How can organisational structure and culture affect business performance?

by Georgia Parker | Sep 14, 2021

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Even if you haven’t heard of organisational structure (also known as an  ‘organogram structure’ or simply ‘org structure’ for short), the chances are you have one. An organisational structure outlines the hierarchy within an organisation, describing the roles, responsibilities and chains of command that exist within your company. Having all of this clearly defined with your business goals in mind is one of the essential ingredients in the recipe for business success.  

The factors that influence organisational culture can be varied and numerous and knowing which type of structure to install within your business can be tricky without expert knowledge and guidance to support you.  

So how does organisational structure affect culture and how could making positive changes boost business performance? We’ll answer this question in this article. 

Types of organisational structure

First things first, it’s important to establish that there are different types of organisational structure – a good number of them, in fact. The way a company is structured varies and largely depends on its size, goals and industry. Implementing a structure that adds value and aligns with your vision and objectives is crucial. Some of the main types of organisational structure include:

Hierarchical structure

A hierarchical structure is the most common type of organisational structure out there. At its most basic level, it involves employees being grouped and assigned a supervisor – these groups can be determined by skillset, function, types of products/services or geography. This is a classic pyramid-style structure (in a business sense – not to be confused with MLM or network marketing – those are different types of structure altogether!) Leadership at the top expands down through multiple levels of supervision and management.

Functional structure

Within a functional structure, an organisation is divided into groups by roles, responsibilities or specialisms. Functional structures are popular and well-used – think of the many companies who work in this way with a finance department, marketing department, customer services department etc. This structure establishes clearly defined roles and expectations and compartmentalises different aspects of the business clearly.

Flat structure

Flat structures operate with middle management removed, meaning there’s little separating staff-level employees from the leadership. Employees generally take on more responsibility within this structure and have greater decision-making power, as it strips away hierarchical pressures and supervision, often enhancing productivity and employee confidence.

Matrix structure 

To understand the matrix structure, think of your company as a grid in which employees with similar skills are grouped together and report to several managers – usually a project manager and a product manager, who monitors strategy and success. Matrix structures are often employed by larger multinationals and can be especially useful in the creative industries as they encourage skills sharing and knowledge blending across departments in order to fulfil company goals.

Divisional structure

In divisional structures organisations are split into subsets based on specific services, products or geographical locations. This type of structure is often used by blue chips, sizable franchises and large multinational firms to enable them to provide clear order to each area. Every division has its own leadership, departments and resources so they operate independently but with cohesion and overall direction coming from the same source. 

There are many types of organisational structure and what works well for one company won’t work well for another. Many factors influence the suitability of one structure over another – so it’s vitally important to have a good understanding of your company culture and how making changes could positively or negatively impact your business as a whole. To do this, you could assess your organisational culture through surveys, Cultural Values Assessments, interviews and more. 

Which structure is best for a positive culture?

As you may have guessed, there’s no straight ‘one size fits all’ answer for this question.

A few things you might want to consider when determining which type of company structure could work best for you include:

  • What type of company do I have and what type of structure best serves my organisation and goals?
  • What do I want to achieve through implementing a new organisational structure?
  • How long will organisational structure change take – and what impact may that have on the business in the short term?
  • What company culture do I currently have/want to have?
  • Is there anyone who can help me to implement this change smoothly and successfully?

Organisational structure influences culture – so getting this right and having a solid appreciation and understanding of your structure and what it does for your business is key.

How does organisational culture affect performance & OKRs?

Your company culture encompasses everything you do and how you do it – from the talent you recruit to responsibilities, leadership and more. So culture naturally influences and impacts your business performance and the likelihood of achieving your objectives.

If you’re looking at implementing OKRs within your business, it’s crucial to look at your company culture alongside them and determine if how things currently are will help or hinder you on your way to achieving those goals.

Speak to us today for friendly, expert advice on OKR implementation and management, corporate culture change and more.