Proper Organization Structure

There are many factors that go into determining a company's proper organization structure. For example, sometimes proximity is important in developing an organization structure. Therefore, a company will adopt a geographical organization structure to better service regional customers. Sales forces are often centered around geographical structures. Marketing departments may also be decentralized because customer preferences vary greatly by region. Proper organization structure can also vary between companies of various sizes.
A flat organization structure may be the proper one for a small company. Small companies typically have very few levels of management. Therefore, most employees are only several levels down from the president or CEO. Additionally, larger companies may require a taller organization structure. Numerous managers may be needed to manage various project tasks. For example, an advertising vice president may oversee the budget, but he may delegate the ad schedule to the advertising director.
Identification

Example of Organization Structure

Sometimes, a customer- or market-oriented organization structure is appropriate. Companies that service a diverse group of customers may need to structure their organization by customer type. For example, a small electronic payment company may offer services to consumers, corporations, financial institutions and health clubs. Consequently, the owner may deem it proper to have a separate sales, marketing and financial management team for each customer type.
Types
"Functional" and "product" are two major organization structure types. A functional organization structure may be the proper one to use if a company needs to efficiently group knowledge, skills and resources. Consumer products companies often have management teams reporting to vice presidents of marketing, finance, accounting and engineering. Grouping marketing people together creates the synergism of experience necessary for evaluating a new advertising campaign. A product organization structure may be the proper one to use for companies that sell a variety of products. For example, department stores often divide departments by housewares, sporting goods and women's clothing. Product expertise is important for companies that use product organization structures.
Benefits
There are inherent benefits in using the proper organization structure. Larger companies may enhance the decision-making process by organizing their company by function. For example, marketing people would make decisions related to marketing research and product management. Additionally, the financial team would oversee the budgets of all departments. Communication may also be the impetus behind a proper organization structure. Smaller companies may want to maintain an "open door" policy between executives and lower-level employees. Small companies are often constantly dependent on high levels of feedback as the company grows.
Considerations
A matrix organization structure may be the proper one for ad hoc or temporary projects. Matrix organization structures combine two or more organization structures. Companies will sometimes create a hybrid organization structure combining both functional and product-oriented duties. For example, a small dairy company may develop a cross-functional team to manage a new product introduction.