And do you need to re-evaluate given the state of play today?
When you’re starting up a business, there are a lot of decisions you have to make. You need to decide what your branding should be like, who your target customer base is, how you’ll approach marketing and more.
But some people may not realize you also have to decide on the basics of how you want to structure your business. There’s also a point in time when you may be thinking about permanently changing your approach to a remote workforce or even a hybrid of remote and brick and mortar.
Many of us assume companies have to have a president or CEO to function, but that’s not the only organizational structure.
Read on to learn more about hierarchical and organic structures and the differences between them.
What Is an Organizational Structure?
Before we dive into the differences between hierarchical and organic structures, let’s talk some about what organizational structures are. An organizational structure is an expression of how each person in your company contributes to your business. It describes what they do, whom they report to, and how decisions get made across your business.
Organizational structures can be focused on a variety of different aspects of your business. You may base them on markets, products, functions, or processes, and even within different structure types, your particular structure will be tailored to your business. You may find the same sorts of organizational structures scaled across different sized businesses in a variety of different industries.
What Are Hierarchical Structures?
You may hear a hierarchical structure referred to as a line organization or a mechanistic organization. This is the most common type of organizational structure we see in major corporations today. As the name suggests, this organizational structure follows a strict hierarchy and chain of command.
In a hierarchical structure, the company is overseen by a chief executive officer to whom all other officers and/or vice presidents report. On the next level down from the CEO are the chief operations officer, chief financial officer, director of human affairs, and other executive-level positions. From there, the hierarchy breaks down into mid-level managers, lower-level managers, and then into base-level employees.
Benefits of This Structure
One of the benefits of a hierarchical structure is those company roles are very clear. Every employee knows to whom they report and to whom they need to take problems. If a question needs to be advanced to the next level, there’s a defined structure detailing who has the expertise and authority to answer that question.
Hierarchical structures also provide defined opportunities for advancement in a company. A base-level employee who performs their job well may reasonably expect to be promoted to a lower-level manager. From there, they can work their way up through the organization, perhaps someday reaching the level of an executive officer.
Drawbacks of This Structure
When many of us think of a typical corporate hierarchy, our minds go to miles of red tape, and for good reason. One of the drawbacks of a hierarchical structure is that it can be very inefficient. Rather than simply going to the proper person and asking the question they need to, an employee may have to advance their problem through the chain of command, losing valuable production time.
A hierarchical structure can also create some tricky power dynamics in a company that needs careful management. Poor managers may get carried away with their power and create a company culture that doesn’t follow your business ideals. Lower-level employees may also feel that they aren’t responsible for company success, viewing themselves as unimportant drones in a larger corporate machine.
What Are Organic Structures?
As you might guess from the name, organic structures aren’t as rigidly organized as hierarchical structures. Unlike a hierarchical structure, which has a pyramid-like organization, organic structures are flat. No one person has more power than another; instead, each different sector works together to create a successful business.
In an organic structure, no one person makes authoritative decisions for the entire company. Teams work together to come up with solutions and implement them.
Rather than moving up in a hierarchy, employees shift horizontally to new positions as their role in the company changes.
Benefits of This Structure
Organizational structures are great for businesses that want to focus on building a strong company culture. Because no one person is in charge, every employee feels responsible for the company’s success and empowered to make bold suggestions or raise problems when they come up. Many organic structure companies adopt open floor plans for their offices as a physical way to represent the open communication that exists in these structures.
Organizational structures can also excel at solving problems quickly and in innovative ways. Because the structure is horizontal, not vertical, any employee can go directly to the person they need to get their answer from. They can also brainstorm ways to solve problems with the entire rest of the company, providing more perspectives and freedom to try bold new ideas.
Drawbacks of This Structure
Although organic structures do provide greater opportunities for creative problem solving, they can sometimes sacrifice efficiency to get this flexibility.
When you have one person in charge, making a decision can be a quick process, even if it does take a while to get the problem on the right person’s desk. But in an organic structure, the lack of authoritative leadership can create deadlocks where no one can make a definitive decision for the company.
Organic structures are also not a good fit for people looking for definite advancement opportunities. Because everyone in the company is on equal footing, you never get a promotion, and pay raises can be harder to negotiate.
If you go back to work for a hierarchical structure you may have a harder time getting a position beyond a base-level employee since you don’t technically have management experience.
Find the Right Organizational Structure for You
A business’s organizational structure will define a lot about both company culture and overall function. Hierarchical structures rely on a chain of command and strict organization of labor to operate. Organic structures are a little more free-wheeling and focus on building a strong culture of collaboration and innovation. Both work, you just need to find the right one for you and your goals.
If you’d like help accomplishing your strategic priorities for your business, check out the rest of our site at renataporter.com. We’re a leadership consultancy that can design an engagement to fit your needs. Learn more about our services and start running your business the smart way today.