Organisational Structures

Organisational structure is important in helping companies to run efficiently and achieve their goals. It does so by defining roles and responsibilities, which helps to allocate resources.

Benefits of Organisational Structure

• Accountability - clear workflows create a culture of responsibility

• Clarity - employees understand their roles and what the business aims to achieve

• Cost control - efficient, centralised structures often provide tighter cost control

• Decision making - managers can make informed decisions in specific areas of expertise

• Efficiency - a clear structure reduces duplication and improves efficiency

• Flexibility - a decentralised structure can allow units to react to local market demands

What is your best organisational structure?

Common Types of Business Structure

Entrepreneurial (a.k.a. simple structure)

An entrepreneurial structure is a simple, informal structure that is often used by small businesses. It is flexible and usually focused around an owner who makes decisions daily.

Advantages	Disadvantages
Quick decision making	Can be informal and chaotic
Supports growth as a goal	Less suitable as the business grows
	Some roles may need to be more clearly defined

Functional structure

In a functional structure employees are grouped based on their skills, for example factory workers, office staff, etc. Each department reports to a manager who allocates tasks and resources.

Advantages	Disadvantages
Allows for specialisation of roles	Slower decision making between departments
Employees work in areas of expertise which increases efficiency	Reduced coordination between departments may create inefficiencies
Clear career path for employees	Interdepartmental rivalries

Divisional structure

A divisional structure divides a company into semi-autonomous units with each division being responsible for its performance. Division are often based on geography, demographics or product lines.

Advantages	Disadvantages
Greater manager accountability	May duplicate management effort and increase overheads
Enables performance comparison and local specialisations	Harder to share best practise across divisions
Fewer levels of management increases efficiency	Difficult to cater to clients who span divisions

Matrix structure

A matrix structure combines functional and divisional structures, focusing on flexibility and collaboration. Team members report to more than one manager.

Advantages	Disadvantages
Greater flexibility and communication	Can increase conflict and confusion when reporting to more than one manager
Reduced risk of interdepartmental rivalries	Slower decision making
Good use of resources across divisions	Harder to evaluate individual employee performance

Shamrock organisation

A shamrock organisation is a more modern structure representing a core staff supported by outsourced services and flexible labour depending upon demand. This structure supports virtual teams and can adapt to seasonal demands.

Advantages	Disadvantages
Greater cost efficiency	Reduced employee loyalty and possible lack of continuity
Increased agility and adaptability	Greater communication challenges
Access to specialised skills when required	Management complexity increases with varying workflows

What Type of Business Organisational Structure is Right For Me?

Your best organisational structure will depend on many factors including: business size, industry, goals, number of employees and approach to management.

For most businesses starting out a functional structure is often the most suitable and the one which employees will often be most familiar with.

Which best describes your business?

• Entrepreneurial (simple)
• Functional
• Divisional
• Matrix

See All Options

Points to note:

Organisational structure may need to be adapted as a business grows and develops.

This document is a simplified helpsheet and careful research should be completed if you are unsure.

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