Why You Must Develop an Organisational Structure for Your Business

An illustration of how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational objectives is what is referred to as an organisational structure. It is basically a framework that helps employees do their jobs and achieve their goals. When starting-up, most businesses are run by founders and employees are recruited as the businesses expand. Decisions on recruiting the first employee are usually over-delayed to due to poor cashflows and the fear to actually maintain these employees. As a result, businesses usually tailor expansion of their head-count to the over-demanding task centers which will still have a strong connection to the founder(s). Research has also shown that an appropriate Organizational structure has great strategic significance for an SME’s long-term development, and also plays an important role in resolving problems emerged at the start-up stage.

Good organisational structures support organisations in the following ways and here below we segment them into three major ways;

Strategic support

1.Implementing an appropriate organizational structure empowers an organisation to develop a clear growth agenda and this supports the organisation to better focus on agreed set of objectives rather than erratically shifting from one to another where no one is mandated to do so.

2. It also supports the attainment of organisational goals and objectives. When a strategic focus is developed, the organisation structure allows the organisation to identify who is responsible for what. Such a structure will also spell out details of support that is required at different points to enable accomplishment of these goals and objectives.

General management

From the wide roles of a manager, they can also be segmented into 4 common sub-groups of Planning, Leading, Organising and Controlling. An organisational structure supports managers to execute their core roles in the following ways.

1. Planning

  • Effective planning: – Since the goals are clearly established and resources clearly identified, both short term as well as strategic planning becomes more focused and realistic and such planning contains the provision to permit changes to be made in the right direction including expansion and contraction of facilities, operations and activities when it becomes necessary.
  • Salary scaling: A fair and equitable wage and salary schedule is based upon the premise that the jobs with similar requirements should have similar benefits. If these requirements are clearly established and the yearly increments or the cost of living increments for each type of job are properly and clearly understood, then compensation administration policies are easier to implement

2. Leading

  • Succession: An appropriate organizational structure is better able to prepare qualified employees for management. When the company operates under a strong structure, a comprehensive management training plan is easier to create and execute to help maintain a strong managerial core. Departments can work together on a developmental plan to help encourage the training of managerial candidates within any department.
  • Training: A good organizational structure makes employee training easier to administer, and it also allows it to remain flexible based on the changes within the organisation. When organisational structure regulates the flow of information, then changes within that information are easier to monitor and better adaptable for a company-wide training program.

3. Controlling

This is an important function because it helps to check the errors and to take the corrective action so that deviation from standards are minimized and stated goals of the organization are achieved in a desired manner. An effective organisational structure are able to put in place suitable checks and balances to deter possible ulterior motives that could be detrimental to the business.

4. Organising

This is a management function responsible for a systematic process of structuring, integrating, co-coordinating task goals, and activities to resources in order to attain objectives. An organisational structure allows effective communication (top-down, down-up, teams, geographies etc) which ensures clear coordination within and out of the organisation.

Executing Operations

1. Efficiency and Harmony: An appropriate organisational structure ensures harmony in day-to-day operations as different staff members are sure of their roles and responsibilities and thus, no conflict in activities. Such a situation also enables efficiency as tasks are not duplicated and do not also overlap.

2. Decision Making: An organisational structure can make decision making a more efficient process. When a defined hierarchy is in place, the company is better equipped to make important decisions and adjust practices to meet the requirements of the organisation.

3. Enhances productivity and innovation: When an employee is given sufficient freedom within the domain of his responsibility and his authority, it is a fertile ground to nurture innovation and spur productivity. Since the authority and the extent of exercise of such authority is known, it develops a sense of independence among employees which in turn is highly morale boosting. Because of a sense of belonging and high morale that a well-structured organization develops among employees and also because of clear-cut accountability, recognition of skill and appreciation for their contribution towards organizational growth, the employees develop their own initiative and a spirit of innovation and creativity.

The benefits of an organisational structure can never be underestimated, but it is also true that many small and medium sized enterprises do not have sufficient skills to get into this so-called “non-important” task. In the next article we shall share a detailed guide on how you can develop an appropriate organisational structure for your business.

By Brian Ahabwe Kakuru

Brian Ahabwe KakuruBrian is the Managing Director at BLEGSCOPE®, and has 10+ years of management consultancy experience notably in the finance & banking industry, MSMEs, FMCG companies and in the service industry. You can follow him on twitter >> @BrianAhabweK

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