what is organizational structure in business plan

How to Write a Business Plan: Organization Structure

How to write a business plan: organizational structure, what is the organizational structure for a business plan.

The organization structure section should discuss whether your business will be a sole proprietor, limited liability corporation, or corporation, who will run your business, each person’s responsibility, and how your business will expand if needed.  There are numerous benefits to a detailed assessment of the company’s structure.  First, examining the structure of the business will help for tax purposes.  For example, limited liability and corporations are considered excellent for protecting shareholders concerning liabilities.  However, tax-wise, these firms often are double taxed.  The second benefit of a detailed assessment of a company’s structure is to understand how each owner will contribute to the company.  In other words, if there is more than one owner, what are their responsibilities, and how are these responsibilities to be carried out.

Why is the Organizational Structure important? 

There are numerous reasons why the organizational structure is essential for a business plan. In this section, the business owner will lay out how the company will be structured.  For example, this section will include job titles and responsibilities, resumes from owners and management, showing expertise in the industry, and supporting accolades for expertise.  Through discussing job responsibilities and experiences for management, readers will better understand why this type of business structure, and this management team, will be successful in the proposed business.

A second important reason for the organizational structure is that the section introduces business owners.  The owners and management team should not only be introduced in this section, but their experiences in the industry need to be highlighted and thoroughly explained.  In doing this, a sound foundation for management competence will be established.

A final reason for its importance is the job responsibility segment.  Ownership and management need to have a written document showing specific duties for each owner, if applicable, and specific job responsibilities for each position within the company.  By having this document, readers will see how the business will function and better understand the breakup of management responsibilities.

When to write the Organizational Structure?

The organizational structure should be written after the company description.   In the company description, readers will be introduced to the problem that the company is going to solve and how they propose to solve this problem.  This is usually the product or service offered.  The logical next step is to show a business structure that will allow the company to supply that product or service effectively and efficiently.  Thus the need for the organizational section follows immediately behind the company description.

How to write the Organizational Structure?

When I write my organizational structure for a business plan, for the most part, I start the first paragraph by reminding the readers of the company name.  From this, I then introduce how the company will be held in ownership.  For example, will the company be a limited liability corporation?  Sole proprietorship?  Next, I briefly introduce the management team and owners.  Further, I also briefly introduce their experience in the industry.

By following this structure, the first paragraph is an excellent summation of the section. This allows the reader to understand the breadth of the ownership structure without gaining significant details.

Organizational Structure:  Ownership

In the ownership section, I usually start writing the section by introducing the CEO/founder/majority owner.  In this portion, I usually write the segment, almost like a brief biography.  I will discuss the CEO's history in the industry and the reason why they feel that they are best suited to start and run the operation.

Once this is complete, I then follow the same structure with the other management team members and minority stakeholders.  When this is done, the reader should walk away with an excellent understanding of the qualifications of the ownership team and how their skills will complement each other.

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Organizational Structure:  Responsibilities

In the job responsibility section, I usually structure this portion as a bullet-pointed list.  At the top, I put the title such as CEO, project manager, or job title.  Following this, I list the responsibilities and expectations for each position.  Not only does this help show structure and foresight for the company.  But also, this will help management divvy up duties for the business.

Organizational Structure: Resume

The resume section is for senior managers and owners.  By including resumes, supporting documentation is available for claims made related to experience.  For example, if the CEO claims to have 20 years of experience in the industry, then the resume will show where this experience came from.  This adds credibility to previous claims made.

Organizational Structure: Compensation

Compensation is sometimes necessary to include in the organizational structure component.  Investors expect management to be compensated and employees as well.  However, excessive compensation is often an issue with startups and established businesses.  By showing reasonable compensation for each position, not only will a solid understanding of the pay for each position be shown, but restraint for compensation by the management team and ownership may be highlighted as well.

Organizational Structure: Achievements

This final section is almost like a cherry on top of the cake.  By this point, the reader should be well-versed in the experience and expertise of ownership and the management team.  Adding achievements highlights their expertise in their chosen industry.

Organizational Structure Example

Organizational structure.

Legal Structure

ABC Restaurant will be a limited liability corporation.

Management Summary

John Smith, Sr., MBA., is the founder and CEO of ABC Restaurant.  He has started and managed numerous successful small restaurants over the last ten years.  Restaurants started, and managed, including a breakfast cafe, food truck, and 24-hour diner.  For each business, he was responsible for all aspects of the organization, from marketing to strategic planning.

Job Responsibilities

• Create and execute marketing strategies for business growth.
• Align business strategies with the vision statement.
• Negotiating contracts with vendors.
• Ensure legal compliance for the business.
• Continually examine the firm’s external environment for new market opportunities.

General Manager:

• Control inventory to ensure optimal levels are attained.
• Manage day-to-day operations of the restaurant.
• Servers and cooks during high volume times.
• Interview and hire new employees.
• Assist in the onboarding process for new employees.
• Set up all workstations in the kitchen
• Prepare ingredients to use in cooked and non-cooked foods.
• Check food while cooking for appropriate temperatures.
• Ensure great presentation by dressing dishes as trained.
• Keep a sanitized and clean environment in the kitchen area.
• Stock dining area tables with needed items.
• Greet customers when they enter.
• Present dinner menus and help customers with food/beverages selections.
• Take and serve orders quickly and accurately.

Author: Paul Borosky, MBA., Doctoral Candidate, Published Author

Updated: 3/4/2022

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What is organizational structure and why is it important?

Many company organizational structures are pretty linear — or, more accurately, pretty triangular. The traditional “org chart” images of a pyramid depict companies with a few powerful individuals at the top of the company. Under that is a slightly wider level that reports to them. Each subsequent level gets wider and wider, with a large base of entry-level employees at the “bottom.”

However, just because many organizations are structured in this way doesn’t mean that yours should be. Depending on the size of your team and how your workflows are structured, you may benefit from any number of alternative organizational structures. It can also give you some insight into areas of fraction and possible opportunities for development. If your teams are not delivering the outcomes you need, the organizational structure is one possible culprit. Outcomes are the way to assess whether your systems and structures are working as intended. 

Choosing the right structure for your team requires you to think about how your team currently works and where you’re going. Before you draw up that org chart or start proposing new headcount, read on. We’ll dig into the various types of organizational structures, what they are, and ways to implement them.

What is an organizational structure?

An organizational structure is the way that a company, organization, or team is set up. It can be hierarchical, with different levels of management. Or it can be divisional, with different product lines and divisions. Sometimes, there’s little to no hierarchy at all. Every company and team has an organizational structure, even if it’s not formally defined.

An organizational structure defines how job titles, roles, and responsibilities are assigned within a company. It helps determine who reports to whom, and who makes decisions about what.

Startups often have a matrix organizational structure, with different departments working together on projects. Large organizations usually have a hierarchical structure with a clear chain of command. 

Most people only think of organizational structure as it relates to entire companies. But the same structural concepts also apply to how teams get organized within a function, department, or business unit. Organizational structures and restructuring are largely about decision-making authority, information flows, priorities, and allocating resources. 

Each organization is unique (and has unique needs). Even so, each organizational structure will have a few key components in common.

Key elements of an organizational structure

No matter the organization’s size, certain aspects of workplace decision-making and processes need to be clear. Many small businesses handle these designations informally. As a company grows, though, it’s helpful to revisit and clarify these hierarchies (or lack thereof). At the minimum, each organization needs to designate:

Work specialization

Work specializations are less formally known as roles or job descriptions. They outline what a person is responsible for within an organization or on a smaller team. Clear work specializations allow you to make the best use of talent. They make it clear what an individual person’s responsibilities and measures of success are, and help safeguard against a thinning of resources..

Chain of command

If your organization, like many, relies on a mix of people managers and individual contributors , you need to establish a chain of command. This gives people clear direction on who they should reach out to for support. When people from other departments need to check on the status of cross-functional projects, it makes it easy to find out who’s driving them.

Departmentalization and compartmentalization

Compartmentalizing people into departments creates teams of people whose jobs are organized around a specific type of work. A department could be human resources, sales, marketing, or IT. People in these departments often share common skill sets and work together frequently on projects. Each department is typically led by an executive.

Span of control

The number of team members that report to a given manager is formally referred to as “span of control.” If a manager has a large number of direct reports , the team is often subdivided into smaller departments. This happens often at large companies, where multiple people may fill a similar job function.

Centralization and decentralization

Better thought of as “ top-down vs. bottom-up management ,” the terms centralization and decentralization refer to how much influence upper-level leaders have over an organization. Of course, all leaders have power over their organizations. But decentralized management structures tend to have more agile decision making happening at all levels. Employees are empowered to perform their roles and make decisions as they see fit.

Formalization

Formalization determines how much standardizing there is across the organization. It may affect functions, systems, job descriptions, and the flow of information. Organizations with high formalization are often more mature and highly systematized. Done well, this kind of structure should boost innovation, not stifle it.

The importance of organizational structures

Organizational structures are important because they help businesses implement efficient decision-making processes. By assigning specialized roles to lower-level employees, businesses can make better decisions faster. 

Additionally, organizational structures provide a clear org chart that helps businesses keep track of their human resources. When your company is small, it’s hard to imagine that you’d ever lose track of what everyone is doing. After all, in startups and small businesses, it often feels like everyone is doing everything .

As you grow, these silos become more distinct from each other. At that point, an organizational structure helps you identify gaps in skills and support within your business. People’s roles become more specialized and individual teams grow bigger. Revisiting the allocation of work prevents the duplication of effort and reflects business priorities.

Keep in mind, however, that behind these flowcharts are real people. The leaders and employees represented in an organizational chart each work best under different circumstances and with different leadership styles. If you don’t keep them included in the what and why of your organizational shifts, they’re more likely to resist changes when they occur.

Since change is inevitable, it’s a good idea to communicate early and often as things shift. Strive for as much transparency in the workplace as possible. And if you do make changes in your organization, make time to check in with the people being affected. You can try to minimize the impact to them and help create a transition plan if need be.

Types of organizational structures

There are several different types of organizational structures, each with its own advantages and disadvantages. The most common are functional , divisional , matrix , project team , flat , and network .

Functional organizational structures are best for small businesses because they allow for clear decision-making hierarchies. Each team operates as an individual “silo.” Once teams grow, they benefit from making these functional structures less rigid. Teams often move faster and collaborate better with more overlap.

Divisional structures are best for large businesses because they allow for more specialization. For example, a global company might divide their business into regions (such as EMEA/APAC), or broad service categories (like B2B/D2C).

In the matrix structure , employees work in both functional and project teams which may be structured differently. Employees then typically report to two bosses: one who oversees their day-to-day work, as well as another boss that oversees larger projects or tasks.

A project team approach would include any number of functions working together on a specific project without a permanent hierarchy. Employees report up through their individual bosses. But they also contribute to team efforts led by managers from other departments on the team as needed.

Flat organizations have as little hierarchical structure as possible. Middle managers are largely absent from staff. Instead, the workforce often reports directly to managers or leaders at the “highest” level. Highly-autonomous employees often thrive in these environments. The lack of hierarchy motivates people to make decisions, take ownership, and facilitates problem-solving.

In a network structure , individual freelancers, groups, or associations work together. They each work as separate functional teams, but may share an overarching entity. Professional associations often have this type of structure.

Choosing the best organizational structure for your company

When it comes to organizational structures, there is no one-size-fits-all solution. The best way to choose an organizational structure for your company is to first assess your business needs and goals. From there, you can match those needs with one of the common organizational structures. 

Although there isn’t a “right” answer, some organization structures are a better fit for your team than others. And while we normally advocate for trying several solutions until you find what works, that doesn’t work as well with organizational development . 

Company reorganizations (especially repeated ones) tend to destroy employee morale . Even when handled well, reorgs create uncertainty and stress on employees. Since they’re often a precursor to layoffs, people tend to fear losing their jobs — even when the changes are generally positive. And if there’s a pattern of other major changes rapidly coming down the line? That’s a recipe for cynicism and workplace burnout .

When deciding on an organizational structure, it’s important to keep these four factors in mind:

The structure you choose will depend on the type of company you run. For example, companies that rely on a number of front-line employees are structured a lot differently than nonprofit organizations. Each will have a different organizational chart based on what they do and where they need to prioritize their efforts. 

To build an effective organization , you need to know which team members are there to facilitate the work of the people in the field and which employees support the leaders. For example, C-suite executives often have a team dedicated to supporting their efforts. But the customer service team exists to support the end user. Some roles, like marketing or product development, sit squarely in the middle. Your allocation of resources needs to reflect a balance between these two sets of needs.

Company size is critical to consider when determining a formal organizational structure. Smaller companies often have a high deree of overlap in roles. They have less formalized structures. This lack of standardization can present some challenges, but it frees teams to grow rapidly. 

On the other hand, larger organizations tend to grow faster with a more centralized, formal structure. Why? It makes it easier for people to know where to find information, who to talk to in order to get things done, and avoid duplicating efforts needlessly. The challenges and unique strengths of each differently sized organization help inform the best type of arrangement.

3. Stage 

In order to create standardized systems, there (usually) needs to be something to systematize. It’s pretty hard — or deceptively easy — to develop systems for a business that has no clients, no services, and no employees.

In the early stages, not only do small companies benefit from a less formalized structure — they don’t need one. Once workflows emerge, patterns arise, and problems occur, they can reflect those learnings as a formal process. The need for reporting relationships and divisional structure arises as the need for systems does.

4. Systems 

Organizations at every stage — even with just one person — tend to organize their work by function. There’s accounting, marketing, and service right from day one. When this work is handled by a single person, there’s no need to articulate systems. More people means more need to define how, when, and why teamwork happens. 

Both the existing and desired systems play a role in organization structure. If you need or want faster collaboration and communication across teams, you’ll want to design a “flatter” structure. If leaders need to be removed from day-to-day activities, it will help to have a structure that delegates authority and accountability to others .

Building a healthy organization means more than just functioning well — although that is important. It means creating plans to support your employees and the workplace in their growth. Giving some thought to the types of authority that currently exist can help you choose the right organizational structure. But knowing where you want to go and the outcomes you want to achieve in the future will help you get there.

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What Is an Organizational Structure?

• Understanding Structure
• Centralized vs. Decentralized
• Types of Structures

The Bottom Line

Organizational structure for companies with examples and benefits.

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

Investopedia / Julie Bang

An organizational structure is a system that outlines how certain activities are directed to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.

The organizational structure also determines how information flows between levels within the company. Decisions flow from the top down in a centralized structure. Decision-making power is distributed among various levels of the organization in a decentralized structure. Having an organizational structure in place allows companies to remain efficient and focused.

Key Takeaways

• An organizational structure outlines how certain activities are directed to achieve the goals of an organization.
• Successful organizational structures define each employee's job and how it fits within the overall system.
• A centralized structure has a defined chain of command. Decentralized structures give almost every employee a high level of personal agency.
• Types of organizational structures include functional, divisional, flatarchy, and matrix structures.
• Senior leaders should consider a variety of factors including the business's goals, industry, and culture before deciding which type of organization is best for their businesses.

Understanding an Organizational Structure

Businesses of all shapes and sizes heavily use organizational structures. They define a specific hierarchy within an organization. A successful organizational structure defines each employee's job and how it fits within the overall system. The organizational structure lays out who does what so the company can meet its objectives.

This structuring provides a company with a visual representation of how it's shaped and how it can best move forward in achieving its goals. Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid where the most powerful members of the organization sit at the top and those with the least amount of power are at the bottom.

Not having a formal structure in place can prove difficult for certain organizations. Employees may have difficulty knowing to whom they should report. That can lead to uncertainty as to who is responsible for what in the organization.

Having a structure in place can help with efficiency and provide clarity for everyone at every level. An effective organizational structure should result in each department within the organization becoming more focused and productive.

Centralized vs. Decentralized Organizational Structures

An organizational structure is either centralized or decentralized. Organizations have traditionally been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure with a long and specific hierarchy of superiors and subordinates. There are very clear responsibilities for each role in a centralized organizational system with subordinate roles defaulting to the guidance of their superiors.

More people play a role in decision-making with a decentralized organizational structure, Mid- and lower-level managers as well as regular employees have more of a say in what goes on and can help call the shots.

There's been a rise in decentralized organizations. This approach is popular among many technology startups and is viewed as enabling them to remain fast, agile, and adaptable with everyone able to throw ideas around.

Johnson & Johnson is renowned for its decentralized structure. As a large company with many business units and brands that function in sometimes very different industries, each operates autonomously. Another well-known company that gives employees a high level of personal agency is Spotify.

Decentralized structures are becoming more common and are popular among tech startups.

Built-in hierarchies usually still exist in decentralized companies such as the chief operating officer operating at a higher level than an entry-level associate. Teams are empowered to make their own decisions and come to the best conclusion without necessarily getting "approval" from up top, however.

Types of Organizational Structures

Four types of common organizational structures are typically implemented.

Functional Structure

The first and most common is a functional structure. It's also referred to as a bureaucratic organizational structure . It breaks up a company based on the specialization of its workforce.

Most small-to-medium-sized businesses implement a functional structure. Dividing the firm into departments consisting of marketing, sales, and operations uses a bureaucratic organizational structure.

Divisional or Multidivisional Structure

This type is common among large companies with many business units. It's called the divisional or multidivisional (M-Form) structure.

A company that uses this method structures its leadership team based on the products, projects, or subsidiaries it operates. Johnson & Johnson is a good example of this structure. The company has thousands of products and lines of business. It structures itself so each business unit operates as its own company with its own president.

Divisions may also be designated geographically in addition to specialization. A global corporation might have a North American Division and a European Division.

Team-Based Structure

Team-based organizations segregate into close-knit teams of employees that serve particular goals and functions, similar to divisional or functional structures. Each team is a unit that contains both leaders and workers, however.

Flat (Flatarchy) Structure

Flatarchy, also known as a horizontal structure, is used among many startups. It flattens the hierarchy and chain of command as the name implies. It gives its employees a great deal of autonomy. Companies that use this type of structure have a high speed of implementation.

Matrix Structure

Firms can also have a matrix structure. This is the most confusing and the least used. It matrixes employees across different superiors, divisions, or departments. An employee working for a matrixed company may have duties in both sales and customer service .

Circular Structure

Circular structures are hierarchical but they're said to be circular because they place higher-level employees and managers at the center of the organization with concentric rings expanding outward. They contain lower-level employees and staff. Organizing this way is intended to encourage open communication and collaboration among the ranks.

Network Structure

The network structure organizes contractors and third-party vendors to carry out certain key functions. It features a relatively small headquarters with geographically dispersed satellite offices along with key functions outsourced to other firms and consultants.

Benefits of Organizational Structures

Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company's hierarchy but it allows the firm to lay out the pay structure for its employees. The firm can decide salary grades and ranges for each position by putting the organizational structure in place.

The structure also makes operations more efficient and much more effective. The company can seamlessly perform different operations at once by separating employees and functions into separate departments.

A very clear organizational structure also informs employees on how best to get their jobs done. Employees will have to work harder at buying favors or courting those with decision-making power in a hierarchical organization.

Employees must take on more initiative and bring creative problem-solving to the table in a decentralized organization. This can also help set expectations for how employees can track their growth within a company and emphasize a certain set of skills. It can help potential employees gauge whether such a company would be a good fit with their interests and work styles.

What Are Some Types of Organizational Structures?

Organizational structures take on many forms. Examples include functional, multi-divisional, flat, and matrix structures as well as circular, team-based, and network structures.

What Are the Key Elements of an Organizational Structure?

Key elements of an organizational structure include how certain activities are directed to achieve the goals of an organization. They include rules, roles, responsibilities, and how information flows between levels within the company.

What Is an Organizational Structure Example?

A decentralized structure is an example of an organizational structure. It gives individuals and teams high degrees of autonomy without requiring a core team to regularly approve business decisions. Spotify with its "squads," "tribes," and "guilds" and Google with its independent companies are loosely run this way,

What Is an Organizational Structure Chart?

Organizational structures are normally illustrated in some sort of chart or diagram. A pyramid could be used in a centralized structure with the most powerful members of the organization sitting at the top and the least powerful at the bottom.

What Is the Best Organizational Structure?

There's no one best organizational structure. It depends on the nature of the company and the industry in which it operates.

Entire fields of study are based on how to optimize and best structure organizations to be the most effective and productive. Senior leaders should consider a variety of factors before deciding which type of organization is best for their business , including the business's goals, industry, and culture.

Johnson & Johnson. " Our Heritage ."

The Wharton School of the University of Pennsylvania. " Johnson & Johnson CEO William Weldon: Leadership in a Decentralized Company ."

Johnson & Johnson. " Our Leadership Team ."

Medium. " Unlocking the Spotify Model: Why your Guild is Failing ."

USU. " The Spotify Model: Magic Bullet or Overrated? "

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Business Plan Organization and Management: How to Write Guide .

Sep 17, 2023 | Business Consulting , Business Plan , Organization and Management , Organizational Development , Strategy

Writing the Business Plan Organization and Management Section

It provides critical information for those looking for evidence that your staff has the necessary experience, skills, and pedigree to realize the objectives detailed in the rest of your business plan.

What Is the Organization and Management Section in a Business Plan?

The organization and management section of your business plan should provide details about your business structure and team. This section typically comes after the executive summary. However, some people have it further in the document after the market analysis section.

This section generally is separated into two parts. The first concerns the organization as a whole. It gives readers an overview of the company structure, which is an excellent opportunity for the reader to lift the roof off your office and peer into its inner workings. For your legal design, you may set up as a limited liability company (LLC) or nonprofit/ charity or form a partnership. It’s crucial to include this section. However, suppose you’re starting a home business or have an already operating business where you’re the only person involved. In that case, you can skip this section or show the company registration details from either the company’s house or the awarding .gov.

The second part focuses specifically on your management team and introduces readers to each member — your chance to impress them with the many accomplishments pinned to your organization’s management team.

This section may seem less important than some of the other parts of your business plan, but the truth is that your people are your business. If they’re highly competent and accomplished, the implication is that so is your business.

Of course, if you’re a sole proprietor with no management structure or any employees, this section is unnecessary other than to talk about yourself and your achievements.

The section on organization and management should outline the hierarchy, individual roles, and corresponding responsibilities. It should also highlight each person’s strengths and qualifications for their positions.

Business Plan Organization Section

The organizational section of your business plan outlines the hierarchy of individuals involved in your business, typically in a chart format. This section identifies the President or CEO, CFO, Director of Marketing, and other roles for partnerships or multi-member LLCs. If you’re a single-person home business, this section is straightforward as you are the only person on the chart.

Although this section primarily focuses on owner members, you can include outsourced workers or virtual assistants if you plan to hire them. For example, you may have a freelance web admin, marketing assistant, or copywriter. You may even have a virtual assistant who coordinates with your other freelancers. While these individuals are not owners, they hold significant responsibilities in your business.

There are various business structures, such as sole proprietorships, partnerships, LLCs, and corporations.

Detail the Legal Structure within the Business Plan Organization and Management Section

Here is an indicative list of business structures. It would help if you talked to your accountant and legal advisors to determine which legal form is the best for your business proposition.

Sole Proprietorship

When embarking on a business venture, it’s essential to consider the various structures available. A sole proprietorship is a structure whereby the business is not regarded as separate from its owner’s finances. The owner retains complete control and responsibility for the company. However, they are unable to sell stocks or bring in new owners. The business becomes a sole proprietorship if not registered under any other structure.

Partnership

When forming a partnership, it can either be a limited partnership (LP) or a limited liability partnership (LLP). One partner assumes most liability in a limited partnership (LP). In contrast, the other partners have limited liability and control over the business. Alternatively, in a limited liability partnership (LLP), all partners have limited liability from debts and actions of other partners, and there is no general partner.

Limited Liability Company

A limited company (LTD) or limited liability company (LLC) is a mixture of business structures that mixes aspects of partnerships and corporations. It offers limited personal liability to the owner and passes profits through to their tax returns.

Corporation

There are various types of corporate structures. A C-corporation enables the issuance of stock shares, pays corporate taxes instead of personal returns, and provides the highest level of personal protection from business activities. On the other hand, nonprofit corporations are similar to C corporations. However, they do not aim to make profits and are exempt from state or federal income taxes.

More information on company legal structures is available on UK.Gov and USA.SBA websites.

Describe Your Company’s Organizational Structure

This first step illustrates the positions in your organization’s employee hierarchy and how they all relate to each other.

This is usually done graphically as a guide, using an organizational chart, or “org chart” for short. People use a Microsoft tool, i.e., PowerPoint or Excel, to help.

Organization Charts typically follow a top-down hierarchy, starting with your CEO/ Managing Director in the top box at the top of the page. Lines extend down from that person’s name to boxes containing the terms of the CEO’s direct reports.

We have included an example organizational chart below for guidelines only.

Identify your business organization structure and list your team members’ strengths and skills.

Those managers then have lines extending to those who report to them, and so on, down to your lowest staff positions.

This section will give your readers a quick understanding of your management and governance structure, the size of your organization, and your lines of control and communication.

Describe your Team in your Business Plan Organization and Management Section

In your business plan’s Organization and Management section, please provide a detailed description of your team. Y ou will discuss the company’s management team, starting with the owners.

This section highlights who is involved in the running of your business and who are the support professionals. It also includes the roles and responsibilities of managers.

Suppose the company structure is a multi-owner arrangement or some other multi-owner arrangement. In that case, you’ll want to include information for every member and their percentage of ownership and ongoing involvement in the company.

It’s important to discuss how ownership interests are split, their responsibilities, what they did before securing their current position, and how they came to be involved with the company.

Here, it would help if you talked about some of your critical team members. These people are directly responsible for large portions of your business operations.

Owner/Manager/Members

Within your business o rganization and management section, y ou should introduce the team and talk about their experience, qualifications, previous companies and achievements, role in the company, and any special skills they bring with them. Please provide the following details for each owner, manager, or member of the business within your business plan:

• Percentage of ownership (if applicable)
• Level of involvement (active or silent partner)
• Type of ownership (e.g., stock options, general partner)
• Position in the company (CEO, CFO, etc.)
• Responsibilities and Duties
• Educational background
• Relevant experience and skills
• Previous employment history
• Skills that will benefit the business
• Awards or recognition received
• Compensation structure
• How each individual’s skills and experience will complement and contribute to the business’s success

Perhaps they’re an entrepreneur, business coach, exclusive advisor, or industry specialist to help you grow.

This is an ideal opportunity for companies with an Executive Board of Directors, Governance Structure, or Advisory Board to introduce them to your readers.

Executive Board

Having a board of directors is essential for your management team. Without one, you may be missing out on crucial information. This section includes details similar to those found in the ownership and management team sub-section, such as the names, areas of expertise, positions (if applicable), and involvement with the company of each board member.

Strategic Advisors

Suppose you’re looking for funding for your business or to fill a gap in your knowledge, or you may not have the funds to hire an executive board. In that case, you must inform potential partners and investors that you have a team of professionals assisting you. This includes lawyers, accountants, and any freelancers or contractors you may be working with. When listing these individuals, include their name, title, educational background, certifications, services they provide to your business, and their relationship with you (i.e., hourly rates, projects, retainer, as-needed, regular). Additionally, highlight their skills and experience that make them an asset to your team you need

Does anything else make them stand out as quality professionals (awards, past working with credible brands)?

Spotlight on the Wider Team Structure

Now, you’ve showcased the management team in its entirety. You can provide brief bios for hiring team needs or secondary members and talk at length about how the team’s combined skills complement each other and how they amplify the team’s effectiveness.

It’s also important to point out any gaps in the knowledge your team is currently suffering. Your readers will likely be savvy enough to pick up on existing holes.

Therefore, you’ll want to get ahead of these criticisms and demonstrate that you’re already aware of the positions and complementary skill sets your management team still requires and how you plan to address the knowledge gaps with future hires.

Do you need help writing your business plan o rganization and management section ? 

Every successful business plan should include the organization and management section, helping you communicate your legal structure and team.

Writing a business plan can seem overwhelming, especially when starting a small, one-person business. However, it can be a reasonably simple task. This section of the plan should be updated if there are any changes to the organization structure or team members, such as additional training, awards, or other resume changes that benefit the business.

Creating your comprehensive business plan takes planning, research, time, and a herculean effort. If, at any point, the work becomes too much to handle, we can step in to assist.

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Business Plan Section 3: Organization and Management

This section explains how your business runs and who’s on your team. Learn how to present the information in this section of your business plan.

This section of your business plan, Organization and Management, is where you’ll explain exactly how you’re set up to make your ideas happen, plus you’ll introduce the players on your team.

As always, remember your audience. If this is a plan for your internal use, you can be a little more general than if you’ll be presenting it to a potential lender or investor. No matter what its purpose, you’ll want to break the organization and management section into two segments: one describing the way you’ve set up the company to run (its organizational structure), and the other introducing the people involved (its management).

Business Organization

Having a solid plan for how your business will run is a key component of its smooth and successful operation. Of course, you need to surround yourself with good people, but you have to set things up to enable them to work well with each other and on their own.

It’s important to define the positions in the company, which job is responsible for what, and to whom everyone will report. Over time, the structure may grow and change and you can certainly keep tweaking it as you go along, but you need to have an initial plan.

If you’re applying for funding to start a business or expand one, you may not even have employees to fit all the roles in the organization. However, you can still list them in your plan for how the company will ideally operate once you have the ability to do so.

Obviously, for small businesses, the organization will be far more streamlined and less complicated than it is for larger ones, but your business plan still needs to demonstrate an understanding of how you’ll handle the workflow. At the very least, you’ll need to touch on sales and marketing, administration, and the production and distribution of your product or the execution of your service.

For larger companies, an organizational plan with well-thought-out procedures is even more important. This is the best way to make sure you’re not wasting time duplicating efforts or dealing with internal confusion about responsibilities. A smooth-running operation runs far more efficiently and cost-effectively than one flying by the seat of its pants, and this section of your business plan will be another indication that you know what you’re doing. A large company is also likely to need additional operational categories such as human resources and possibly research and development.

One way to explain your organizational structure in the business plan is graphically. A simple diagram or flowchart can easily demonstrate levels of management and the positions within them, clearly illustrating who reports to whom, and how different divisions of the company (such as sales and marketing) relate to each other.

Here is where you can also talk about the other levels of employees in your company. Your lower-level staff will carry out the day-to-day work, so it’s important to recognize the types of people you’ll need, how many, what their qualifications should be, where you’ll find them, and what they’ll cost.

If the business will use outside consultants, freelancers, or independent contractors, mention it here as well. And talk about positions you’d want to add in the future if you’re successful enough to expand.

Business Management

Now that we understand the structure of your business, we need to meet the people who’ll be running it. Who does what, and why are they onboard? This section is important even for a single practitioner or sole proprietorship, as it will introduce you and your qualifications to the readers of your plan.

Start at the top with the legal structure and ownership of the business. If you are incorporated, say so, and detail whether you are a C or S corporation. If you haven’t yet incorporated, make sure to discuss this with your attorney and tax advisor to figure out which way to go. Whether you’re in a partnership or are a sole owner, this is where to mention it.

List the names of the owners of the business, what percent of the company each of them owns, the form of ownership (common or preferred stock, general or limited partner), and what kind of involvement they’ll have with day-to-day operations; for example, if they’re an active or silent partner.

Here’s where you’ll list the names and profiles of your management team, along with what their responsibilities are. Especially if you’re looking for funding, make sure to highlight the proven track record of these key employees. Lenders and investors will be keenly interested in their previous successes, particularly in how they relate to this current venture.

Include each person’s name and position, along with a short description of what the individual’s main duties will be. Detail his or her education, and any unique skills or experience, especially if they’re relevant to the job at hand. Mention previous employment and any industry awards or recognition related to it, along with involvement with charities or other non-profit organizations.

Think of this section as a resume-in-a-nutshell, recapping the highlights and achievements of the people you’ve chosen to surround yourself with. Actual detailed resumes for you and your management team should go in the plan’s appendix, and you can cross-reference them here. You want your readers to feel like your top staff complements you and supplements your own particular skill set. You also want readers to understand why these people are so qualified to help make your business a success.

This section will spell out the compensation for management team members, such as salary, benefits, and any profit-sharing you might be offering. If any of the team will be under contract or bound by non-compete agreements, you would mention that here, as well.

If your company will have a Board of Directors, its members also need to be listed in the business plan. Introduce each person by name and the position they’ll hold on the board. Talk about how each might be involved with the business (in addition to board meetings.

Similar to what you did for your management team, give each member’s background information, including education, experience, special skills, etc., along with any contributions they may already have had to the success of the business. Include the full resumes for your board members in the appendix.

Alternately, if you don’t have a Board of Directors, include information about an Advisory Board you’ve put together, or a panel of experts you’ve convened to help you along the way. Having either of these, by the way, is something your company might want to consider whether or not you’re putting together the organization and management section or your business plan.

NEXT ARTICLE > Business Plan Section 4: Products and Services

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Blog Graphs and Charts Organizational Structure: What is it, Types, Tips & Examples

Organizational Structure: What is it, Types, Tips & Examples

Written by: Joan Ang Jul 05, 2023

Every company, whether large or small, needs an organizational structure that defines how it operates.

And if you know a thing or two about company structures, I’m sure you’ve heard about functional, divisional, matrix, and flat organizational design (and if you haven’t, I’ll teach you very soon!).

Each org structure type has its pros and cons, so it’s important to choose the right one for success.

In this post, I’ll walk you through the different types of organizational structures, help you figure out the best one for your business, and show you how to build an organizational structure.

If you’re worried about your design skills, don’t stress. With our Organizational Chart Maker , you can create org structures without hassle.

Another option is to customize our organizational chart templates for beautiful structures in minutes.

Click to jump ahead:

• What is an organizational structure?

6 key elements of organizational structure

7 types of organizational structures, which organizational structure is best for what type of business.

• 5 tips for implementing an organizational structure

How to create an organizational structure with Venngage

Which organizational structure is right for you, what is organizational structure.

An organizational structure is a system of rules and relationships that govern how an organization is run.

An organizational structure defines how a company operates.

Since different divisions in a company have specific roles, an organizational structure helps determine how decision-making is distributed, how work gets done, and how information flows. 

Here’s an example of an organizational chart:

Moreover, studying organizational behavior is also critical.

At its basic level, an organizational structure examines the impact of social and environmental factors on how individuals or groups work. 

A well-designed and successful organizational structure outlines how people interact, communicate, and collaborate.

They help companies run smoothly and efficiently, as you can see from this internal structure chart.

There are many different types of organizational structures, which are guided by certain behavior, and each has its own advantages and disadvantages. 

But they all have the same goal: to help the company run like clockwork. What the best organizational structure is for your own company will depend on its unique needs and circumstances.

Why is an organizational structure important?

An organizational structure is important because they define how responsibilities are divided, and coordinated.

If an organizational chart  is not drawn correctly, the entire system will fail.

For example, the organizational structure of government agencies, business units, or private companies always has a well-defined chain of command and operating procedures.

Whether it’s the public or private sector, an administrative structure based on policies, rules, and hierarchy is necessary.

The organizational structure is also critical when it comes to growth.

Employees are more likely to perform better when a system is in place. The structure helps define who is responsible for what and who the employees can turn to for help. 

An org chart helps everyone understand their role in the business as can be seen in this example.

According to  Organizational Behaviour (Bobbins, Judge, & Campbell, 2012), the six key elements to an org structure are:

• Work specialization

Departmentalization

Chain of command, span of control, centralization, formalization, work specialization or division of labor.

Work specialization refers to how operations are divided into separate roles.

Work specialization not only increases production efficiency and production, but it also increases boredom, weariness, and stress. This can lead to low output, poor quality, increased absenteeism, and high turnover.

Hence, this tendency towards specialization has shifted as people realize broadening the scope of tasks can increase productivity.

Departmentalization refers to the process by which jobs are grouped together.

This can be done by function, product, geography, process, or customer.

Functional departmentalization divides tasks into categories based on their functions, such as engineering, accounting, or human resources. There are  project management software for accountants  that you can invest in which can help streamline communication between these different departments.

The chain of command is the line of authority that runs from the top to the bottom, defining who reports to whom.

The right of a boss to issue orders and expect them to be followed is referred to as authority.

The span of control refers to the number of employees that can be managed by one manager.

A narrow span of control fosters a more intimate and hands-on work environment as a manager only controls a small number of employees.

But a wide span of control puts numerous employees under one manager, assuming that daily tasks and processes are clearly defined.

The optimal control span will vary depending on the situation.

Centralization refers to decision-making concentrated in a single place in the organization.

Top management makes crucial decisions in a centralized structure with little or no involvement from lower-level employees.

A decentralized structure, on the other hand, allows lower-level employees to provide input or even make choices.

Formalization aids the creation of processes, relationships, and operational procedures which outlines procedures, rules, and duties for individual employees, units, groups, teams, and the company as a whole.

When it comes to the types of organizational structure , businesses are spoiled for choice.

Here’s an overview of 7 common org structures used by companies today:

• Hierarchial

Functional org structure

In a functional organizational structure, employees are grouped together according to function or role.

Similarly, internal departments are organized around core competencies required to accomplish a strategic goal.

These org structures generally start at high-level positions and work down from there.

In this hospital org structure example, the organizational chart establishes a clear chain of command from top to bottom.

Divisional org structure

A divisional organizational structure splits a company into self-contained divisions based on products, services, or locations.

These divisions are semi-autonomous and have control over their resources and act as an independent company within a larger one.

In this org chart example, a corporation is organized into divisions based on client segments.

Matrix org structure

A matrix organizational structure is a hybrid of functional and divisional structures. In this structure, employees are grouped based on functional expertise and/or specific projects.

Managers in a matrix org structure have more than one reporting line, which includes both individuals to manage and lines of responsibility.

Depending on project demands and priorities, it might be possible to “switch” from one boss to another.

Flat org structure

A flat organizational structure, also known as a horizontal or decentralized structure, has few or no levels of management between employees and top leadership.

In a flat organization, traditional layers of authority and decision-making are minimized to empower employees.

A flat structure is often used in startups until they grow big enough to have different departments.

Team-based org structure

A team-based organizational structure, also known as a team structure, emphasizes the formation of well, self-managed teams.

In this type of structure, an organization is composed of multiple teams such as Scrum or Innovation teams that have their own set of responsibilities and goals.

Hierarchical org structure

A hierarchical organizational structure, also known as a traditional or pyramid structure, is a system in which authority flows in a linear fashion from top to bottom.

With this structure, employees are organized into various tiers, each with a different level of authority and responsibility.

At higher levels, there is more decision-making power, while the lower levels carry out specific tasks and report to superiors.

Network org structure

A network organizational structure, also known as a networked organization or network model, is a relatively new approach to organizing businesses.

In a network structure, the organization has a decentralized network of interconnected entities, both internal and external, that collaborate to achieve common goals.

For different types of enterprises, different structures can work.

A functional organizational structure, for example, may not be right for a company with a lot of products or services because it doesn’t illustrate how they’re related and arranged. 

In this scenario, a divisional structure could be more appropriate.

However, if a company only sells one product or service and employs a small number of people (say, less than 100), a flat structure is the better option since it allows employees to communicate easily with each other and with supervisors.

When an organization demands change or when difficulties occur, organizational structures must be updated.

For instance, if a leader wishes to make structural changes to be more responsive to changing consumer needs, they can transition from a functional to a matrix structure. 

When leaders find that staff is spending too much time in meetings or dealing with internal issues rather than executing their tasks, they should consider switching from a divisional to a flat structure.

Depending on the demands of the business, an organizational structure can also be a mix of two or more types. 

It’s also critical for project managers or management teams to examine their culture to implement necessary changes.

These design changes begin with actions that best match culture rather than what makes sense from a purely economic perspective.

Organizations should select change management techniques that enable them to attain their desired cultures while also allowing them to successfully implement new designs.

5 tips for implementing a corporate organizational structure

Define the organizational structure and levels.

The first step in creating organizational structures is to designate management and employee levels.

This includes creating management layers and reporting links, cross-functional processes, and workflows, and clear lines of authority and accountability that enable staff to spot and fix issues before they become a problem.

Develop a philosophy

When designing organizational structures, the company’s philosophy should be clearly articulated.

A philosophy defines the driving ideas for how your company will operate, so it should be expressed in plain language that everyone can understand.

Employees must understand the type of company they work for to know what actions are required of them at all times.

Choose options based on tradeoffs

The organizational structure you select should be based on what works best for your business, given its unique demands and objectives.

Everything must be taken into account when developing a structure to guarantee that all employees understand their positions in the company.

The needs, competitive business climate, culture, communication patterns and processes, worker capabilities, and firm size are all elements to consider.

Prepare managers for their new roles

Because managers are in charge of allocating resources within units, they must be heavily involved in the development of organizational structures.

They should always be aware of how employees interact with each other when performing activities, as well as the impact changes in an org structure, will have on their function.

Communicate changes clearly and often

Changes in the structure influence everyone in the organization, so it’s critical to convey them clearly and frequently.

Employees will be more successful in accomplishing duties if they have a better understanding of organizational structures.

This will not only enhance employee morale but will also create stronger teams that properly manage their time and perform tasks per their needs.

When creating an organizational structure, numerous critical components such as design, chart, job descriptions, and workflows must be taken into account.

Venngage takes care of many of these requirements with organizational chart templates like the one below that you can customize. 

• Sign up for a free Venngage account.
• Click on  Templates  on your dashboard or  Home , then  Diagrams  on the left pane to see a list of the types of diagrams and charts you can make, including an  Organizational Chart .

• Choose a template that suits your needs. This will bring you to the canvas, where you can adjust and edit the chart as needed with the many tools available. 

• You can save your work to your device if you have a Premium or Business account. Simply click  Download  from the upper right menu pane and select PNG or PNG HD if you have a Premium account, or in PDF and PPT if you have a Business account.

Venngage also has a business feature called  My Brand Kit  that enables you to add your company’s logo, color palette, and fonts to all your designs with a single click.

For example, you can make your organizational structure reflect your brand by uploading your logo, fonts, and color palette using Venngage’s branding feature.

Not only are Venngage’s organizational chart templates free to use and professionally designed, but they are also tailored for various use cases and industries to fit your exact needs and requirements.

A business account also includes a  real-time collaboration feature , so you can invite members of your team to work simultaneously on a project.

We’ve already seen the advantages and disadvantages of different org structures.

But generally, large organizations can benefit from divisional structures since they can be organized by product line or market segment, resulting in a clear reporting chain.

However, if not handled appropriately, it can lead to silos, which is a problem when separate divisions compete against one another rather than collaborate.

On the other hand, smaller companies or teams will benefit from a flat org structure since everyone can contribute while being close to the boss.

But, on the other hand, employees may believe they lack the resources of larger organizations or authority to effectively provide value.

In Summary: Build your organizational structure with Venngage today

Venngage simplifies the process of creating organizational structures with stunning org charts .

The examples provided in this post can be used by companies to create structures that are best suited to their goals and available resources.

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How To Write the Management Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Ownership Structure

Internal management team, external management resources, human resources, frequently asked questions (faqs).

When developing a business plan , the 'management section' describes your management team, staff, resources, and how your business ownership is structured. This section should not only describe who's on your management team but how each person's skill set will contribute to your bottom line. In this article, we will detail exactly how to compose and best highlight your management team.

Key Takeaways

• The management section of a business plan helps show how your management team and company are structured.
• The first section shows the ownership structure, which might be a sole proprietorship, partnership, or corporation.
• The internal management section shows the department heads, including sales, marketing, administration, and production.
• The external management resources help back up your internal management and include an advisory board and consultants.
• The human resources section contains staffing requirements—part-time or full-time—skills needed for employees and the costs.

This section outlines the legal structure of your business. It may only be a single sentence if your business is a sole proprietorship. If your business is a partnership or a corporation, it can be longer. You want to be sure you explain who holds what percentage of ownership in the company.

The internal management section should describe the business management categories relevant to your business, identify who will have responsibility for each category, and then include a short profile highlighting each person's skills.

The primary business categories of sales, marketing , administration, and production usually work for many small businesses. If your business has employees, you will also need a human resources section. You may also find that your company needs additional management categories to fit your unique circumstances.

It's not necessary to have a different person in charge of each category; some key management people often fill more than one role. Identify the key managers in your business and explain what functions and experience each team member will serve. You may wish to present this as an organizational chart in your business plan, although the list format is also appropriate.

Along with this section, you should include the complete resumés of each management team member (including your own). Follow this with an explanation of how each member will be compensated and their benefits package, and describe any profit-sharing plans that may apply.

If there are any contracts that relate directly to your management team members, such as work contracts or non-competition agreements, you should include them in an Appendix to your business plan.

While external management resources are often overlooked when writing a business plan , using these resources effectively can make the difference between the success or failure of your managers. Think of these external resources as your internal management team's backup. They give your business credibility and an additional pool of expertise.

Advisory Board

An Advisory Board can increase consumer and investor confidence, attract talented employees by showing a commitment to company growth and bring a diversity of contributions. If you choose to have an Advisory Board , list all the board members in this section, and include a bio and all relevant specializations. If you choose your board members carefully, the group can compensate for the niche forms of expertise that your internal managers lack.

When selecting your board members, look for people who are genuinely interested in seeing your business do well and have the patience and time to provide sound advice.

Recently retired executives or managers, other successful entrepreneurs, and/or vendors would be good choices for an Advisory Board.

Professional Services

Professional Services should also be highlighted in the external management resources section. Describe all the external professional advisors that your business will use, such as accountants, bankers, lawyers, IT consultants, business consultants, and/or business coaches. These professionals provide a web of advice and support outside your internal management team that can be invaluable in making management decisions and your new business a success .

The last point you should address in the management section of your business plan is your human resources needs. The trick to writing about human resources is to be specific. To simply write, "We'll need more people once we get up and running," isn't sufficient. Follow this list:

• Detail how many employees your business will need at each stage and what they will cost.
• Describe exactly how your business's human resources needs can be met. Will it be best to have employees, or should you operate with contract workers or freelancers ? Do you need full-time or part-time staff or a mix of both?
• Outline your staffing requirements, including a description of the specific skills that the people working for you will need to possess.
• Calculate your labor costs. Decide the number of employees you will need and how many customers each employee can serve. For example, if it takes one employee to serve 150 customers, and you forecast 1,500 customers in your first year, your business will need 10 employees.
• Determine how much each employee will receive and total the salary cost for all your employees.
• Add to this the cost of  Workers' Compensation Insurance  (mandatory for most businesses) and the cost of any other employee benefits, such as company-sponsored medical and dental plans.

After you've listed the points above, describe how you will find the staff your business needs and how you will train them. Your description of staff recruitment should explain whether or not sufficient local labor is available and how you will recruit staff.

When you're writing about staff training, you'll want to include as many specifics as possible. What specific training will your staff undergo? What ongoing training opportunities will you provide your employees?

Even if the plan for your business is to start as a sole proprietorship, you should include a section on potential human resources demands as a way to demonstrate that you've thought about the staffing your business may require as it grows.

Business plans are about the future and the hypothetical challenges and successes that await. It's worth visualizing and documenting the details of your business so that the materials and network around your dream can begin to take shape.

What is the management section of a business plan?

The 'management section' describes your management team, staff, resources, and how your business ownership is structured.

What are the 5 sections of a business plan?

A business plan provides a road map showing your company's goals and how you'll achieve them. The five sections of a business plan are as follows:

• The  market analysis  outlines the demand for your product or service.
• The  competitive analysis  section shows your competition's strengths and weaknesses and your strategy for gaining market share.
• The management plan outlines your ownership structure, the management team, and staffing requirements.
• The  operating plan  details your business location and the facilities, equipment, and supplies needed to operate.
• The  financial plan  shows the map to financial success and the sources of funding, such as bank loans or investors.

SCORE. " Why Small Businesses Should Consider Workers’ Comp Insurance ."

Organizational Planning Guide: Types of Plans, Steps, and Examples

Organizational planning is like charting your company’s path on a map. You need to know what direction you’re headed to stay competitive.

But what exactly is organizational planning and how do you do it effectively? This guide will cover:

The Different Components or Types of Organizational Plans?

The 5 Process Steps of Organizational Planning

Organizational planning examples.

Organizational Planning Tools

What is Organizational Planning?

Organizational planning is the process of defining a company’s reason for existing, setting goals aimed at realizing full potential, and creating increasingly discrete tasks to meet those goals.

Each phase of planning is a subset of the prior, with strategic planning being the foremost

There are four phases of a proper organizational plan: strategic, tactical, operational, and contingency. Each phase of planning is a subset of the prior, with strategic planning being the foremost.

Types of Organizational Planning

A strategic plan is the company’s big picture. It defines the company’s goals for a set period of time, whether that’s one year or ten, and ensures that those goals align with the company’s mission, vision, and values. Strategic planning usually involves top managers, although some smaller companies choose to bring all of their employees along when defining their mission, vision, and values.

The tactical strategy describes how a company will implement its strategic plan. A tactical plan is composed of several short-term goals, typically carried out within one year, that support the strategic plan. Generally, it’s the responsibility of middle managers to set and oversee tactical strategies, like planning and executing a marketing campaign.

Operational

Operational plans encompass what needs to happen continually, on a day-to-day basis, in order to execute tactical plans. Operational plans could include work schedules, policies, rules, or regulations that set standards for employees, as well as specific task assignments that relate to goals within the tactical strategy, such as a protocol for documenting and addressing work absences.

Contingency

Contingency plans wait in the wings in case of a crisis or unforeseen event. Contingency plans cover a range of possible scenarios and appropriate responses for issues varying from personnel planning to advanced preparation for outside occurrences that could negatively impact the business. Companies may have contingency plans for things like how to respond to a natural disaster, malfunctioning software, or the sudden departure of a C-level executive.

The organizational planning process includes five phases that, ideally, form a cycle.

Strategic, tactical, operational, and contingency planning fall within these five stages.

1. Develop the strategic plan

Steps in this initial stage include:

Review your mission, vision, and values

Gather data about your company, like performance-indicating metrics from your sales department

Perform a SWOT analysis; take stock of your company’s strengths, weaknesses, opportunities, and threats

Set big picture goals that take your mission, vision, values, data, and SWOT analysis into account

2. Translate the strategic plan into tactical steps

At this point, it’s time to create tactical plans. Bring in middle managers to help do the following:

Define short-term goals—quarterly goals are common—that support the strategic plan for each department, such as setting a quota for the sales team so the company can meet its strategic revenue goal

Develop processes for reviewing goal achievement to make sure strategic and tactical goals are being met, like running a CRM report every quarter and submitting it to the Chief Revenue Officer to check that the sales department is hitting its quota

Develop contingency plans, like what to do in case the sales team’s CRM malfunctions or there’s a data breach

3. Plan daily operations

Operational plans, or the processes that determine how individual employees spend their day, are largely the responsibility of middle managers and the employees that report to them. For example, the process that a sales rep follows to find, nurture, and convert a lead into a customer is an operational plan. Work schedules, customer service workflows, or GDPR policies that protect prospective customers’ information all aid a sales department in reaching its tactical goal—in this case, a sales quota—so they fall under the umbrella of operational plans.

This stage should include setting goals and targets that individual employees should hit during a set period.

Managers may choose to set some plans, such as work schedules, themselves. On the other hand, individual tasks that make up a sales plan may require the input of the entire team. This stage should also include setting goals and targets that individual employees should hit during a set period.

4. Execute the plans

It’s time to put plans into action. Theoretically, activities carried out on a day-to-day basis (defined by the operational plan) should help reach tactical goals, which in turn supports the overall strategic plan.

5. Monitor progress and adjust plans

No plan is complete without periods of reflection and adjustment. At the end of each quarter or the short-term goal period, middle managers should review whether or not they hit the benchmarks established in step two, then submit data-backed reports to C-level executives. For example, this is when the manager of the sales department would run a report analyzing whether or not a new process for managing the sales pipeline helped the team reach its quota. A marketing team, on the other hand, might analyze whether or not their efforts to optimize advertising and landing pages succeeded in generating a certain number of leads for the sales department.

Depending on the outcome of those reviews, your org may wish to adjust parts of its strategic, tactical, or operational plans. For example, if the sales team didn’t meet their quota their manager may decide to make changes to their sales pipeline operational plan.

These templates and examples can help you start thinking about how to format your organizational plan.

This is a single page two-year strategic plan for a fictional corporation. Notice that the goals listed in the “Strategic Objectives and Organization Goals” section follow the SMART goals model: They’re specific, measurable, actionable, relevant, and time-based.

Workforce Planning

Companies need to use workforce planning to analyze, forecast, and plan for the future of their personnel. Workforce planning helps identify skill gaps, inefficiencies, opportunities for employee growth, and to prepare for future staffing needs.

Use Pingboard as a tool to plan and unite your workforce. Start today for free !

This is a two-year action plan for an administration, which could also be described as a tactical plan. Organization-wide goals—aka strategic goals—that are relevant to this department are listed in the top section, while the more tactical goals for the manager of this department are listed below.

Check out this strategic plan template . You’ll notice that tasks for an individual employee fall under operational planning. Note the space within each item for the manager to leave feedback for the employee.

Organizational Planning is Vital for a Successful Business

While organizational planning is a long and complex process, it’s integral to the success of your company. Luckily, the process becomes more automatic and intuitive with regular planning and review meetings.

Use Pingboard’s org chart software to help you plan and communicate your strategy. With Pingboard users can build and share multiple versions of their org chart to help with succession plans, organization redesigns, merger and acquisitions plans. Pingboard also helps with hiring plans by allowing you to communicate open roles in your live org chart so employees understand where their company is growing and what roles they can apply for. Pingboard’s employee directory helps find successors for specific roles by allowing managers to search through their workforce for the skills and experience needed to fill a position.

Start planning today – risk free!

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Organizational Structure Explained: A Comprehensive Guide for Businesses

Discover the different organizational structures, their benefits, and how they can shape your company's success in 2024 and beyond.

Organizational structure aligns and relates parts of an organization, so it can achieve its maximum performance. The structure chosen affects an organization's success in carrying out its strategy and objectives. Leadership should understand the characteristics, benefits and limitations of various organizational structures to assist in this strategic alignment.

Overview Background Business Case Key Elements of Organizational Structures Types of Organizational Structures

Vertical structures (functional and divisional)

Matrix organizational structures, open boundary structures (hollow, modular virtual and learning).

The Impact of Growth Stages on Organizational Structure Metrics Communications and Technology Global Issues Legal Issues

This article addresses the following topics related to organizational structure:

• The case for aligning organizational structure with the enterprise's business strategy.
• Key elements of organizational structure.
• Types of organizational structures and the possible benefits and limitations of each.
• The impact of an organization's stage of development on its structure.
• Communications, technology, metrics, global and legal issues.

Organizational structure is the method by which work flows through an organization. It allows groups to work together within their individual functions to manage tasks. Traditional organizational structures tend to be more formalized—with employees grouped by function (such as finance or operations), region or product line. Less traditional structures are more loosely woven and flexible, with the ability to respond quickly to changing business environments.

Organizational structures have evolved since the 1800s. In the Industrial Revolution, individuals were organized to add parts to the manufacture of the product moving down the assembly line. Frederick Taylor's scientific management theory optimized the way tasks were performed, so workers performed only one task in the most efficient way. In the 20th century, General Motors pioneered a revolutionary organizational design in which each major division made its own cars.

Today, organizational structures are changing swiftly—from virtual organizations to other flexible structures. As companies continue to evolve and increase their global presence, future organizations may embody a fluid, free-forming organization, member ownership and an entrepreneurial approach among all members. See  Inside Day 1: How Amazon Uses Agile Team Structures and Adaptive Practices to Innovate on Behalf of Customers .

Business Case

A hallmark of a well-aligned organization is its ability to adapt and realign as needed. To ensure long-term viability, an organization must adjust its structure to fit new economic realities without diminishing core capabilities and competitive differentiation. Organizational realignment involves closing the structural gaps impeding organizational performance.

Problems created by a misaligned organizational structure

Rapid reorganization of business units, divisions or functions can lead to ineffective, misaligned organizational structures that do not support the business. Poorly conceived reorganizations may create significant problems, including the following:

• Structural gaps in roles, work processes, accountabilities and critical information flows can occur when companies eliminate middle management levels without eliminating the work, forcing employees to take on additional responsibilities.
• Diminished capacity, capability and agility issues can arise when a) lower-level employees who step in when middle management is eliminated are ill-equipped to perform the required duties and b) when higher-level executives must take on more tactical responsibilities, minimizing the value of their leadership skills.
• Disorganization and improper staffing can affect a company's cost structure, cash flow and ability to deliver goods or services. Agile organizations can rapidly deploy people to address shifting business needs. With resources cut to the bone, however, most organizations' staff members can focus only on their immediate responsibilities, leaving little time, energy or desire to work outside their current job scope. Ultimately, diminished capacity and lagging response times affect an organization's ability to remain competitive.
• Declining workforce engagement can reduce retention, decrease customer loyalty and limit organizational performance and stakeholder value.

The importance of aligning the structure with the business strategy

The key to profitable performance is the extent to which four business elements are aligned:

Leadership. The individuals responsible for developing and deploying the strategy and monitoring results.

Organization. The structure, processes and operations by which the strategy is deployed.

Jobs. The necessary roles and responsibilities.

People. The experience, skills and competencies needed to execute the strategy.

An understanding of the interdependencies of these business elements and the need for them to adapt to change quickly and strategically are essential for success in the high-performance organization. When these four elements are in sync, outstanding performance is more likely.

Achieving alignment and sustaining organizational capacity requires time and critical thinking. Organizations must identify outcomes the new structure or process is intended to produce. This typically requires recalibrating the following:

• Which work is mission-critical, can be scaled back or should be eliminated.
• Existing role requirements, while identifying necessary new or modified roles.
• Key metrics and accountabilities.
• Critical information flows.
• Decision-making authority by organization level.

See  Meeting the Challenges of Developing Collaborative Teams for Future Success.

Key Elements of Organizational Structures

Five elements create an organizational structure: job design, departmentation, delegation, span of control and chain of command. These elements comprise an organizational chart and create the organizational structure itself. "Departmentation" refers to the way an organization structures its jobs to coordinate work. "Span of control" means the number of individuals who report to a manager. "Chain of command" refers to a line of authority.

The company's strategy of managerial centralization or decentralization also influences organizational structures. "Centralization," the degree to which decision-making authority is restricted to higher levels of management, typically leads to a pyramid structure. "Centralization" is generally recommended when conflicting goals and strategies among operating units create a need for a uniform policy. "Decentralization," the degree to which lower levels of the hierarchy have decision-making authority, typically leads to a leaner, flatter organization. Decentralization is recommended when conflicting strategies, uncertainty or complexity require local adaptability and decision-making.

Types of Organizational Structures

Organizational structures have evolved from rigid, vertically integrated, hierarchical, autocratic structures to relatively boundary-less, empowered, networked organizations designed to respond quickly to customer needs with customized products and services.

Today, organizations are usually structured vertically, vertically and horizontally, or with open boundaries. Specific types of structures within each of these categories are the following:

• Vertical — functional and divisional.
• Vertical and horizontal — matrix.
• Boundary-less (also referred to as "open boundary")—modular, virtual and cellular.

See  What are commonly-used organization structures?

Two main types of vertical structure exist, functional and divisional. The functional structure divides work and employees by specialization. It is a hierarchical, usually vertically integrated, structure. It emphasizes standardization in organization and processes for specialized employees in relatively narrow jobs.

This traditional type of organization forms departments such as production, sales, research and development, accounting, HR, and marketing. Each department has a separate function and specializes in that area. For example, all HR professionals are part of the same function and report to a senior leader of HR. The same reporting process would be true for other functions, such as finance or operations.

In functional structures, employees report directly to managers within their functional areas who in turn report to a chief officer of the organization. Management from above must centrally coordinate the specialized departments. 

A functional organizational chart might look something like this: 

Advantages of a functional structure include the following:

• The organization develops experts in its respective areas.
• Individuals perform only tasks in which they are most proficient.
• This form is logical and easy to understand.

Disadvantages center on coordination or lack thereof:

• People are in specialized "silos" and often fail to coordinate or communicate with other departments.
• Cross-functional activity is more difficult to promote.
• The structure tends to be resistant to change.

This structure works best for organizations that remain centralized (i.e., a majority of the decision-making occurs at higher levels of the organization) because there are few shared concerns or objectives between functional areas (e.g., marketing, production, purchasing, IT). Given the centralized decision-making, the organization can take advantage of economies of scale in that there are likely centralized purchasing functions.

An appropriate management system to coordinate the departments is essential. The management system may be a special leader, like a vice president, a computer system or some other format.

Also a vertical arrangement, a divisional structure most often divides work and employees by output, although a divisional structure could be divided by another variable such as market or region. For example, a business that sells men's, women's and children's clothing through retail, e-commerce and catalog sales in the Northeast, Southeast and Southwest could be using a divisional structure in one of three ways:

• Product—men's wear, women's wear and children's clothing.
• Market—retail store, e-commerce and catalog.
• Region—Northeast, Southeast and Southwest.

A divisional organizational structure might look like this:

The advantages of this type of structure are the following:

• It provides more focus and flexibility on each division's core competency.
• It allows the divisions to focus on producing specialized products while also using knowledge gained from related divisions.
• It allows for more coordination than the functional structure.
• Decision-making authority pushed to lower levels of the organization enables faster, customized decisions.

The disadvantages of this structure include the following:

• It can result in a loss of efficiency and a duplication of effort because each division needs to acquire the same resources.
• Each division often has its own research and development, marketing, and other units that could otherwise be helping each other.
• Employees with similar technical career paths have less interaction.
• Divisions may be competing for the same customers.
• Each division often buys similar supplies in smaller quantities and may pay more per item.

This type of structure is helpful when the product base expands in quantity or complexity. But when competition among divisions becomes significant, the organization is not adapting quickly enough, or when economies of scale are lacking, the organization may require a more sophisticated matrix structure.

A matrix structure combines the functional and divisional structures to create a dual-command situation. In a matrix structure, an employee reports to two managers who are jointly responsible for the employee's performance. Typically, one manager works in an administrative function, such as finance, HR, information technology, sales or marketing, and the other works in a business unit related to a product, service, customer or geography.

A typical matrix organizational structure might look like this:

Advantages of the matrix structure include the following:

• It creates a functional and divisional partnership and focuses on the work more than on the people.
• It minimizes costs by sharing key people.
• It creates a better balance between time of completion and cost.
• It provides a better overview of a product that is manufactured in several areas or sold by various subsidiaries in different markets.

Disadvantages of matrix organizations include the following:

• Responsibilities may be unclear, thus complicating governance and control.
• Reporting to more than one manager at a time can be confusing for the employee and supervisors.
• The dual chain of command requires cooperation between two direct supervisors to determine an employee's work priorities, work assignments and performance standards.
• When the function leader and the product leader make conflicting demands on the employee, the employee's stress level increases, and performance may decrease.
• Employees spend more time in meetings and coordinating with other employees.

These disadvantages can be exacerbated if the matrix goes beyond two-dimensional (e.g., employees report to two managers) to multidimensional (e.g., employees report to three or more managers).

Matrix structures are common in heavily project-driven organizations, such as construction companies. These structures have grown out of project structures in which employees from different functions formed teams until completing a project, and then reverted to their own functions. In a matrix organization, each project manager reports directly to the vice president and the general manager. Each project is, in essence, a mini profit center, and therefore, general managers usually make business decisions.

The matrix-structured organization also provides greater visibility, stronger governance and more control in large, complex companies. It is also well suited for development of business areas and coordination of complex processes with strong dependencies.

Matrix structures pose difficult challenges for professionals charged with ensuring equity and fairness across the organization. Managers working in matrix structures should be prepared to intervene via communication and training if the structure compromises these objectives. Furthermore, leadership should monitor relationships between managers who share direct reports. These relationships between an employee's managers are crucial to the success of a matrix structure.

More recent trends in structural forms remove the traditional boundaries of an organization. Typical internal and external barriers and organizational boxes are eliminated, and all organizational units are effectively and flexibly connected. Teams replace departments, and the organization and suppliers work as closely together as parts of one company. The hierarchy is flat; status and rank are minimal. Everyone—including top management, managers and employees—participates in the decision-making process. The use of 360-degree feedback performance appraisals is common as well.

Advantages of boundary-less organizations include the following:

• Ability to leverage all employees' talents.
• Faster response to market changes.
• Enhanced cooperation and information sharing among functions, divisions and staff.

Disadvantages include the following:

• Difficulty in overcoming silos inside the organization.
• Lack of strong leadership and common vision.
• Time-consuming processes.
• The possibility of employees being adversely affected by efficiency efforts.
• The possibility of organizations abandoning change if restructuring does not improve effectiveness quickly.

Boundary-less organizational structures can be created in varied forms, including hollow, modular and virtual organizations.

Hollow organizations. Hollow structures divide work and employees by core and noncore competencies. Hollow structures are an outsourcing model in which the organization maintains its core processes internally but outsources noncore processes. Hollow structures are most effective when the industry is price competitive and choices for outsourcing exist. An example of a hollow structure is a sports organization that has its HR functions (e.g., payroll and benefits) handled by outside organizations.

Advantages of this type of structure include the following:

• Minimizing overhead.
• Enabling the organization to focus on its core product and eliminating the need to develop expertise in noncore functions.

Disadvantages include:

• Loss of control over functions that affect employees regularly.
• Restriction by certain industries (e.g., health care) on the extent of outsourcing.
• Lack of competitive outsourcing options.

Modular organizations. Modular structures differ from hollow organizations in that components of a product are outsourced. Modular structures may keep a core part of the product in-house and outsource noncore portions of the product. Networks are added or subtracted as needs change. For a modular structure to be an option, the product must be able to be broken into chunks. For example, computer manufacturer Dell buys parts from various suppliers and assembles them at one central location. Suppliers at one end and customers at the other become part of the organization; the organization shares information and innovations with all. Customization of products and services results from flexibility, creativity, teamwork and responsiveness. Business decisions are made at corporate, divisional, project and individual team member levels.

Advantages include the following:

• Minimizing the specialization and specialists needed.
• Enabling the company to outsource parts supply and coordinate the assembly of quality products.

Disadvantages include concerns about the actions of suppliers outside the control of the core management company. Risk occurs if the partner organization removes itself form the quality check on the end product or if the outsourced organization uses a second outsourced organization. Examples of supplier concerns include the following:

• Suppliers, or subcontractors, must have access to—and safeguard—most, if not all, of the core company's data and trade secrets.
• Suppliers could suddenly raise prices on or cease production of key parts.
• Knowing where one organization ends and another begins may become difficult.

Virtual organizations. A virtual organization (sometimes called a network structure) is cooperation among companies, institutions or individuals delivering a product or service under a common business understanding. Organizations form partnerships with others—often competitors—that complement each other. The collaborating units present themselves as a unified organization.

The advantages of virtual structures include the following:

• Contributions from each part of the unit.
• Elimination of physical boundaries.
• Responsiveness to a rapidly changing environment.
• Lower or nonexistent organizational overhead.
• Allows companies to be more flexible and agile.
• Give more power to all employees to collaborate, take initiative, and make decisions.
• Helps employees and stakeholders understand workflows and processes.

The disadvantages of virtual organizations include the following:

• Potential lack of trust between organizations.
• Potential lack of organizational identification among employees.
• Need for increased communication.
• Can quickly become overly complex when dealing with lots of offsite processes.
• Can make it more difficult for employees to know who has final say.

Virtual structures are collaborative and created to respond to an exceptional and often temporary marketing opportunity. An example of a virtual structure is an environmental conservancy in which multiple organizations supply a virtual organization with employees to save, for example, a historic site, possibly with the intent of economic gain for the partners.

Understanding the organizational environment is crucial in open boundary models. For example, some industries cannot outsource noncore processes due to government regulation. (For example, health insurance organizations may be unable to outsource Medicare processes). Or, in some cases, outsourcing may have to be negotiated with a union.

The key to effective boundary-less organizations is placing adaptable employees at all levels. Management must give up traditional autocratic control to coach employees toward creativity and the achievement of organizational goals. Employees must apply initiative and creativity to benefit the organization, and reward systems should recognize such employees.

Learning organizations. A learning organization is one whose design actively seeks to acquire knowledge and change behavior as a result of the newly acquired knowledge. In learning organizations, experimenting, learning new things, and reflecting on new knowledge are the norms. At the same time, there are many procedures and systems in place that facilitate learning at all organization levels.

The advantages of learning organizations include the following:

• Open communication and information sharing.
• Innovativeness
• Ability to adapt to rapid change.
• Strong organizational performance.
• Competitive advantage.

The disadvantages of learning organizations include the following:

• Power difference is ignored.
• Process of implementing will be complicated and take longer.
• Fear of employee participation in organizational decisions.
• Breaking of existing organizational rules.

The Impact of Growth Stages on Organizational Structure

Organizations typically mature in a consistent and predictable manner. As they move through various stages of growth, they must address various problems. This process creates the need for different structures, management skills and priorities.

The four stages of development in an organization's life cycle include the following:

The beginning stage of development is characterized by an inconsistent growth rate, a simple structure and informal systems. At this stage the organization is typically highly centralized. "Dotcom" companies are a good example of startup companies.

The expansion stage is evidenced by rapid, positive growth and the emergence of formal systems. Organizations at this stage typically focus on centralization with limited delegation.

Consolidation

The consolidation stage is characterized by slower growth, departmentalization, formalized systems and moderate centralization.

Diversification

The diversification stage occurs when older, larger organizations experience rapid growth, bureaucracy and decentralization.

As an organization grows or passes from one stage of development to another, carefully planned and well-conceived changes in practices and strategies may be necessary to maximize effectiveness. There are no guarantees that an organization will make it from one stage to the next. In fact, a key opportunity for leadership is to recognize indicators that suggest an organization is in a risky or unhealthy stage and to make appropriate structural adjustments.

The art of organizational design is assessing the environment's essential aspects and their meaning for the organization's future. Translating those characteristics into the right structure is critical to increasing efficiency and controlling costs. When selecting the best structure for the organization, company leaders should examine and evaluate current key structural dimensions and contextual factors. See  How do I determine which HR metrics to measure and report?

Structural dimensions

Leaders can develop an understanding of the organization's internal environment through measurement and analysis of its structural dimensions. Key dimensions, which are usually measured through a survey, include:

Specialization. The extent to which an organization's activities are divided into specialized roles.

Standardization. The degree to which an organization operates under standard rules or procedures.

Formalization. The extent to which instructions and procedures are documented.

Centralization. The degree to which leaders at the top of the management hierarchy have authority to make certain decisions.

Configuration. The shape of the organization's role structure, which includes:

• Chain of command. The number of vertical levels or layers on the organizational chart.
• Span of control. The number of direct reports per manager or the number of horizontal levels or layers on the organizational chart.

Contextual factors

A review of contextual factors will provide a better understanding of the external environment and the relationship between the internal and external environment. Some of the significant contextual factors to consider in this review include:

Origin and history. Was the organization privately founded? What changes have occurred in ownership or location?

Ownership and control. Is the organization private or public? Is control divided among a few individuals or many?

Size. How many employees does the organization have? What are its net assets? What is its market position?

Location. How many operating sites does the organization maintain?

Productsand services. What types of goods and services does the organization manufacture and provide?

Technology. Are the organization's work processes effectively integrated?

Interdependence. What is the degree to which the organization depends on customers, suppliers, trade unions or other related entities?

After examining the structural dimensions and contextual factors and developing an understanding of the connection between an organization's structure and strategy, organization leaders can consider alternative structures. They may use diagnostic models and tools to guide the design process.

Communications and Technology

The last few years have seen an unprecedented expansion and improvement of online communication. Software has pushed the boundaries of workplace communication beyond e-mail into collaborative social media platforms and innovative intranets. The decline in traditional communication methods and the dramatic increase in cyber communication has had a major impact on the workplace and is leading to restructuring.

As organizations continue to restructure to remain competitive, communications can drive the transition to an effective new organizational structure. Research suggests that companies can positively affect their credibility with employees through various organizational communication programs.

In establishing internal communication channels, leadership must be aware of the advantages and shortcomings of communication technologies and match them to the organization's needs, strategic goals and structure. Employers should also be cognizant of, and be prepared to deal with, the common communication challenges in various organizational structures. For example, communications technology has enabled organizations to create virtual workplaces and teams. In a virtual team, members from various geographical locations work together on a task, communicating via e-mail, instant messaging, teleconferencing, videoconferencing and web-based workspaces.

Although virtual teams have significant advantages—most notably reduced travel costs and flexibility in staffing and work schedules—they also pose challenges. Virtual teams often find coordinating team logistics and mastering new technologies difficult. Communication is also a major challenge because of the absence of visual (body language) and verbal (intonation) clues. Research suggests that organizations can overcome these challenges through effective support and training.

Global Issues

Organizational structures often need to change as companies expand around the globe. An organization's leaders should plan carefully before opening offices in another country.

Many issues arise when an employer plans to open an international branch, hire international workers and formulate a globalized strategy. Among the questions that must be answered are:

• How do human resource legal requirements and practices vary from country to country?
• Should HR officials at headquarters do the work, or should a company open HR offices in the other country?
• Should an organization hire consultants to handle local hiring and personnel services?

Unless employers have a sound HR strategy ready before leaping into another country, they could fail.

When an organization opens international offices, HR professionals and other business leaders should be able to communicate as effectively with workers across the globe as around the corner. That can be a challenge. Having a robust intranet and using videoconferencing are alternatives to face-to-face communication.

As rapid changes in technology affect global communication, employees must be aware of linguistic, cultural, religious and social differences among colleagues and business contacts. The organization should train all employees (not just managers and CEOs who travel) in cultural literacy.

Moreover, employers should be aware that language difficulties, time‐and‐distance challenges, the absence of face‐to‐face contact, and, above all, the barriers posed by cultural differences and personal communication styles make global virtual work far more complex than local structures. These practices can enhance global virtual team relationships:

• Using online chats, video- and audioconferencing in addition to one-on-one conversations and e-mail.
• Posting profiles of team members that outline their expertise and roles in the organization.
• Being sensitive to the level of engagement team members are likely to deliver if they must meet at inconvenient hours across multiple time zones.

Legal Issues

Regardless of the type of structure, employers must ensure compliance with legal requirements in the countries where their organizations operate. Some of those requirements will be quite extensive (for example, public companies must ensure compliance with the Sarbanes-Oxley Act, and most organizations must ensure compliance with the Fair Labor Standards Act and its related state laws).

When organizational structures change, or if the chain of command is weak or fails to keep up-to-date with changes in the business, a company may have compliance problems because the structure has not been evaluated with regard to these laws. Imagine, for example, a restructuring that reduces the number of direct reports for an entire layer of management, which perhaps leads to those individuals no longer being exempt.

As an organization moves internationally, laws in the host countries must also be evaluated and a plan put in place for compliance before the expansion occurs. Employers must anticipate and plan for laws affecting all aspects of the employee experience, including hiring, benefits, leaves and termination.

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Business Plan Management Structure: What You Need to Know

A business plan management structure can help your business identify its goals, growth plan, and structure for management. 3 min read

Business Organization

Every business, regardless of size, needs to have a solid plan in place for how it will be run. Without a business plan, it is nearly impossible to run the company smoothly or successfully. One aspect of the business plan should include the positions in the company and definitions for each position. Those definitions can identify roles and responsibilities, as well as the reporting structure for each role. As the needs of the business change and shift, the business structure likely will change as well. It's easier to make changes as you go when you have a plan in place.

When you're starting a business and need funding, you might not have any employees to fit the roles you have outlined in your plan. This list of roles could be more idealistic for how the company will operate when you have funding and more opportunities to hire employees. Smaller businesses tend to have less complicated needs than larger ones, so the process is usually more streamlined. However, all businesses need to show a clear understanding of workflow and demonstrate how it will be handled through every phase of growth and expansion.

The business plan should include:

• Administration
• Marketing and sales
• Production and distribution of product or service execution

Larger companies need a more detailed organizational plan with procedures that have been well thought out and documented. By creating this detailed plan, you can avoid internal confusion about who is responsible for what as well as avoid duplicated efforts that waste time. When your business runs and operates smoothly, it will be more cost-effective and efficient than a business that is disorganized. With a detailed and informative business plan, it becomes clear to potential investors and employees that you know what you're doing as a business owner. Larger companies may also need additional resources to operate, such as research and development or human resources.

Organizational Structure

You can use graphics to show your company's organizational structure. Simple flowcharts and diagrams offer visual representations of the management levels within your business, as well as the positions that fall beneath each level. With a graphic, it's easier to show the reporting structure and how various departments and divisions work together. This graphic will also help you show the other employee levels within the business.

The lower-level employees are responsible for the daily tasks of the business, so you'll need to identify and recognize the types of individuals you plan to hire, the number of people needed, and their qualifications. You might choose to include details about your hiring plan, such as where you will find employees and their estimated salaries. Don't forget to include your plan for hiring independent contractors, freelance workers, or consultants. Finally, the hiring plan should include any future positions that would be added if the business is able to expand.

Management Team Section of a Business Plan

Your company's management team is essential to business success. The management team is responsible for identifying and analyzing the objectives and goals of the company. After completing these tasks, experienced management professionals can implement and enforce strategies that will lead to success. In your business plan, this team should include the managers, owners, and board of directors (if applicable).

You can include information about the management team in several sections of your business plan, depending on the style. Regardless of where you place the details in the plan, make sure to include information about the company's legal structure and a list of owners. The owner's education, experience, and other related skills should be outlined. Discuss how much of the company each owner has, as well as the role of each owner in the business operations.

If your company has a board of directors, include the name of each member. Along with their names, you should also expand on their experience, background, and credentials, as well as include their contact information. Provide additional details on the contributions provided by each member to the company, along with information about how the members will contribute to the future growth and expansion of the business.

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Content Approved by UpCounsel

• Details of a Business Plan
• Creating a Business Plan
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• Sample of a Good Business Plan
• LLC Business Plan Template
• Purpose of Business Plan Sample: Everything You Need To Know
• Business Plan for Existing Company
• Do I Need a Business Plan
• Management Plan in a Business Plan
• Parts of Business Plan and Definition

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Types of Organizational Structures to Consider for Your Business

An organizational structure helps you determine your company's leadership hierarchy and flow of information.

Table of Contents

Running a business means successfully delegating tasks among your employees. It also means having the final say on all projects or, if your company is on the larger side, hiring people whom you trust enough to give full approval powers. An organizational structure for your business can help you make sense of where and with whom your company’s responsibilities lie, and you have plenty of types from which to choose.

What is an organizational structure?

An organizational structure is a set of rules, roles, relationships and responsibilities that determine how a company’s activities should be directed to achieve its goals. It also governs the flow of information through levels of the company and outlines the reporting relationship among midlevel staff, senior management, executives and owners. It is effectively a hierarchy for a company, though some organizational structures emphasize a near-total lack of hierarchy.

How many types of organizational structures are there?

In your research, you may at first read that there are two types of organizational structures: centralized and decentralized. However, using just these two classifications for every possible team structure may paint with too broad a brush. That’s why experts have come up with eight types of organizational structures, each of which is either centralized or decentralized:

• Hierarchical structure (also known as line structure)
• Functional structure
• Divisional structure (also known as multidivisional structure)
• Flatarchy structure (also known as horizontal, or flat, structure)
• Matrix structure
• Team structure
• Network structure
• Projectized structure

All of these are centralized except for the flat, team and network structures. In a centralized structure, power flows up the chain of command to the executives and owners, whereas decentralized organization structures give far more power to non-executives and non-owners. We’ll get more into how this works in just a moment.

Types of organizational structure to consider for your business

Now that you know the eight types of organizational structures, you’re probably wondering which one is best for your business. The answer, as with many business matters, is that the right choice differs by company. Below, we’ll detail what each organizational structure entails so you can discern which model best fits your ongoing business practices and future business needs.

1. Hierarchical structure

A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Its chain of command is the one that likely comes to mind when you think of any company: Power flows from the board of directors down to the CEO through the rest of the company from top to bottom. This makes the hierarchical structure a centralized organizational structure.

In a hierarchical structure, a staff director often supervises all departments and reports to the CEO. This structure is well suited for any business in any industry.

These are some advantages of a hierarchical structure:

• It clearly defines reporting relationships, project organization and division of authority.
• It details your company’s corporate ladder and promotional structure, thereby encouraging high-quality work.
• It helps to specialize each employee’s work.
• It cultivates stronger relationships among employees within a team.

There are also some drawbacks of choosing a hierarchical structure:

• Bureaucratic hurdles could delay project completion and discourage employees from taking risks.
• It may encourage employees to prioritize their own department and direct supervisors instead of the whole company.
• It can make employees feel like they have no say in how to approach their projects.

2. Functional structure

The functional structure is a centralized structure that greatly overlaps with the hierarchical structure. However, the role of a staff director instead falls to each department head – in other words, each department has its own staff director, who reports to the CEO. Any company with several modestly sized departments may find the functional structure to be a fit. 

These are some advantages of a functional structure:

• It helps employees develop specific, specialized roles.
• It boosts individual departments’ and employees’ self-sufficiency and innovation.
• It scales easily to work for companies of all sizes.

These are some disadvantages of a functional structure:

• It doesn’t encourage communication and interaction among different departments.
• It hides key details of departmental processes and strategies from employees outside that department.

3. Divisional structure

The centralized structure, known as a divisional organization, is more common in enterprise companies with many large departments, markets or territories. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. In the divisional structure, each line or product has its own chief commanding executive. Large companies of any sort, but especially in manufacturing industries, are the best fit for this structure. 

These are the main advantages of a divisional organization:

• The different departments have some flexibility to operate separately from the company at large.
• It’s more adaptable to customer needs.
• Individual departments have more autonomy and room for innovation.

These are some disadvantages of a divisional structure:

• It risks accidental duplication of resources.
• It encourages poor communication and low interaction among different departments.
• It encourages internal competition across departments rather than uniting the company against outside competitors.

4. Flat structure

A flat structure is a decentralized organizational structure in which almost all employees have equal power. At most, executives may have just a bit more authority than employees. This organizational structure is common in startups that take a modern approach to work or don’t yet have enough employees to divide into departments. That makes flat structures especially well suited to the tech industry, which is home to many small startups with flexible work arrangements.

These are some advantages of a flat structure:

• Employees have more responsibility and independence.
• It improves communication and interaction among employees.
• It’s faster to implement new practices or ideas, with less risk of error.

These are the main disadvantages of a flat structure:

• Employees lack supervision.
• There could be confusion around reporting procedures.
• Employees lack or don’t develop specialized skills.
• It has poor scalability as the company grows.

5. Matrix structure

The matrix structure is a fluid form of the classic hierarchical structure. This centralized organization structure allows employees to move from one department to another as needed. You might encounter this structure in industries home to highly skilled employees who might be their company’s only experts in their field.

These are the main advantages of a matrix organization:

• Supervisors have the flexibility to choose the best employees for a project.
• It allows a dynamic org chart with varying responsibilities for employees.
• Employees have the opportunity to learn and foster skills outside their primary roles.

These are some disadvantages of a matrix organization:

• There could be conflicts of interest between the needs for project organization and department organization.
• The organizational chart is prone to regular changes.

6. Team structure

A team structure is a decentralized but formal structure that allows department heads to collaborate with employees from other departments as needed. It is similar to a matrix structure, but the focus is less on employee fluidity than on supervisor fluidity, leading to a decentralized functional structure. Any industry in which flat or matrix structures are common might also be home to many companies with team structures.

These are the advantages of a team structure:

• The lack of compartmentalized labor drives productivity, growth and transparency.
• It prioritizes employee experience over seniority.
• It minimizes employee management tasks.

These are some disadvantages of a team structure:

• It could confuse employees, given the potential subversion of traditional executive and lower-level roles.
• It obscures the corporate ladder and may disincentivize employees from working harder to be promoted.

7. Network structure

A network structure is especially suitable for a large, multicity or even international company operating in the modern era. It organizes the relationships not just among departments in one office location, but also among different locations and each location’s team of freelancers, third-party companies to whom certain tasks are outsourced, and more. 

While this may sound like a lot for one type of network structure to detail, this decentralized structure can be useful for understanding the human resources your company has on hand. You’ll commonly encounter network structures among distributors, tech companies or logistics companies with international branches.

These are potential advantages of a network structure:

• It improves understanding of how functional roles are distributed among on-site employees, off-site employees, freelancers and outsourced third parties.
• It boosts flexibility for one department or location to delegate tasks to another.
• It drives employee communication, collaboration and innovation.
• It clearly outlines workflows and chains of commands in large businesses.

These are the possible disadvantages of a network structure:

• It’s complex, especially in regard to out-of-office processes.
• It’s vague as to which employee, department or office should make the final decisions.

8. Projectized structure

In a projectized structure, the focus is on one project at a time. In this centralized organizational structure, project managers act as supervisors, not just resource allocators and decision-makers. 

Unlike other structure types, a projectized structure involves the demobilization of teams and resources upon a project’s completion. But it’s like other types of organizational structures in that an obvious hierarchy exists. Software development teams may benefit from projectized structures given the complexity that can go into app or website development.

These are some advantages of a projectized structure:

• It fosters more efficient decision-making and communication.
• The sense of urgency around project completion increases employee cooperation.
• It increases employee flexibility and versatility.

These are some disadvantages of a projectized structure:

• The strict deadlines could increase workers’ stress.
• The power might be too strongly centralized with the project manager.
• It lacks the opportunity for long-term skill development among employees.

Below is a chart summarizing the eight types of organizational structures.

Which organizational structure is best?

No one organizational structure is best for all businesses. When determining the right one for your company, think about how much power you would like to give your employees, how much room you would like to leave for innovation, how large your company is and how much interaction among employees matters to you. After weighing these factors, you’ll likely know which organizational structure is best for you – and if you get it wrong, you can always switch to another organizational structure.

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8 Organizational design types

Designing an effective organizational structure is important for any business looking for operational excellence and sustainable growth. Here, we’ll explore the various types of organizational structures, their pros and cons, and provide a guide on how to design the best structure for your company.

Published by Orgvue   September 26, 2024

Home > Resources > article > 8 Organizational design types

What is organizational design?

Firstly, what is organizational design? It’s the process of structuring an organization’s roles, responsibilities, and relationships to achieve its objectives and improve efficiency.

An effective organizational design ensures that resources are fully utilized, decision-making processes are streamlined and employees are empowered to perform at their best.

What is organizational structure?

Organizational  structure, on the other hand, is the framework that describes how activities are coordinated and controlled within an organization. It defines the hierarchy of authority, decision-making processes, and communication channels. Essentially, it’s the blueprint that shapes how work gets done and how information flows within your company. 

Whether it’s a traditional hierarchical structure, a flat organization, or a matrix system, the chosen structure impacts everything from employee relationships to company culture and ultimately influences the efficiency and effectiveness of the organization as a whole. 

Understanding and designing the right organizational structure will help your business thrive in today’s dynamic and competitive environment.

Importance of organizational structure in business

Organizational structure is crucial for business as it serves as the backbone that determines how tasks are delegated, decisions are made, and information flows within the company.

A well-defined structure ensures clarity in roles and responsibilities, minimizing confusion and promoting efficiency. It also facilitates effective communication, both vertically and horizontally, fostering collaboration and teamwork. Moreover, the right structure aligns with the company’s goals and strategy, enabling the business to adapt quickly to industry or market changes.

Ultimately, a thoughtfully designed organizational structure not only enhances operational effectiveness but also contributes to a positive work environment and supports the overall success and sustainability of the business.

8 Types of organizational design

Functional structure.

A functional structure organizes a company into departments based on specialized functions, such as marketing, finance, human resources and production. Each department is managed by a leader who oversees their team’s activities and reports to the top management.

• Specialization: Employees can focus on their specific area of expertise, enhancing productivity and efficiency.
• Clarity: Clear roles and responsibilities reduce overlap and confusion.
• Accountability: Departmental heads are responsible for their team’s performance.
• Silo effect: Departments may become isolated, hindering communication and collaboration across the organization.
• Limited viewpoint: Employees might focus too much on their function, missing the broader organizational goals.
• Slow decision making: Interdepartmental coordination can be slow, affecting responsiveness.

Hierarchical structure

A hierarchical structure features a clear, top-down chain of command where authority flows from the highest level to the lowest. Each level of the hierarchy has a distinct level of responsibility and authority.

• Clear authority: Defined roles and responsibilities make it easy to understand who’s in charge of what.
• Efficiency: Streamlined decision-making processes within each level.
• Promotion path: Clear career advancement opportunities within the hierarchy.
• Rigidity: Can be inflexible and slow to adapt to change.
• Communication barriers: Information may get distorted as it moves up and down the hierarchy.
• Employee morale: Lower levels may feel disconnected from top management.

Flat structure

A flat structure, also known as a simple structure, minimizes levels of management, promoting a more decentralized approach. There are few or no middle managers between staff and executives, fostering a collaborative and inclusive environment.

• Agility: Faster decision making and more responsive to change.
• Employee engagement: Greater involvement and empowerment of employees.
• Cost efficiency: Fewer management layers reduce overhead costs.
• Role confusion: Lack of defined hierarchy can lead to unclear roles and responsibilities.
• Management burden: Managers may be overwhelmed with broad spans of control.
• Growth challenges: As the company grows, maintaining a flat structure can become difficult.

Divisional structure

A divisional structure segments the organization into semi-autonomous units or divisions, each focusing on a specific product line, market, or geographic area. Each division operates independently, with its own functional departments.

• Focus: Each division can focus on its specific market or product, improving performance.
• Flexibility: Divisions can adapt quickly to market changes and customer needs.
• Accountability: Clear responsibility for the success or failure of each division.
• Duplication: Resources and efforts may be duplicated across divisions.
• Competition: Divisions might compete for resources rather than collaborate.
• Cost: Maintaining multiple divisions can be expensive.

Matrix structure

A matrix structure blends functional and divisional structures, creating a grid where employees report to both functional managers and project or product managers. This dual authority system aims to leverage the benefits of both structures.

• Flexibility: Resources and skills can be allocated dynamically across projects.
• Collaboration: Encourages cross-functional teamwork and knowledge sharing.
• Efficiency: Combines the strengths of functional expertise and product focus.
• Complexity: Dual reporting lines can create confusion and conflicts.
• Power struggles: Managers may vie for control, leading to tension.
• Cost: Requires significant coordination and management effort.

Network structure

A network structure relies on a central core of key functions and outsources non-core activities to external organizations. This creates a web of relationships with partners, suppliers, and contractors, forming a dynamic and flexible organization.

• Flexibility: Easily adapts to changing business environments.
• Cost-effective: Reduces costs by outsourcing non-core activities.
• Focus: Allows the company to concentrate on core competencies.
• Control: Limited control over external partners and their performance.
• Dependence: Reliance on third parties can be risky if they fail to deliver.
• Coordination: Managing relationships with multiple external entities can be challenging.

Virtual structure

A virtual structure is an organizational system where employees are geographically dispersed and rely heavily on technology for communication and collaboration, functioning as a cohesive unit despite physical distance.

• Flexibility: High flexibility in work locations and schedules.
• Cost savings: Reduced overhead costs due to less need for physical office space.
• Access to talent: Ability to hire talent from a global pool.
• Communication challenges: Potential for miscommunication and lack of face-to-face interaction.
• Management complexity: More complex to manage and coordinate remote teams.
• Isolation: Employees may feel isolated and disconnected from the organization.

Process-based structure

A process-based structure organizes a company around its key processes, emphasizing end-to-end workflows and cross-functional teams to enhance efficiency and customer satisfaction.

• Efficiency: Streamlined workflows improve efficiency and reduce redundancies.
• Customer focus: Greater emphasis on meeting customer needs and expectations.
• Collaboration: Promotes cross-functional collaboration and teamwork.
• Complexity: Can be complex to design and implement effectively.
• Resistance to change: Employees may resist shifting from traditional roles to process-based roles.
• Coordination issues: Requires strong coordination and alignment across different processes.

How to design an organizational structure

Designing an effective organizational structure involves several key steps to ensure that the structure aligns with the company’s goals, promotes efficiency, and supports growth. Here’s a reference guide on organizational design to help you.

1. Define the organization’s strategy and goals

• Clarify objectives: Understand the long-term vision and short-term goals of the organization. Determine what the company aims to achieve in terms of growth, market positioning, and operational efficiency.
• Strategic alignment: Ensure that the structure supports the strategic direction of the company. The organizational design should facilitate the execution of the business strategy.

2. Analyze activities and processes

• Identify core functions: List all the critical functions and processes required to achieve the organization’s goals, such as marketing, sales, production, and customer service.
• Workflow analysis: Understand how tasks and processes flow within the organization. Identify dependencies, bottlenecks, and areas for improvement.

3. Determine the structure type

• Choose the right model: Based on the size, complexity, and nature of the business, select a structure type (e.g., functional, divisional, matrix, flat, or network).
• Evaluate pros and cons: Consider the advantages and disadvantages of each structure type in relation to the organization’s specific needs.

4. Define roles and responsibilities

• Job descriptions: Create clear and detailed job descriptions for each position within the organization, outlining roles, responsibilities, and required skills.
• Authority levels: Establish the hierarchy of authority, specifying who reports to whom and decision-making powers at each level.
• Succession planning: Incorporate succession planning to ensure that future leaders are prepared and that there’s continuity in strategically important roles.

5. Establish communication channels

• Information flow: Design communication pathways that facilitate efficient information exchange within and between departments.
• Collaboration tools: Implement tools and systems to support collaboration and knowledge sharing among employees.

6. Design reporting mechanisms

• Performance metrics: Define key performance indicators (KPIs) for each role and department to measure effectiveness and productivity.
• Feedback loops: Create mechanisms for regular feedback and performance reviews to continuously improve processes and address issues.

7. Plan for scalability and flexibility

• Growth considerations: Ensure that the structure can accommodate future growth and changes in the business environment.
• Adaptability: Design the organization to be flexible, allowing for quick adjustments in response to market changes or strategic shifts.

8. Implement the structure

• Change management: Develop a change management plan to guide the transition to the new structure. Communicate the changes clearly to all employees and provide necessary training.
• Pilot testing: Consider running a pilot test of the new structure in a smaller part of the organization to identify and resolve potential issues before full implementation.

9. Review and refine

• Continuous improvement: Regularly review the organizational structure to ensure it remains effective and aligned with the company’s goals.
• Feedback integration: Incorporate feedback from employees and managers to refine and improve the structure over time.

Factors influencing organizational design

Several factors influence the design of an organization, each shaping its structure, processes, and overall effectiveness. 

• Business environment and market conditions
• Business environment: Dynamic and rapidly changing environments may necessitate flexible and adaptable organizational designs.
• Market conditions: Competitive pressures and market demands can drive organizations to streamline operations and innovate their structures to remain competitive.
• Strategic goals and competitive edge
• Strategic goals: The organization’s long-term objectives and mission shape its design to align resources and efforts towards achieving these goals.
• Competitive edge: Maintaining a competitive advantage may require specialized structures that focus on innovation, customer service, or efficiency.
• Organization size and span of control
• Company size: Larger companies often require more complex structures with multiple levels of hierarchy to manage increased operations and workforce.
• Span of control: Refers to the number of subordinates a manager oversees, impacting the layers of management and degree of control within the organization.
• Organizational culture and employee feedback
• Organizational culture: The values, beliefs, and behaviors that define an organization influence its design, promoting structures that support the desired culture.
• Employee feedback: Input from employees can highlight inefficiencies and areas for improvement, guiding adjustments in organizational design to enhance satisfaction and productivity.

Common mistakes in organizational design

Designing an effective organizational structure can lead to operational success, but several common mistakes can undermine this effort:

• Overlooking the importance of communication channels
• Ineffective communication: Failure to establish clear communication pathways can lead to misunderstandings, bottlenecks, and reduced collaboration across the organization.
• Lack of transparency: Without proper channels, information flow can become opaque, hindering decision making and trust among employees.
• Inconsistent decision-making authority and power
• Ambiguity in roles: When roles and decision-making powers are not clearly defined, it can cause confusion, delay decisions, and create conflicts.
• Imbalance of authority: Uneven distribution of power can lead to micromanagement or even too much autonomy without proper oversight, both of which can be detrimental.
• Ignoring the alignment with business goals
• Misalignment with objectives: An organizational design that does not reflect the company’s strategic goals can result in wasted resources and efforts that don’t contribute to achieving key objectives.
• Disconnect with vision: If the structure does not support the company’s vision and mission, it can lead to demotivated employees and a lack of unified direction.

Examples of successful organizational design

• Why: Google’s flat hierarchy and emphasis on cross-functional teams promote innovation, agility, and open communication, aligning with its mission to foster creativity and user-focused solutions.
• Why: Zappos’ adoption of Holacracy, a decentralized management system, empowers employees by distributing authority and decision making, enhancing flexibility and responsiveness.
• Why: Netflix’s culture of freedom and responsibility, coupled with a minimalistic approach to hierarchy, allows for quick decision making and encourages a high-performance environment focused on innovation and customer satisfaction.
• Why: Spotify’s “Squad” model, which organizes employees into small, autonomous teams, encourages agility, innovation, and a strong sense of ownership over projects, aligning with its fast-paced industry demands.
• Why: Amazon’s focus on small, independent “two-pizza teams” ensures that teams remain agile and efficient, driving continuous innovation and customer-centric solutions.

Implementing the right organizational structure for your business

Understanding and implementing the right organizational structure can significantly improve your business’s efficiency and agility.

For a tailored approach to organizational design, Orgvue can offer comprehensive solutions that align with your strategic goals, ensuring your company is structured for success.

Organizational design

Use Orgvue to streamline your organization.

How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

Best Organizational Structures for a Business

Blueprints on how companies are run and how information is passed within the organization

What are the Best Organizational Structures for a Business?

Organizational structures are essentially blueprints that reveal how companies are run and managed and how information is passed within the organization. An organizational structure is literally a chart or diagram that depicts the logistical organization of a company.

Finding the most appropriate organizational structure for a business depends on a number of factors. Below are three of the most important factors to consider in choosing among the best organizational structures for a business:

• The industry the company fits into
• The overall size of the company
• The company’s goals (what it hopes to achieve, whether that be in terms of finances or how the company intends to be of service to its customers)
• Organizational structures are essentially blueprints that reveal how companies are run and how information is passed within the organization.
• Traditional line organizational structures are simplistic but rigid. It can take a good deal of time for information to pass through the company, with each link reporting to ONE direct supervisor. Such a structure is best suited to smaller companies.
• Functional organizational structures are similar to line structures; however, each tier may share information and offer direction horizontally (to one another). This structure is ideal for large companies with many departments and for those companies that need to meet strict deadlines.

Types of Organizational Structures

1. traditional.

A traditional line organizational structure is truly the place to start for most companies, especially the smaller ones that don’t necessarily comprise a vast number of departments or require a major number of links in the chain of command/communication. The image above is an example of what a traditional line organizational structure looks like.

With the traditional structure, simplicity is the primary distinguishing feature. It is a top-down approach. Direction and communication start with the head of the company (in this example, the company is led by the chief executive officer ). The next tier or link in the chain is a director. This is the individual (or office) that oversees a department or segment of the company. Finally, within each department, there are managers and employees.

With the traditional line organizational structure, the process of communicating information is very much narrowly focused. All information starts at the top and is passed down, typically from one individual to the next. While the practice keeps things simple, it’s a rather rigid organizational structure and, because there is no horizontal sharing of information, it can take a substantial amount of time to process information throughout the company. The traditional organizational structure is best suited to small businesses that, again, comprise a fairly small number of departments and a limited number of employees.

2. Functional

The image above reveals what a functional organizational structure looks like. It differs from the traditional line structure by means of the existence of established channels for the horizontal sharing of information and direction, with a substantial increase in the sheer number of lines of communication .

With the traditional structure, individual employees communicate directly with their immediate supervisors. With the functional structure, however, employees often communicate with individuals whose control they don’t fall immediately under.

The functional type of organizational structure is ideal for larger companies with a lot of departments and for companies that need to meet short timeframe deadlines.

3. Project-based

One final organizational structure to look at is the project-based structure. It breaks a company up into groups based upon the projects it needs to complete. There is, of course, a primary leader – the director. Then, there is a manager appointed to oversee the team assigned to complete each project.

The project-based structure features the best of both the traditional line and functional organizational structures: it’s simple, with the first tiers answering only to a direct supervisor. The final tier is the team responsible for completing whatever project is set before them. However, each member of the team can easily get information and assistance from the other members.

Related Readings

Thank you for reading CFI’s guide to the Best Organizational Structures for a Business. To keep learning and advancing your career, the following CFI resources will be helpful:

• Forms of Business Structure Course
• Board of Directors
• Key Performance Indicators (KPIs)
• How to Assess Effective Management
• Types of Organizations
• See all management & strategy resources
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Design Your Organization to Match Your Strategy

by Ron Carucci and Jarrod Shappell

Summary .   

An organization is nothing more than a living embodiment of a strategy. That means its “organizational hardware” (i.e., structures, processes, technologies, and governance) and its “organizational software” (i.e., values, norms, culture, leadership, and employee skills and aspirations) must be designed exclusively in the service of a specific strategy. Research suggests that only 10% of organizations are successful at aligning their strategy with their organization design. Some of the problem is a gross misunderstanding of what the word “alignment” actually means in this context. When it comes to executing strategy, alignment means configuring all of the organization’s assets in the service of your stated strategy and making sure there is no confusion about what each part of the organization does to bring it to life. If you’re embarking on executing your company’s strategy, here are six ways to make sure your organization is designed to do it successfully.

Strategy execution is commonly fraught with failure . Having worked with hundreds of organizations, we’ve observed one consistent misstep when leaders attempt to translate strategy into results: the failure to align strategy with the organization’s design.

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City of Peterborough launches interactive Official Plan Map

Peterborough, ON – The City of Peterborough is pleased to launch a new interactive web mapping application that provides residents and stakeholders with easy access to visualize the City’s recently adopted Official Plan. This innovative tool is designed to enhance public engagement, transparency, and understanding of the City's strategic vision for growth and development.

The Official Plan Map Viewer takes information about growth areas, infrastructure and natural heritage systems from the Official Plan document and applies them to geographic information about the City. The interactive map, developed by the City’s Geomatics/Mapping Division, is available at peterborough.ca/OfficialPlanMap .

Using information from the Official Plan, this new mapping tool gives the user the ability to filter based on Official Plan Schedules, providing information about land use, road and trail networks, and natural heritage systems. Users can also search by address to see which schedules of the Official Plan apply to a given location.

The Official Plan is the City’s key planning document that guides long-term growth and development throughout the City. It describes the goals, objectives and policies that guide land use decisions. Learn more about the Official Plan at peterborough.ca/OfficialPlan .