Why Is Organizational Structure Important?

There are a number of factors that differentiate small-business operations from large-
business operations, one of which is the implementation of a formal organizational
structure. Organizational structure is important for any growing company to provide
guidance and clarity on specific human resources issues, such as managerial authority.
Small-business owners should begin thinking about a formal structure early in the growth
stage of their business.

Purpose

Organizational structure provides guidance to all employees by laying out the official reporting
relationships that govern the workflow of the company. A formal outline of a company's structure
makes it easier to add new positions in the company, as well, providing a flexible and ready means
for growth.
Significance

Without a formal organizational structure, employees may find it difficult to know who they
officially report to in different situations, and it may become unclear exactly who has the final
responsibility for what. Organizational structure improves operational efficiency by providing
clarity to employees at all levels of a company. By paying mind to the organizational structure,
departments can work more like well-oiled machines, focusing time and energy on productive
tasks. A thoroughly outlined structure can also provide a roadmap for internal promotions,
allowing companies to create solid employee advancement tracks for entry-level workers.