Organizational structure and business functions are two important concepts in business management. While they are related, they are not the same thing.
Organizational structure refers to the way in which an organization is structured. It defines the relationships between different parts of the organization, such as departments, teams, and individuals. The organizational structure also determines how information flows within the organization and how decisions are made.
Business functions are the activities that an organization performs in order to achieve its goals. These functions can be broadly categorized into three main groups:
- Operations. These functions are responsible for producing and delivering the organization’s goods or services.
- Management. These functions are responsible for planning, organizing, and controlling the organization’s activities.
- Support. These functions are responsible for providing support to the operations and management functions.
Organizational structure in a typical business
Every organization that is made up of more than one person will need some form of organizational structure – how a company is organized. Companies which are owned by shareholders choose directors to look after their financial interests. The directors then appoint managers to run the business on a day-to-day basis.
The traditional way of organizing structures of the business is based on different functions as it is often the best way of communicating and organizing – specialists are able to focus on their specializations under the supervision of specialist managers. An organizational chart shows the way in which the chain of command works within the organization.
- Chief Executive Officer (CEO), or Managing Director, has the major responsibility for representing the company as well as keeping an eye on all departments.
- Production Manager is responsible for keeping a continuous supply of work flowing to all production workers and organizing manpower to meet the customers’ orders.
- Distribution Manager is responsible for controlling the movement of goods in and out of the warehouse and overseeing the transport of goods to and from the firm.
- Sales Manager is responsible for making contact with customers and obtaining orders from those contacts to sell the products.
- Accountant controls all the financial dealings of the company and is responsible for producing management accounts and financial reports.
However, this may not be the only way of organizing the business organization. Other organizations will have different structures.
For a number of projects cross-functional teams may be set up. In developing a new product line, it makes sense to set up a team containing specialists from marketing, advertising and sales, production as well as finance and accounts. Once the project is completed, these specialists can then go back to concentrating on their own specialist area or they may be pulled into another cross-functional project.
When specialists have many line managers, they may be organized in a matrix structure which is a structure with more than one line of command. Individuals who make up the matrix may be accountable to two or more managers depending on the complexity of the matrix. A production line worker may both be accountable to the production manager and to the project leader for new product development.
Business functions in a typical business
In the past, many manufacturing businesses were divided up on functional lines and this is still the case today in many organizations where it makes sense to create distinctive departments in this way. The functions of a business are the key specialisms divided up into marketing, accounts and production.
Clearly the most important department in a manufacturing company is often the production department. In individual factories there may be a works or factory manager with overall responsibility for organizing and managing the production function. Then, there may be production managers for each of the product lines.
However, in addition to the production function, there will be other functional specialisms such as the advertising and sales department. In most organizations, a marketing department responsible for market research and marketing planning. And, a customer services department will look after customer requirements.
A Human Resources (HR) department will be responsible for recruitment and selection of new employees, employee motivation and a range of other people focused activities.
The finance and accounts department will handle money-related matters.
In addition, there will be a number of cross-functional areas such as the administration department and Information Technology departments that service the functional areas of the company. These departments will provide back up support and training.
To sum things up, the organizational structure of an organization should be designed to support its business functions.
