Guide to Organizational Structure

A clear organizational design can maximize your company's efficiency.

By Erin Brereton

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Establishing a strong organizational structure can increase a company's efficiency -- whether it consists of two employees or 200. Organizational structure identifies the positions in an office, determines who manages departments and defines individual job roles. Organizational charts or "org" charts are often used to display the org structure.

Very small companies may have a simple organizational structure, with one manager making decisions. Larger companies may divide the company into groups to distribute responsibility. Putting an effective organizational structure into place can increase productivity, improve operating costs and employee satisfaction. If your business has grown beyond its initial structure or your current organizational design just isn't working, it may be time to rethink the roles your managers, departments and committees play and move toward a better company structure.

Options to develop a company organizational structure include:

1. Design your own simple organizational charts.
2. Allow a human resources department to outline your company's org structure.
3. Use software to help map out an organizational structure.
4. Hire management consultants to determine your organizational design.

Action Steps
The best contacts and resources to help you get it done

Create your own org structure

If your company is very small (for example, five employees or less), a simple organizational structure -- identifying the owner or president and supporting staff roles -- may work. However, you still need to assess your current resources and consider future needs. Who will be in charge when the main decision maker is out of the office? Who will take on new responsibilities as work increases?

I recommend: Check out the free org structure examples from a floral importer, coffee exporter and other types of small businesses in the sample business plans provided at the Business Plan Pro software site. These samples can provide a glimpse at growth needs, management gaps and job definitions. Using the software, you can modify the organizational info to fit your own business.

Empower your HR department to create a company organizational design

If your company is large enough to have a human resource department, consider giving it a large role in determining your organizational design. As the entry and exit point for all employees, HR staff members should be able to assess worker needs and resources.

I recommend: HR professionals may find the basic job descriptions at hrVillage.com helpful when determining tasks to be included in the org structure. Joining the Society for Human Resource Management will also provide your HR team with organizational structure case studies and access to the SHRM's Organizational Development Panel, which reports emerging trends and offers structural advice.

Consider purchasing software to create your organizational charts

Not only can organizational structure software help create org charts to visually show where current staffing needs exist, some versions help track staff changes and can provide quick employee totals. A number of software options exist for creating organizational charts for both small and large companies.

I recommend: EDrawSoft's EDraw Organizational Chart software features user-friendly drawing tools and is designed for small businesses with less than 500 employees. As your company grows, take note that OrgChart, by Office Work Software, comes in three varieties -- Standard, which allows you to create org charts for up to 50 employees; Professional, which works for up to 1,000 employees and Corporate, which allows charting for 15,000 employees. Other organizational structure software, such as org.manager from Ingentis, will link to your company HR system and provide real-time results as employee changes are entered into your HR database.

Hire a consultant to produce an organizational structure

Management consultants can help assess your company's needs and establish a new, more cost-effective organizational structure. Although hiring a consultant is an added expense, many firms will provide a project estimate before starting to help you budget for the service.

I recommend: Firms like PeopleFit keep cost in mind - PeopleFit claims to be able to assess current company organizational structure using less than 10 hours of a manager's time. Organizations like Leadership Strategies, LLC don't have a minimum billing requirement and pay employees per project, not by amount of billable hours.

Tips & Tactics
Helpful advice for making the most of this Guide

If your company has recently grown or its organizational structure is outdated, consider developing and instituting a new organizational design.
Even extremely small companies can benefit from implementing a simple organizational structure after assessing resources and needs.
Organizational charts can help set responsibility and establish a chain of command, improving communication and staff relationships.
Share org charts with your company so that everyone knows which employees are responsible for various functions, who should be contacted for information and how the internal positions relate to each other.

The official source of Organizational Structure is
the Organizational Structure page at Business.com