Which Organizational Structure is Better for Your Business? Jonathan Herrick The key to effective business collaboration isn’t contingent on the type of personalities that your team portrays. It doesn’t depend on what your company does, or what it’s selling. While all those areas may contribute in some way, they aren’t solely responsible for achieving effective collaboration. It may surprise you, but organization is a crucial factor in determining whether or not your business will be able to collaborate effectively. The truth is, the more products and people added to the equation, the harder it is to keep everything together. Therefore, a company looking to grow must develop a configured system early on. Enter: The Organization Chart. What is an Organization Chart? Consider this the roadmap of your company culture. An org chart lays the groundwork for the way a business functions and how roles are maintained. It helps to define three key elements: Chain of command Span of control Centralization These types of systems determine which tasks are delegated and where work is approved. It establishes how proposals, requests, and issues are communicated, and the line of authority to manage them. An org chart will arrange the decision-making process and answer the how, who, and where of daily operations. It guides everyone on accountability and creates the foundation for corporate growth. Not only that, but it also provides your team with a clear outline of who supports who. Types of Org Charts The way a company structures its staff can be departmentalized and mechanic or flexible and organic. Each method has sociological advantages and disadvantages. There are several different types of org charts that fall on the spectrum. It’s essential to know the flow of each before choosing which works best for your business. It’s also important to understand what kind of company you want to be. If you want to create a more autonomous environment, one that is more linear, then your org chart will look very different from that of a company focused on who manages who and who is in charge of what department. Hierarchical Structure This type of organization is known for having a narrow span of control. Also called a mechanical or bureaucratic structure, it is a centralized form of rule that follows more traditional organizational patterns. Below is an example of what this organizational chart might look like: One or two entities ultimately make final decisions. Specific standards and practices are used to govern every aspect of decision-making. A clear chain of command Controlled accountability High level of specialization Coordinated policymaking Centralized decision-making A mechanistic organization chart is based on top-down management. There will always be someone seated at the highest possible spot. The hierarchical structure can be organized based on a variety of positions in a company involving: Function Market Geography Product line Process A bureaucratic org chart is very formal and highly centralized. Although it is an efficient form of management, it can stifle organic growth and deter employee engagement. Other disadvantages include: Limited collaboration between departments Can be a hindrance to creativity and agility Slows the decision-making process Duplication of activities and resources (less communication) Missed opportunities to network It may be hard for a company to keep up with a swiftly changing market if their organization is structured too tight. In this model, teams only collaborate as needed. If your company involves a market that shifts arbitrarily, an organic org chart may work better. Organic (Flat) Structure On the other end of the spectrum is an org chart that is defined through organic positioning. Authority is flexible, and the autonomous environment promotes a free flow of information. Below is an example of what this organizational chart may look like: Benefits to an organic (flat) structure include: More balanced decision-making Increased opportunity to share resources Less hierarchy-related pressure Spurs innovation and productivity Consistent communication and collaboration An org chart with this type of construction is not a tiered pyramid, like hierarchical arrangements. Instead, it can look like a flat structure with limited levels of management. All employees are only a few steps away from leadership. An organic structure yields a decentralized decision-making process where final choices are made within a group or team. This may not work for every business. Especially if you are looking to scale quickly. A company may need a central person to make quick decisions. Other disadvantages to a flat org chart include: A confusing approval process Difficult to identify authority Unclear responsibilities Lack of accountability Hard to settle disagreements If you choose to have a flat organization, best practice is to have a marked tier of management or group of employees. This way, executive decision-making can happen fast when necessary. The Benefits of Organizational Structure Organization charts can be applied to a business of any size in any industry. As a company grows, this type of system helps new employees understand how processes are managed. It defines corporate culture and keeps daily operations running efficiently. An organizational structure will visualize workflows to forecast future business. It enables a company to pivot or shift leadership as the brand evolves. There is no right or wrong way to organize your business. Some establishments may require rigid and centralized foundations, while others flourish with flexible and decentralized environments. Org charts are not set in stone. If one isn’t working, change up the workflows. In the real world, the solution lies somewhere in between. Companies typically choose a hybrid version of a hierarchal and organic chart. Try borrowing elements from different structures. Ultimately, it’s about daily function, brand identity, and employee satisfaction and productivity. No matter the type, a well-defined organizational structure is always critical for business development.