A company is not a small business operation, and there are several factors that differentiate small business operations from large ones, one of such factors is the use of a formal business structure.
Having a business structure is very important for the company to give clarity and guidance on some certain human resource issues like managerial authority. Though small business operations may not be too bothered with a formal business structure in their early stage, it is very important for large business operations to be bothered and here are reasons why a company needs a business structure for their operations.
For Organizational Purpose
A formal business structure guides all employees in the company by outlining and clarifying the official reporting relationships between employees that govern workflow within the company. The business structure provides a formal layout of the company’s structure, which makes it easier to provide a flexible and ready means for growth for the company as well as to add new positions.
To Increase Operational Efficiency among Employees
Without the business structure, employees in the company may find it very hard to know whom they are to officially report to in different situations. Also, it becomes hard for employees to know who exactly has the final responsibility for what. Since business structure provides clarity to every employee at all organisational levels of the company, it increases their operational efficiency.
By carefully observing the business structure, various sections within the company can work together more seamlessly and focus their energy and time on more productive tasks. More so, a thoroughly lay out business structure provides a roadmap for internal promotions, which enables the company to create a solid advancement tracks for employees.
To Define and Support Organizational Mission
Every company has a mission (reason for doing what it does) and so does the company. The company’s mission lays the foundation for its business structure. Hence, a good business structure supports the mission of the company and makes attempt to meet the various needs of stakeholders.
To Set Organizational Priorities
Well-outlined business structure helps the company to set organisational priorities. Setting priorities helps to communicate what is and what isn’t important. Most companies set their priorities from high too low, with their overall brand image occupying the topmost position. Other companies may set their priorities as regulatory compliance, security, operational efficiencies, growth, sales, and strategic initiatives, etc. Each of these priorities and where each is placed tell a lot about the company. For instance, giving regulatory compliance a top priority might be very important, but far less important to a company that sells garden tools.
To Determine Employees’ Functions
At this point, organizational charts should not be mistaken for business structure. Organizational charts only outline employees and their positions as well as a clear hierarchy of employees i.e. who reports to who. While a business structure is based on a company’s mission, long-term goals, and vision.
Therefore, organizational chart, which determines the employees’ functions, is based on the business structure and an employee’s function within the business structure is based on his or her area of specialization.
Outline the Execution of Priorities and Functions
The business structure also outlines how things are conducted. The business structure, through the help of the organizational chart, tells who does what, and who is responsible to who. Every employee has his or her job titles, and each job title has job descriptions that define roles and responsibilities. Hence, how every employee interacts and functions within the company should be the top priority and also be in support of the company’s mission.
For a large business company like the construction company for example, having a well-planned business structure is very important for running a smooth operation.