How can organizational structure affect the organization's bottom line?
Companies may be structured in different ways, depending on the needs of the business. How a company opts to organise itself is extremely important, as organizational structure has a multifaceted impact on the bottom line of the business: profit.
This becomes clearer if you look at the specific areas affected by the organizational structure: communication, discipline, retention and efficiency.
The way a business is organised affects how those within the company communicate with each other. For instance, if there is a large number of employees, management may provide training in a lecture setting where there are fewer opportunities for questions. In a smaller company, training may be one-on-one. Company structure also dictates to whom you directly report -- that is, it dictates the channels through which communication must flow. Organizational structure also can affect the amount of gossip that spreads.
A company's organizational structure determines which person can discipline another person for any infractions while on the job. It also determines how many people one person oversees. This ultimately affects how quickly discipline is carried out. The faster discipline can be enforced, the faster the company can return to normal business operations.
Structural organisation affects how any given employee may advance, either within his general career or within a specific business. For instance, if a company develops particular teams to handle different types of projects, employees on one team are confined to the same kind of projects, and there is little opportunity for the team members to learn other skills. If employees feel as though they are stagnant in the company and have no room to grow, they may look for greener career pastures and leave the business.
Communication, discipline and retention all relate to one major effect of organizational structure: efficiency. Companies that are organised in ways that promote clear, quick communication and discipline, and which provide room for advancement, often are more efficient because they have less miscommunication, higher morale and more innovation. This increase in efficiency is where the organizational structure's effects become readily apparent as a matter of dollars and cents because increased efficiency usually means more productivity and therefore more revenue and profit.
- Jupiterimages/BananaStock/Getty Images