When Is It Time To Think About Company Structure?

There are several common signs to look out for when a company is not reaching its potential due to a lack of organizational structure.

If you’re questioning whether or not your company structure is operating efficiently, it likely needs to be tweaked. In fact, small businesses rarely get it right without major strategic planning.

That’s not to say that businesses can’t be successful without a clearly defined company structure, but it can be a difficult feat to take on. Changing a company’s organizational structure can be disruptive and downright catastrophic if not handled correctly.

However— it’s also very rewarding. Getting the company structure right can take your business to a level you never thought possible. 

What Is Company Structure?

Company structure, or the organizational structure, refers to a system that outlines how various activities will be handled to achieve the organization’s goals. These activities may include team collaboration, task allocation, and the managerial hierarchy for employee reporting. 

Companies of all sizes need to have a solid organizational structure. The company structure defines each employee’s role and how they can best support the objectives of the business. In simple terms, the company’s organizational structure creates a map of who is responsible for what and which departments should communicate with one another. 

The company structure should be visible to all employees and illustrated in a chart or diagram that clearly depicts the flow of operations. A lot of organizational structures look almost like a pyramid, with the most powerful leaders at the top and entry-level employees at the bottom. 

Why Is Company Structure So Important?

A formal organizational structure eliminates confusion among employees on specific human resources issues. No matter what growth stage your business is in, company structure is essential to maintaining synergy and harmony throughout operations.

A clear company structure guides employees to understand the reporting relationships that best support the workflow of the organization. Once you have guidelines in place, adding new positions into the business makes it even easier to create a flexible and supportive means for growth.

A well-defined organizational structure improves the efficiency of operations by providing clarity to employees and managers at all levels of the company. This allows departments to focus their time and energy on the most productive tasks. 

Common Signs It’s Time To Rethink Your Company Structure

Here is a list of signs it may be time to think about your company structure:

  1. Every day feels chaotic
  2. Departments lack coordination
  3. You recently changed your business strategy
  4. Newly hired leaders are not working out
  5. Your team is focused on the short-term rather than the long-term

Changing a company’s organizational structure is a huge undertaking that you should handle with care. Your employee’s livelihood is on the line, and if the restructure is not handled correctly, it can be a total disaster for the company.

1. Every Day Feels Chaotic

It’s normal for a certain level of chaos in the early stages of a company’s life. It’s almost thrilling at first, but that feeling quickly dwindles as the business grows.

Employees who waste time going in circles will eventually lose motivation out of frustration. Keeping a streamlined order of business allows the big thinkers to dream up even better systems rather than chasing their tail. 

2. Departments Lack Coordination

If each of your departments is performing pretty well, but they don’t communicate effectively with one another, that’s a tell-tale sign it’s time to restructure the company. 

Each department should clearly understand how their role affects the next and maintain open communication in regards to their ongoing stats and goals. Assigning accountability for specific development roles will always produce better results. 

3. You Recently Changed Your Business Strategy

If your company has recently made a directional pivot or added additional services, it may be time to consider the company structure. The bigger the change in company strategy, the more change is needed in the organizational structure. 

People tend to do things the way they always did them so a new product strategy almost always warrants a change in leadership. To fully execute a new strategy, it’s imperative to realign the powers of execution for a fresh perspective. 

4. Newly Hired Leadership Are Not Working Out

If you’ve hired multiple people for leadership positions that didn’t last long, it’s likely a structural issue. High turnover in management spreads negativity down the chain of command, so it’s important to get a handle on it early. 

A bad or toxic environment can infect even the best of workers. If three or more new hires have walked out, take a look at the expectations and accountabilities surrounding their roles. 

5. Your Team is Focused on the Short-term Rather Than the Long-term

If your company has consistently hit every short-term goal you made, but there isn’t much talk about long-term innovations, you may need to restructure the company. 

It’s critical to have one dedicated team or leader focused on expansion so that it’s not influenced by other factors related to short-term demands. If the two are handled too closely, they both will likely fail since they often have competing agendas.

What Are the Main Types of Company Structure?

Different types of organizational structures determine how information flows through different departments within the company. The four most common types of company structure are functional, divisional, futarchy, and matrix.

Functional Structure

Most small to medium-sized businesses operate with a functional structure in place since it’s the easiest to implement.

That means each department is divided based on a specialization, such as sales, marketing, and operations.

Divisional Structure

The divisional or multidivisional (M-Form) structure is a common method in large companies with many business units to separate. 

A company utilizing this organization can structure the leadership team based on products, projects, or geographic locations for global corporations. 

Flatarchy Structure

Flatarchy, or horizontal structure, is a relatively newer and popular method among startups. As the name implies, it flattens the chain of command and gives employees more autonomy in their roles.

This company structure has a high speed of implementation.

Matrix Structure

The matrix structure is the least commonly used because it’s the most confusing. This method overlaps individual employees across multiple superiors or departments.

This means one employee may have customer service and sales duties for a matrixed company. 

What Other Types of Organizational Structure Are There?

There are more types of organizational structures that companies could use to define employee roles and the chain of command.

  • Team-Based: Segregated into small, close-knit teams with their own leader.
  • Circular Structure: A circle of hierarchy with high-level managers at the center and rings expanding outward of lower-level employees and staff. 
  • Network Structure: Structure with a small headquarters that organizes around contractors and third-party vendors. 

What Are the Consequences of Poor Company Structure?

When a company is not structured well, it leads to negative workplace culture and eventually lower retention rates.

If a company lacks organizational structure, it will be a breeding ground for miscommunication, work delays, and reduced productivity.

As employees become increasingly frustrated with their work environment, morale will plummet, and they’ll begin looking for employment elsewhere. All of these issues hurt the company’s bottom line. 


A well-thought-out company structure is imperative for any business to thrive and reach its full potential. Take a hard, honest look at your operations and consider where improvement can be made. 

You may need to reassess your organizational structure several times each year until you get it right. The key is to find what works for your particular business type. 


Deciding Your Organization Structure For 2021 | Forbes

Do You Have a Well-Designed Organization? | Harvard Business Review

What Is an Organizational Structure? | Investopedia

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