All great companies start with a vision. At some point, your vision will include an “organizational structure” - the “whos” and “hows” of your company.
What exactly is an organizational structure, and why is it so indispensable to making the best hiring decisions?
Ways You Can Structure Your Organization
Also known as an “org chart,” an organizational structure functions as a map that lays out the relationships between different people and teams, as well as areas of responsibility within your company. In many cases this is a standardized process, which is why hr software is also often used to acommodate it.
Organizational structures are both descriptive and prescriptive: you can map a company’s relationships based on how people and departments actually relate to one another; and you can also draw out the ideal way you’d like your company to be organized.
There are many building blocks to creating an organizational structure, but some common ways of mapping things out include:
Functional Structures. Here departments are formed by the type of work they do - Marketing, Sales, Product, Services. These will often be used by startups and small businesses that don’t have as much complexity when it comes to their products and services.
Product-Division Structures. In this case teams organize around particular product and service groupings, like Hardware, Software, and Consulting. Product structures bring the biggest benefits to companies that have a large selection of offers and are more established - one famous example is Procter & Gamble.
Regional-Division Structures. A company might organize around regions - Provinces, Countries, or even Continents. The key advantage here comes from gaining a deep understanding of the nuances associated with different geographical areas, and proves useful when a company's products and services involve a large legislative component.
Market-Division Structures. In this type of structure, departments are split according to certain audience and client types. In order to do this effectively, a business should be selling to at least 2 large but very different markets - for example a food distributor targeting both consumers and restaurants.
To Centralize or Not to Centralize?
You also have to take into account whether a more centralized or decentralized organization makes for a more effective structure. Centralized organizations consolidate decision-making to a smaller group of executives and are more hierarchical, whereas decentralized organizations are more flat, leaving much of the decision-making to individuals within the specific departmental divisions.
Finally, you can also find unconventional organizational structures, such as Zappo’s Holacracy, which emphasizes individual autonomy and self-organizations.
Why HR Needs a Organizational Vision in Place
Today’s HR professionals are much less practitioners of “Taylorism,” or “scientific management,” and are instead for a much broader set of strategic company goals in building people and culture.
At its most valuable, HR identifies how different systems within an organization come to work together, and how they can do better work.
How “better work” comes to be defined is largely up to the organization. In a traditional business sense, this involves measuring profitability. However, there’s nothing that ultimately throws all other priorities out the window. HR can just as well aim to make the people in the organization more happy. Or more efficient. Or even less bored.
This is where organizational structures come into play. Even if you're a small business or a startup, an organizational structure helps you define the lines of where your people's responsibilities fall, shows you exactly what holes need to be filled, and gives you a clear way of mapping out your team’s direction.
Every organization benefits from a “people roadmap.” Even if the map is made up only of dotted lines, even if they cross over, and even if you're going to color in the corners later.
Exactly How Systems Make You Better at Hiring
Without an organizational structure, your business is bound to face a set of common challenges.
If any of this sounds familiar, you might have an org chart problem:
● People doing the same work twice because too many think it’s their responsibility.
● Work and projects not getting done at all because nobody knows exactly whose responsibility something is.
● Employees getting frustrated due to a lack of direction or in-fighting.
● Ineffective transfer of information throughout the company.
● Lack of delegation and clear authority, meaning every small decisions has to be cleared by upper management.
When you have an organizational structure in place, hiring becomes easier in two ways:
First - identify your biggest needs at a glance.
For example, in some organizations team members will pick up slack in multiple areas of the company. With an org chart you can give them clearly defined roles and areas of responsibility, which creates real visibility into exactly what kind of talent you need to fill various gaps.
Second - know exactly what you need for a culture fit.
Is your organization hierarchical and follows very standardized protocol, or do you expect your team to be more self-sufficient and self-directed? Will your employees work in a function-focused environment, say surrounded by others in a Marketing department, or will they be part of a team that touches every aspect of your operations, like in a product-division?
Ultimately, having a vision of your organizational structure helps you make better decisions, faster. You'll be able to see exactly what kind of talent you need, and assess candidates only on things that truly matter.