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Importance of designing an effective Organisational Structure

Many organisations today are sleepwalking in their journey. Even though they work hard, they don’t feel like they are getting what they want. That’s because they don’t have a direction of where they want to go or what they want to achieve, they don’t have a defined structure. An organisational structure of a company can have a direct impact on its success or failure. In this article, we’ll take a look at why designing an effective organisational structure is so important, and how you can go about doing it.

What is an organisational structure?

An organisational structure is the framework that a company uses to guide operations, prioritise goals, and allocate resources.

There are different types of organisational structure and the type of structure a company chooses should align with its business model and strategy. For example, a start-up that is focused on innovation and agility might choose a flat structure, while a large corporation that prioritises stability and efficiency might choose a hierarchical structure.

Designing an organisational structure is not a one-time event but rather an ongoing process that should be revisited as the company grows and changes.

There are many benefits to having a well-designed organisational structure. A good structure can help an organisation to be more efficient and effective in achieving its goals. It can also help to create clarity and accountability within the organisation, which can lead to better decision-making.

A well-designed organisational structure can also help to foster a positive corporate culture by providing employees with clear expectations and guidelines for their work. Let’s dig more to find its benefits and how it can help to thrive in this ever-changing world.

What are the benefits of having a well-designed organisational structure?

An organisation requires an appropriate structure in order to function properly. When it comes to the performance, growth, and profitability of the firm, a structure is a crucial component. It establishes specific objectives and guarantees that roles are well-defined.

There many benefits of having a well- designed organisational structure

1. Improved communication :

An organisational structure that is well-planned can help to improve communication between different levels and departments within a company. This can lead to a better flow of information and quicker decision-making.

2. Greater efficiency :

Companies can become more efficient as there will be a clear line of authority and responsibility, and everyone knows their role within the company. This can lead to faster turnaround times and better-quality products or services.

3. Increased motivation :

Employees who understand the organisational structure and their place within it are often more motivated to do their best work. They know that their efforts contribute to the overall success of the company, and this can lead to increased job satisfaction and loyalty.

4. Improved planning :

A properly constructed organisational structure can help with planning at both strategic and operational level. Having a clear understanding of the company’s hierarchy, objectives and goals makes it easier to develop plans that are aligned with the overall strategy.

5. Reduced costs :

In many cases, a well-designed organisational structure can help to reduce costs by streamlining processes and improving efficiency. This can free up resources that can be reinvested in other areas of the business.

How to design an organisational structure

Organisational structure is important because it provides a framework for how the company will operate. A well-designed organisational structure can help a company to run more efficiently and effectively, while a poorly designed one can lead to confusion and chaos. There are a few key things to keep in mind when designing an organisational structure.

However, organisation restructuring doesn’t have to be complex and overwhelming. Leverage the industry-wide experience of experts at NamanHR to make it efficient, effective, and tangible.

1. Define the company's goals and objectives

The first step in designing an organisational structure is to clearly define the company’s goals and objectives. What does the company want to achieve? What are its core values? Once you have a good understanding of the company’s goals, you can start to design a structure that will help to achieve them.

2. Consider the different types of organisational structures

There are many different types of organisational structures, and each has its own advantages and disadvantages. It is important to deeply analyse your needs and then identify the structure that suits your organisation’s needs and culture. Some of the most common types of structures are functional, divisional, and matrix.

3. Create a hierarchy of authority

In any organisation, there must be a clear hierarchy of authority so that everyone knows who is in charge of what. This hierarchy will be reflected in the organisational structure. For example, if there is a board of directors, they will be at the top of the hierarchy, followed by the CEO, then the managers, and so on.

4. Assign tasks and responsibilities.

Once you have created a hierarchy of authority, you need to assign tasks and responsibilities to each level. What will each level be responsible for? What authority do they have? Make sure that everyone understands their role and what is expected of them.

5. Implement the organisational structure.

Finally, you need to implement the organisational structure. This means creating any necessary policies and procedures, as well as training employees on how the new structure will work. Once the organisational structure is in place, you should monitor it closely to make sure that it is working as intended.

Implementing the organisation structure isn’t what we all have to worry about. The biggest question which arises now is which organisation structure will be the best to inculcate and how well will it work!

Types of organisational structures

Organisational structures come in different forms, and no single type is perfect for all businesses. The most important thing is to choose a structure that best suits your company’s needs. Below are four common types of organisational structures:

1. Functional Structure

The functional structure is the most common type of organisational structure. In this type of structure, the business is divided into different departments, each responsible for a different function. For example, there might be separate departments for marketing, sales, customer service, accounting, and human resources.

Some companies that have adopted a functional organisational structure are Ikea, Netflix, Apple and many more.

2. Divisional Structure

In a divisional structure, the business is divided into different divisions, each responsible for a different product or service. For example, a company that makes both cars and trucks might have a division for each or a company that sells both to businesses and consumers might have separate divisions for each market.

Some companies that have adopted a division structure are Microsoft, McDonald’s, Nike and many more.

3. Matrix Structure

A matrix structure combines elements of both functional and divisional structures. In this type of organisation, there are both departments and divisions. However, employees report to both their department head and their division head. This can create a more complex reporting structure, but it can also allow for more flexibility and creativity in how work gets done.

Some companies that have adopted a Matrix division structure are Phillips, Caterpillar, Texas Instruments and many more.

4. Flat Structure

A flat structure is one in which there are few or no levels of management. Employees report directly to the CEO or other top executives. This type of organisation is often found in small businesses, where there is less need for hierarchy and more need for direct communication and collaboration.

Some companies that have adopted a flat organisational structure are Google, Amazon, HubSpot and many more.

When an organisation is starting out or is smaller in size, it frequently has a flat organisational structure where everyone answers to the CEO. However, as the organisation grows, this structure must be revised for the organisation’s benefit.

How to create an effective organisational structure

Organisational structure is important for any company or organisation because it provides a framework for how the organisation will function. It outlines the roles and responsibilities of each member of the organisation and how they will interact with each other.

A well-designed organisational structure can help to improve communication and collaboration within the organisation and can also make it easier to achieve goals and objectives.

It is important to design an organisational structure that allows the business to achieve its goals and objectives. The organisational structure should be designed to allow for efficient communication and coordination between different departments. A well-designed organisational structure can help to improve employee morale and motivation, as well as increase productivity levels.

The Naman approach begins with clearly identifying gaps between the current design and the one that will be most suitable to your business model. We identify the value chain and, wherever needed, re-engineer business processes. This alignment is achieved to optimise manpower and other assets while ensuring functional integrity and autonomy.

We test the new norms in a control group, watch their effects, and course correct before implementing across board. To leverage the industry wide experience of our experts, talk to us now!

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