Common Organizational Structures Seen in Small Businesses

Small business can only run smoothly if they have an organized structure. However small your business might be, it needs a definite shape to make it more methodical. If you ignore organizing your small business in the right way, it might be all over the place and not deliver according to its potential.

Organized structures help small businesses implement their strategies in a more channelized way. Everyone starts small at one point of time after all, but their growth depends on many factors, one of them being organizational structure. When you formally structure the chain of command, responsibility and accountability is imbibed by the employees and operations become more target oriented. Normally, small businesses start with a typical structure, some of which are discussed below.

Common Organizational Structures Seen in Small Businesses


1. Universal functional structure

Functional means structuring your manpower according to their “function”. It is the age-old hierarchy that involves segregation according to the job role of an employee.This structure has a group of people under the same category who have a common target to achieve. Such a structural division keeps the employee clear about their job role from their very name of the assigned designation.

For example: the functional designation called “Sales Manager” would clearly point out the employee`s role and responsibilities for the organization. This structure also keeps the management clear about their employee`s contribution.

2. Division based structure

This structure divides the employees by either defining their region or product. Such structuring is more appropriate if your business hierarchy is spread over different regions or sells multiple products. An area-wise division gives each employee a unique job description, even though they might belong to the same department.

For example: A marketing department of one company can have multiple marketing executives, who individually handle different regions of the company`s operations. Such a structuring style not only has a functional angle but also brings in the divisional aspect to a job description.

3. Matrix structure

This structure divides the employees into teams and assign them each with a team lead. Itis an easier structuring and does not require multiple designing of designations. As per this structure, one employee can have multiple functions as assigned by the team lead. However, each team handle specific projects individually. It is quite decentralized and might get more confusing for the management when the business grows and employs more employees.

4. Rotational structure

Many businesses begin with a certain kind of structure and later keep changing it to see what works best for their kind of business. Small businesses in the beginning do not need to think of detailed structuring since they have very limited employees. However, as they keep growing and increasing their team, they begin to pay more heed to formal structuring.

For example: A local business may start with a functional structure initially and move to divisional one when they spread to other countries/states/cities etc. Rotational structuring is a need-based trial and error sort of method that many small business owners implement.