Business Organization – What is it and Why Is it Important?


Organizational structures that are inefficient or a poor fit for the industry will get in the way of delivering the results your business is here to provide. Unnecessary complexity or outright confusion on the structure of the organization slows down decision making. A lack of clear chains of communication interferes in the sharing of ideas, best practices and mission critical information. But what is business organization exactly? And why is it important?

What Is Business Organization?

The business organization is the structure the business follows. This includes but isn’t limited to how business functions are divided, the roles that people are assigned, how decisions are made, how business functions are coordinated and how tasks are delegated. The business structure is the formal system of task and activity relationships. This explains how people coordinate actions and use resources. A lack of a formal organization leads to confusion regarding responsibility and roles, and it interferes with accountability and even reporting.

What Is Organizational Design?

Organizational design is the process by which management selects the structure of the company so that it can control the activities necessary for the effective function of the organization.

A good organizational design includes a clear chain of command without being overly bureaucratic, and the ability to deal with contingencies. Businesses also need to be able to alter their organizational structure as necessary, because the business environment is constantly changing. Organization design consulting services such as those from ON THE MARK can help businesses to determine the best type of organizational design for their situation and advise them on how to make the transition as smoothly and quickly as possible.

Why Is Business Organization Important?

The silo mentality and associated turf battles are among the worst problems a business can face. If you can’t communicate problems to people who can find solutions and arrange the resources necessary to solve them, this puts the future of the organization at risk.

It is expensive in terms of time, labour and money to change organizational structures if you’ve made a mistake. An efficient and effective organization will deliver on its promises. This can help them attract and retain skilled employees.

For example, when managers don’t have clear roles for their employees and instead add on new roles, it overwhelms the employee while interfering in what was their original job. The solution is to instead have clear roles for each employee and hire a new person when you need a new skill set.

Streamlining or updating the organizational structure of a business may allow a business to deliver products or services faster, cheaper or better. Changing the organizational structure is often necessary to handle expansion into new countries or properly outsource key functions and work. In other cases, evolving from a manufacturer to include other services requires massive organizational change.

Organizational design is the backbone of your business. If the bare bones structure is lacking or poorly assembled, everything may fall apart. It is possible to make changes to an existing structure, but it is less painful to design an organization for success from the very start.