Why Is Organizational Structure Important

1. Why Is Organizational Structure Important?
There are a number of factors that differentiate small-business operations from large-
business operations, one of which is the implementation of a formal organizational
structure. Organizational structure is important for any growing company to provide
guidance and clarity on specific human resource issues, such as managerial
authority. Small-business owners should begin thinking about a formal structure
early in the growth stage of their business.
2. Describe the formal and informal structure within an

Organization
Within any organization, there are usually formal structures and informal
structures. Informal structures will often become more important if the formal
structures stop working and the organization does not adjust them.
An organization’s formal structure can be seen in its organizational

chart. Organizational charts show the official flow of work and authority in a
company. They show who reports to whom. They show who has responsibility for
certain areas of work. They show which people.
3. What are the advantages and disadvantages functional and

divisional organizational structures?
Both functional and divisional structures have advantages and disadvantages. In a
divisional structure, the teams are organized in set of divisions, where each division
corresponds to the end product or services provided by the organization. Each
division has its own set of functional units like research, manufacturing, marketing
etc and is completely.
Advantages:
1. Clear Accountability
2. Departmental Coordination
3. Broader skills development:
4. Unstable Environment:
Disadvantages:
1. Resource Duplication:
2. Inhibits career growth of Specialists
3. Divisional Affiliations:
4. Difficult Product Integration
4. What are the advantages and disadvantages of the

Matrix organizational structures
Matrix management was originally designed to address the disadvantages of both
functional and divisional management by creating a flexible system to allow for ad
hoc management structures to be implemented on per project basis. The main
advantage of the system is staffing flexibility. For organizations with projects
requiring specialized skills, matrix management enables creation of project teams
based on needed employee.
Advantages
 Clear articulation of project objectives
 Workable way of integrating project objectives with functional objectives
 Efficient use of limited human resources
 Rapid (often interdisciplinary) information flow through the project
 Retention of expert teams through the life of the project
 Rapid dispersion of team members back into the functional organization
upon project completion without organizational disruption
 Project management trains managers to become leaders in the functional
organization
 Project structures develop team spirit and high morale
 Possibility of conflicts arising during the project carrying over to functional
management
Disadvantages
 Two-boss problems, leaving project members caught in the middle

 Project members playing bosses against one another
 Increases organizational complexity
 Requirement for high degree of cooperation between functional and project
management
 Potential for conflicting management directives
 Difficulty of establishing priorities suiting both functional and project
management
 Possible slowdowns in management reaction to events when two structures
required for solution
 Possible structural collapse in "crunch time"
 Increase in management overhead costs
6. Why is a formal structure and design important to an

organization?
A formal organizational structure is necessary for the management of a bigger
number of people, because it unites different business activities, processes and
people and formalizes their relationships to achieve the common objectives of the
organization. There is no optimal organizational structure. There are only
organizational structures that optimize the deployment of management and staff to
achieve the organization’s goals.
 To facilitate the accomplishment of the goals of the organization: In a formal

organization, the work is delegated to each individual of the organization. He/She
works towards the attainment of definite goals, which are in compliance with the
goals of the organization.
 To facilitate the co-ordination of various activities: The authority, responsibility,
and accountability of individuals in the organization is very well defined. Hence,
facilitating the co-ordination of various activities of the organization very
effectively.
 To aid the establishment of logical authority relationship: The responsibilities of
the individuals in the organization are well defined. They have a definite place in
the organization due to a well-defined hierarchical structure which is inherent in
any formal organization.
 Permit the application of the concept of specialization and division of Labour.
Division of work amongst individuals according to their capabilities helps in
greater specializations and division of work.
 Create more group cohesiveness.
7. Benefits of flat organizational structure
1. The cost structure of a business is improved.
One of the greatest costs to the annual budget for a business is labor. By
eliminating multiple layers of middle management, a flat organizational structure
can quickly save hundreds of thousands, if not millions, of dollars for certain
businesses. Although large companies can struggle to implement this structure
because of the dynamics of size, SMBs who implement a flat organizational
structure effectively can see tremendous savings.
2. It is a structure that improves employee morale.
Without middle management expertise, the flat organizational structure requires
the front-line staff to be experts in their job responsibilities. Because there is a
focus on hiring the best people possible for each position, less turnover typically
occurs. Fewer bosses means fewer conflicts and that makes for happier employees
as well. That improves employee morale.
3. There is less miscommunication.
Because this organizational structure is based on direct contact, there are fewer
opportunities to misinterpret feedback or ideas. Instead of relying on an
intercessory, the C-Suite gathers information directly from the source and this can
limit the amount of miscommunication that can occur at the workplace. At the
same time, the front-line staff receives direct communication from the C-Suite,
allowing each worker to make clear adjustments to their responsibilities when
necessary.
4. There is less dominance in the workplace.
The flat organizational structure naturally increases the levels of independence that
workers experience in their job every day. There are fewer eyes looking over their
shoulders or criticizing their ideas, which allows each worker to focus on what they
do best instead of focusing their efforts to please a supervisor who controls the
feedback that goes into their personnel file.
5. It can improve employee retention.
Highly-skilled workers often struggled in structured hierarchy environments
because their creativity is often limited. In a flat organizational structure, their
creativity is encouraged. For many workers, career satisfaction isn’t just about the
size of the paycheck. It also involves a chance to pursue their passions and this
business structure can make that happen.
8.
Child, John 1972 Organizational structure, environment and performance: The

role of strategic choice. Sociology 6:1-22.

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1. Why Is Organizational Structure Important?

2. Describe the formal and informal structure within an

An organization’s formal structure can be seen in its organizational

3. What are the advantages and disadvantages functional and

4. What are the advantages and disadvantages of the

 Two-boss problems, leaving project members caught in the middle

6. Why is a formal structure and design important to an

 To facilitate the accomplishment of the goals of the organization: In a formal

Child, John 1972 Organizational structure, environment and performance: The

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