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How to Choose the Right Organization Structure for a Startup


Business organizational structure


During the conceptualization stage, one of the most critical aspects to consider is your fledgling organization's operational structure. From the beginning, you must visualize the way you want your organization to function and evolve. That said, how do you determine the ideal structure for your startup?


What is Organizational Design?


Organizational design is an in-depth analysis of processes to find the best design for your organization's needs. The analysis can comprise anything from reviewing configurations of authority (and accountability) to analyzing technology for day-to-day tasks.


The Importance of Organizational Design


Choosing the right organizational structure for your startup ensures that you have a comprehensive road map from Day 1. Clear expectations will allow you to guide your organization toward a purposeful goal. 


How to Recognize a Purposeful Organization


With so many different types of businesses, how can you know what a purposeful organization looks like? Although companies may operate differently, organizations with purpose will share the following characteristics:


Employee engagement. Employees in a purposeful organization have a sense of ownership and direction. They feel empowered to make changes that benefit the company, and they are confident in their communications with other employees, management, and customers.


Clear Goals and Expectations. Employees understand what is expected of them individually and as a group. They trust that the organization is looking out for their best interests, and they understand its overarching goals. Policies and procedures should exist to guide, not to limit employees.


Timely resolution to problems. An excellent gauge of the effectiveness of an organization's structure is the speed with which problems are resolved, both inside and outside the company. Speedy solutions come from a well-formed and functional organization. 


What Are the Critical Elements of Organizational Design?


Be sure that you and your organizational design consultant consider the following critical elements when designing your startup's structure:


  • Efficiency: Workers are assigned specific tasks and responsibilities to facilitate optimum productivity levels.

  • Flexibility: Managers can leverage both a centralized or decentralized structure as the market demands.

  • Accountability: A clear chain of command promotes operational efficiency.

  • Communication: Expectations are communicated clearly to all employees.


Types of Organizational Structure


Once you have determined the goals of your startup's organizational design, you'll need to consider the type of organizational structure that best suits your business. The organizational structure will determine the flow of authority and accountability within your company's operational framework.


In his 2015 Forbes series "The Five Types of Organizational Structure," Jacob Morgan provides a helpful explanation of the different types of organizational structures and their applications in several industries. 


Hierarchical Structure


The hierarchical structure is probably the most well-known form of organizational design. It employs a pyramid chain-of-command structure. You have a leader or small group of managers at the apex, with each successive downward level decreasing in authority.


This is still the most common operational structure, especially in established corporations. Adaptations to conventional hierarchical structures generally emphasize a "flatter" pyramid with more decision-makers across the organizational framework.


This approach is conventional but clearly delineates expectations for everyone. As a result, employees feel a deeper sense of ownership and relevance within an organization. It has been adopted by several successful international corporations, including Cisco, Whirlpool, and Pandora.


Horizontal or Flat Structure


On the opposite end of the spectrum is the flat structure, which eschews the idea of hierarchy entirely and places every employee at the same level. There are no managers or supervisors, and everyone has an equal say and equal share of responsibility in outcomes.


This structure is useful for smaller organizations, such as tech startups, where such freedom can bolster innovation. However, a revised, more efficient structure may be required as the organization grows.


"Flatarchy" Blend of Management


A "flartarchy" is a management strategy that involves creating smaller project-oriented groups under different management structures. This approach combines both flat and hierarchical structures. For example, a strictly hierarchical organization can create a specialized, flat-structure group in which hierarchical authority doesn't apply.


Conversely, a flat-structured organization can create ad hoc project groups with hierarchical structures that apply only within those groups. This form of organization can be an effective vehicle for innovation and has been employed successfully at Google and LinkedIn.


Holacracy 


A holacracy is a relatively new organizational structure employed most famously by Zappos and Medium. It combines the above management styles and allows employees to play to their strengths. Although there's a hierarchical management structure in place, it isn't a set one. A holocracy focuses on harnessing each employee's potential to the fullest through the vehicle of self-organized teams.


The idea behind holacracy is to put power (and initiative) into the hands of the employees, while still retaining a measure of hierarchical structure.


Improve the Utilization of Resources to Support Critical Business Processes


With an array of organizational design choices available to you, deciding on the right structure for your startup can be a complicated process. It helps to have professional advice you can trust. Our expert consultants at GRBA LLC have helped more than 1,000 startups design, develop, and launch unique products and services around the world. To learn how you too can benefit from our expertise, contact us today to craft a plan for your success! 

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