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Organizational structures: The foundation of a business

Organization structure, the way the business is formed and holds up is one of the most important aspects of entrepreneurship. Almost every decision that is taken, is effected by structure of that organization. The speed of communication, efficiency in relaying information, taking and giving orders are all effected by the type of organizational structure. Of course, not always a business can choose an organizational structure, due to their type of operation, field of expertise, size etc. Today I will discuss only two of the major organizational structures.

Let us discuss a very common organizational structure first, to build an understanding. Being called Bureaucratic organizational structure, it is one of the best structures that supports top down management styles.

In this type of organizational structure, decisions can be made very fast. The reason I called it top-down management is because the CEO from top will give orders down to Managers and further workers. This also means that there is no sharing of power, which you might hear as “Delegation”. Another drawback is that there is no horizontal or diagonal communication. The managers cannot communicate with each other, as a result there is a lack of creative ideas and knowledge. Although this structure is very inflexible, it has a huge plus. It is very easy to understand the position of each person and see how much power each worker has.  This can make it convenient to understand how the business works and how information flows. However, we live in a very diverse world and not being able to come up with creative ideas using intense knowledge of every worker is not a good idea. Besides, the managers can never bring out, for what is called the true potential of workers unless they are delegated some powers, given a say in the business and are allowed to communicate with other workers.

 

To solve this problem, another organizational structure was introduced knows as The matrix structure

Although it is slightly difficult to understand, the Matrix structure has the ability to cut across traditional vertical methods of communication. It allows communication with everyone and the organization can be seen as projects. With sets of teams from different departments working on projects, they are able to come up with solutions that otherwise cause conflicts. E.g. Higher quality leads to higher costs (Leading to arguments between finance manager and production manager). With accumulated skills, operations are carried out much better. However, there are some problems with this structure as well. The communication is never quick or easy. With so many lines between receiver and sender ends, the messages can be changed or otherwise may take too long. The same goes for making decisions, although the decisions can be undeniably better. With many more people having a say in decision making, wiser decisions can be made. As good as it may sound, it leads to another problem, conflicts. Not only is it difficult to understand the power of each person but it also leads to plenty conflicts in making decisions and giving opinions.

The truth is, each organizational structure has its own benefits and drawbacks. We have to form our structure based on many factors, including our vision of the business itself in the near future. It is important to understand completely how a business works before trying to mold it into a certain type of structure. Choosing the right type of organizational structure can lead to long term profits, growth and achievement of objectives.

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About Qudrat Qureshi

Qudrat Qureshi
A Bachelors student at Sungkyunkwan University, South Korea majoring Global Business Administration. Native from Pakistan Qudrat has certain levels of proficiency in 5 languages including Urdu, Hindi, English, German and Korean. He started working as a Freelancer writer for the language services company IGMI Ltd. and within two months continued managing the Customers Service Department and taking part in the company’s Business Development decisions.

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