Alternative Organizational Structure

ALTERNATIVE ORGANIZATIONAL STRUCTURES

by Bert Markgraf

      The organizational structure of your company is important for determining how your business functions. Traditional organizational structures give you a lot of control.
With alternative structures, you have less control but increased flexibility as you shift the responsibility for tasks down the organization to the levels that are closest to the work. Mixed organizational structures can give you the control you want and the market flexibility your business needs.

HIERARCHY

     A traditional hierarchical organizational structure has centralized decision-making and a rigid structure of controls, authorizations and approvals at the executive level. This structure is efficient because everything is decided centrally and little coordination is necessary. It is suitable for stable business environments and highly regulated businesses where particular outcomes are required. When markets change rapidly, the hierarchically organized business can't adapt quickly because the working level has no authority to make changes. If your business environment is unpredictable, an alternative structure with more flexibility can mean better performance.

DEPARTMENTAL

    Departmental units with centralized decision-making can act more autonomously than in a pure hierarchy. A typical basis for such organization is by function, such as departments for finance, customer service, operations and marketing. Other possibilities include geographical, product-related or market-based departments. Department-centered organizations are more flexible than hierarchies because they make decisions closer to the working level, but upper management must coordinate the work between the departments.

 MATRIX

        A matrix organization combines the advantages of the hierarchy and departmentalized structure. Employees report to a department boss for work-related matters and to a corporate boss for discipline, salary, promotions and company-wide policies. The employees can make work-related decisions with their department manager, quickly responding to customers and the markets. The company keeps the control and coordination functions it needs at the upper management level. Such an organizational structure lets you retain tight control of business outcomes while introducing some ability to react to market changes.

 PROJECT

     A project-based organizational structure places most of the decision-making at the working level. Work is organized around teams that receive specific and time-limited objectives. If you need to introduce a new product, it becomes a project for a team. If sales are below target, a team receives the job of increasing sales to projected levels. The projects making up the company organization exactly reflect what is happening in the company's markets. The projects change as the business requirements change. You have reduced control but a high customer and market focus. This type of organizational structure performs better than other types in a rapidly changing business environment.