Businesses can be very complex organisations with many hundreds or thousands of people working in them in many different roles. In order to manage their resources effectively, businesses must have clear organisational structures in place. Organisational structures include the different relationships between people in an organisation. For example in some cases, an employer might want to have a very formal relationship between people in the organisation in others it might be more relaxed. This happens in every day life too. Think about any organisation you"re a part of. Do you call the other people by their first names? Do you call them by their title? What about the other members themselves? Do they call each other ‘Mrs D", ‘Dr X" or ‘Mr M" or do they refer to each other by their first names? How do they refer to the the person leading the organisation?
Different levels in a business are referred to as hierarchies. A hierarchy occurs where people are given some sort of title or rank that signifies their importance in the organisation. All businesses have employees working at different levels of responsibility. At the bottom, a business depends on its operatives to produce the products or services. Team leaders often perform the day-to-day management role, with operational managers setting direction and strategy for the business as a whole. The number of employees in each level will depend on the business" organisational structure. It is important to determine who takes responsibility for decision making, who reports to who and who to blame when things mess up (or who gets the pat on the back if things go well!)
There are three typical organisational structures. They are known as hierarchical, flat and matrix.
A hierarchical structure is typical in large companies where each level of employee reports upwards and each level has a narrow span of control. The downside of this type of structure is that it can often lead to significantly slower communication and decision making.
A flat organisational structure has much less levels of hierarchy and wider spans of control. This means employees at each level can communicate with managers more easily and quickly. However, this usually means that workers take more responsibility for decision-making. The benefits of this are that it may encourage a more dedicated and motivated workforce. Typically this type of structure is used in small businesses and start-ups. A benefit of this structure is that it allows the business to change rapidly to respond to the market, customers or competitors. However, this only applies if the staff are well trained and are actually capable of making the changes.
Lastly, a matrix structure gathers employees who hold the relevant expertise in order to help the business to meet its goals. The people selected come from different levels and departments within the business. The structure can be used in both hierarchical and flat organisations and are typically used for specific projects. Individual team members may come from different parts of the business, regardless of their usual location in the hierarchy. Obviously once a project is over the matrix will be disbanded.