The need for an Organizational Structure

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Organizational Structure can be simply put as the method through use of a hierarchy by which an organization, a group of people, a company or a business, plan to achieve their shared goal. Organizational Structure is extremely important to categorize each and every person's job description and how everyone will communicate with each other/management etc. It essentially lays down a blueprint or framework on how to run the organization and its helps in making sure that the effort of each and every person is brought together and channeled into achieving the shared objective of the organization.

Since the organizational structure determines how the roles and responsibilities are allocated and how they will be monitored as well as the flow of communication between different levels and sectors, it is entirely dependent on the organizations goals and how it wants to reach them. In centralized structures all the decision making power is retained at the top level of management and all the other departments are closely monitored and controlled, While in the decentralized structure decision making power is delegated to the lower levels as well to an extent to increase the speed of implementation as well as increase job satisfaction among other things.

Organizational structure can be categorized into two different dimensions, vertical and horizontal. The vertical organizational structures have many different levels of authority with individuals in management or supervisory positions having a small or narrow span of control (span of control being the number of subordinates working under an individual) compared to the horizontal structure. A narrow span of control is easier to handle and communicate with. It also requires less management skill then to control a larger number of people like in a wide span of control. Horizontal organizations structures tend to have a wider span of control i.e. many subordinates under one manager or supervisor. Horizontal structures tend to have better communications and are generally cost effective for an organization due to not needing many managers.

Types of Organizational Structure

Companies tend to organize themselves in different ways according to their needs. "Appropriate organizational structure depends upon the unique strategy of the business, its unique customer base, its unique sense of products and services and its management of these considerations as they are dispersed throughout the enterprise" (Fontaine, 2007).

Some of the major structures are as follows,

Functional Structures

These are most probably the most common type of organizational structure implemented by companies worldwide. Its popularity is due to it being simple yet effective. In this structure an organizations divides its self into different department (for example, Research and Development, Customer Sales, Human Resource Management, et cetera). People with similar skills are grouped together in their respective departments.

Divisional Structures

Divisional structures differ from functional structures because it does not belive in grouping people with similar skills into different departments, rather it distributes them across the organization to where ever they might be needed. For example in the divisional structure if a retail outlet has branches in different cities then every city will have a separate customer sales department rather than have a single department for the whole company.

Matrix Structures

This is somewhat of an amalgam of both Functional and Divisional Structures. It is made up of teams of personnel from different sectors of the organization brought together for a specific project. These teams are usually not permanent but are project specific. This is a highly effective type of structure in most cases. They are usually led by Project Managers who report directly to the head of the organization.

An important point to be noted here is that some companies, especially very large companies usually employ different types of structures in different departments rather than a single structure throughout.

Organizational Culture

Organizational Culture can be defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization."(Hill and Jones, 2001)

Culture of an organization is not always easy to explain but it can felt or sensed much more distinctly. Simply put, it is the personality of the company.


This type of culture is well defined and stable. It is quite a formal culture which emphasizes on control and authority to keep the organization running smoothly. This type of culture offers security and stability.


This type of culture is similar to Hierarchy Culture in the sense that it also focuses somewhat on security and stability but it is driven results. It is a very competitive environment to work in and there is very high focus on production.


The focus of this type of organizational culture is the employees of the organization. It is a very friendly environment to work in. Loyalty is emphasized and employees are asked to express themselves more openly. There is also a lot of importance given to teamwork.


This type of culture emphasizes thinking outside the box. Employees are given a bit of latitude to experiment and to think differently. Creativity is encouraged and appreciated. The atmosphere is dynamic and roles are not always defined. It is quite different from the rest of the organizational cultures.

Like organizational structures, it is not necessary that one type of culture will be prevalent throughout an organization. Some companies tend to implement different cultures in different sectors. "Pure Control (Hierarchy), Compete (Market), Collaborate (Clan) or Create (Adhocracy) are extremely rare." (Tharp, 2009)

Relationship Between Organizational Structure And Culture And Its Effect On The Business

To reach their goals effectively organizations always need to have a formal structure. This is important to distribute tasks into different groups to ensure that no two people are working on the same project or task so that we get the most output for our input. Because organizations cannot be run without people, this tends to create different informal structures or environments in the organization which leads to different attitudes, perceptions, behaviors and traits with lots different types of aptitudes. So when employees are supposed to work together on a task in the constraints of a formal structure to reach a certain objective there are certain ways to speak and interact, which in effect forms an organizational culture, where it may be created knowingly or unknowingly by the employees. Organizational culture in some way defines the organizational structure of an organization but the structure also partially defines the culture of an organization.

It can also be said that the structure is a framework for the culture to be implemented, while the culture dictates how the company should be structured. So, no matter how big a company, if its culture starts to disintegrate, it is only a matter of time till the structure also follows.

Business performance in a Functional Organization structure can be severely affected by the time it takes for the flow of communication through the different levels of the hierarchy making the organization very slow to adhere to the new technology, the political situations, the economy, cultural changes or social factors and legal issues. It generally has a narrow span of control which may cause restrictrictions in individual expression and power which causes job dissatisfaction and de-motivation. The level of motivation employees possess will affect their output affecting business performance. Employees might not understand the bigger scenario and the significance of their individual work. Employees may have a bad perception towards work or because everything is so clearly defined and communication is limited, this could result in an indiffrent nature and attitude even greater affecting employee relations, affecting motivation, resulting in low business performance.

On the other hand a Divisional Organizational structure has greater flexibility because of low levels of management. This fast attribute to change makes it competitive, able to adjust to customers wants and needs very fast, giving it better performance. Better communication encourages individual through initiative and power to make decisions giving the feeling of self-freedom, causing highly motivated employees, which affects business in a very good way. This is also dependent upon the individual personalities and networking within the organization. If people don't work with each other or have a tendency to percept what others say or do differently it could affect employee relations and output affecting business performance. This is why employees need to be selected who will fit the organizational culture so that there will be excellent work relationships.

Matrix being the newer organizational structure, it is a bit different from the old thinking of the typical boss; it also redefines the idea of hierarchy or individuals use of organizational power to make decisions but that of expertise power of employees. The task culture is reflected in the matrix organization and there is at times no clear leader within each team. These shifts give rise to employees' high job satisfaction because of individual participation and the group identity thus affecting business performance, simply because motivated employees work better.