What are the key contingency factors to consider when making decisions about organizational design?

No matter what industry you’re in or how big (or small) your business is, team structure in the American workplace always seems to follow the same organizational hierarchy: decision-makers at the top and doers at the bottom.

And that structure works for a lot of companies, which is why we’re so used to seeing it. However, this “one size fits all” approach to organizational design isn’t practical or even feasible for everyone. Each business is unique and often demands a more adaptive and flexible approach to organizational structure.

Read on to find out which organizational factors you should consider when deciding the best organizational structure for your company.

Why traditional hierarchy doesn’t work for every organization

In a competitive environment shaped by evolving organizational considerations, more companies are choosing to give their staff the autonomy and support they need to implement fresh solutions, express greater accountability, and achieve lasting results.

For example, managers (and even executives) at startups may find it necessary to provide hands-on assistance with basic work responsibilities or other customer-facing duties. Or when facing tight turnarounds, junior employees may need to rely on their own judgment, delegate tasks, or exercise authority without direct approval from above.

Though job titles and management roles have their place, these instances show that they aren’t always the be-all and end-all of a business. By having a clear understanding of organizational factors of team structure, you’ll be able to create a more optimized organizational structure, empower all employees to work effectively, and add to the bottom line.

What are the factors that influence organizational structure?

There are many different factors that affect organizational structure, so you’ll likely be unable to include all of them in your organizational design strategy. Prioritize the ones that are most relevant to your situation when planning or reexamining your team structure.

Company size and development stage

Does your organizational structure make it possible for all your employees to do their jobs and do them well? And is it optimal for its current scale and growth stage? Smaller companies or new businesses, like startups, often have to operate with an “all hands on deck” mentality where everyone has to wear several different hats. In that case, it doesn’t make sense to have different tiers of managers if there aren’t even enough employees to make up different departments.

As companies grow larger, become more established, and add more specialized roles, adding a hierarchical structure with managers and department heads becomes a help rather than a hindrance––it would be overwhelming and inefficient for a general manager or CEO to have hundreds or even thousands of employees report to him or her directly. Use our organizational structure roles and responsibilities template to better under each member duties.

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Business strategy

The way you position your company should also inform your organizational design. Are you operating in a way that makes that possible? How could your organizational structure and team structure enhance your company objectives? 

For example, software development is an industry where flexibility and speed of innovation is paramount for staying ahead of the competition. Cross-functional teams, like Scrum teams, work well in this industry because of the need for rapid iteration that would be stymied if each department worked individually. For companies offering different products or services, each product or service might require very different strategies and thereby result in distinct subdivisions. 

Location

We live in a global, digital age. Companies across all industries have to consider how they’ll handle employees who work from home, employees in satellite offices or international offices, partners, freelancers, and the many complexities of the 21st-century workplace. These aren’t just logistical questions but important organizational considerations.

The resources that you decide to centralize or keep in house versus the ones that get localized or outsourced will have repercussions. For example, having a single marketing team will mean a very different set up than if each of a company’s locations has its own––will they all work independently or still report to a central manager? How will this affect branding? If there’s only a central team, how will requests be prioritized and managed?

Culture

What do you want your employees to think or feel when they come to work and how can your team structure make that happen? While seemingly intangible, there are a lot of concrete factors that affect a company’s brand––benefits, activities, workspace arrangement, parties, and values, to name a few––which means that you can be purposeful in creating the kind of culture that you want for your employees. 

As we’ve already said, a hierarchy will be a stable, predictable environment for people to work in. However, a flat hierarchy with very little upper management allows for more genuine collaboration, employee-driven problem solving, and creativity. Some companies push this to having no hierarchy whatsoever, like Menlo Innovations or AgBiome, to really stimulate and intensify that collaborative, self-driven spirit in all their employees.

Technology

Advances in technology make it easier than ever to track various metrics, collect and analyze information, and communicate with others. These aren’t just convenient––they change how businesses operate. How can your company use technology to become more efficient and streamline your organizational structure? 

As we previously discussed, there’s the move to more “virtual” workplaces, which lowers costs. Simpler communication and reporting also makes it possible for managers to oversee more workers, possibly shrinking the number of managerial positions. Additionally, performance tracking means that businesses can invest in the right people and positions that will help them grow and expand.

Finding what works is an ongoing process

What factors influence organizational structure vary from company to company. When determining the team structure for your company, it’s okay to look beyond the limitations of the traditional organizational hierarchy. Within the right framework, your employees have the opportunity to realize their own potential—as well as that of your company.

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