Organization Design Creating an Effective Organizational Structure

It can be difficult to know where to start when it comes to organization design. There are many different routes that you can take when choosing an effective organizational structure. It is up to you though to decide which one is best for your organization design.

Factors such as your company values, goals, and priorities are key to consider within your organization design. As well as this, you need to understand how you will divide and organize a variety of units within your team. Creating the right organization design is definitely a challenge, but it is rewarding. With an effective approach to your organizational structure, you can navigate your organization successfully into the future.

What is Organization Design?

Organization design refers to how you choose to structure an organization to maximize the efficiency and productivity of your business practices. When choosing an organization design, you need to determine how you can best organize your team while also evaluating the objectives and priorities in place. This requires determining what organizational structure will be best for you.

Here are some of the most common organizational structures:

• Functional Organizational Structure

This organization design involves grouping employees who have similar skills or job functions. For example, you could divide departments into groups such as marketing or financing. This improves how you allocate and utilize resources within your organization. As each grouping plays to its strengths, you may find that there is a lack of understanding and collaboration across functions.

• Product-Based Organizational Structure

A product-based organizational structure uses a product, service, or customer type to divide teams. This allows your employees to focus on product or service innovation. As well as this, it allows your team to have the full resources to deal with any customers for a specific product or service.

• Geographic Organizational Structure

This organization design divides employees using geographic location or region. This organizational structure is useful for organizations that have a range of locations. Communication can prove to be an issue with this organization design, however.

• Matrix Organizational Structure

A matrix organizational structure combines elements of a functional organizational structure and a product-based organizational structure. You may choose this organization design as it means employees need to report to both functional managers and product managers. If effective, you can achieve a healthy balance between specialization and coordination across teams.

Choosing an organization design from these structures takes time and careful consideration. They need to be able to give your team maximum effectiveness and productivity. As well as this, you need to able to deliver customers products and satisfy them. With a proper organization design in place, you can ensure that your team is set up for success.

Key Principles for Building an Effective Organizational Structure

There are several key principles you need to keep in mind when building an effective organizational structure. Here are some of them:

• Flexibility

Adapting to change quickly is crucial for your organization design. If your team can’t react effectively to problems that arise, they will have a hard time staying on track. Having an agile organizational structure where teams are cross-functional can help resolve issues.

• Streamlined Communication

With clear systems in place, communication can be smooth and free across the organization. It fosters collaboration when communication flows between members of your organization. As well as this, decisions can be made quicker which can benefit how fast an organization progresses.

• Balanced Centralization

Centralization to an extent helps to align and control the direction of an organization and its team. Too much control can damage things like innovation and flexibility. This means that it is critical you find the right balance in your organization in terms of centralization to enable both leadership and autonomy.

• Simplicity

It is easy to underestimate the importance of simplicity. Having a logical organization design where you clearly define roles and responsibilities helps keep everyone on the same page. When you implement a complex organizational structure, it fosters confusion and inefficiency among a team.

Which Organizational Structure Can You Choose?

Choosing an organizational design depends on some important factors. Firstly, you need to consider the size of your company. Smaller organizations may choose an organizational structure that is relatively simple and made up of a few layers. As an organization grows, it may find that a more complex hierarchy is necessary for coordinating a team.

If you have a wide variety of functions within your organization, you could consider a more decentralized organization design. This allows different heads of departments to have more autonomy in making their own decisions. For organizations that have more interdependent divisions, you may find that a centralized structure will be of more benefit.

As well as this, if your organization has multiple locations or a global team, a decentralized organizational structure may be the best approach. This allows regional managers to lead their own divisions. When this happens, they can navigate any cultural differences that may occur otherwise.

Overall, the organization design you choose needs to fit your goals and purpose. Find what works for you and your organization by making finding the right organizational structure a priority. If effective, you will put your team on the path to success.