design into the overall organizational plan.  The key to successful organizational design is flexibility.

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