The key for successful organizations
is how well the organization
An apt analogy for the organization structures of many family businesses is that they are akin to an old country house that was built one room at time.
As the family grew, so did the house. At the time, little thought was given to how functional or how efficient the floor plan was - what drove the design of that old country house was expediency - not a thoughtful design process. So as the house grew in size, it became ever more inefficient.
With family-owned businesses, the awful truth is that most are very poorly organized. Many family businesses never achieve the true potential of their business because ...view middle of the document...
â€¢ Some departments operate like political fiefdoms.
â€¢ Customers are complaining about service and quality.
â€¢ Competition is taking more and more business from you.
â€¢ Managers do not plan - they just move from one crisis to another.
â€¢ Change in your family business moves glacially.
It doesn't have to be that way!
If you have concerns about the organization structures of your family business, contact us. We can help!
Very often the first step in getting the business better organized involves getting the family better organized. That is our business!
We would like to present five of the traditional organization structures. Each has some specific advantages and each has some disadvantages. But regardless of what organization structures you use, remember, to work well, they must be well organized.
To select the best organization structures, first consider your firm's strategic intent, then adapt the organization structure that best supports that intent.
Of course, it rarely happens that a family business adopts any one of these organization structures exactly. The reality is that form changes and adapts over time as strategies change and reporting needs change. Growth in the structure can happen vertically [adding additional reporting levels in the organization] or horizontally [adding new functional or divisional responsibilities].
Organizations with relatively few reporting levels are known as flat organization structures and usually have decentralized control, while those with many levels are known as tall organization structures and usually have more centralized control.
Five Formal Organization Structures
â€¢ small size,Â single-product line
â€¢ undifferentiated market
â€¢ scale or expertise within the function
â€¢ long product development and life cycles
â€¢ common standards
â€¢ hybrids in large organizations may follow structure by division or business unit
â€¢ Centralized control of strategic results
â€¢ Very well suited for structuring a single business
â€¢ Structure is linked tightly to strategy by designating key activities as functional departments
â€¢ Promotes in-depth functional expertise
â€¢ Well suited to developing functional skills and functional based competencies
â€¢ Conducive to exploiting learning/experience curve effects associated with functional specialization
â€¢ Enhances operating efficiency where tasks are routine and repetitive
â€¢ Excessive fragmentation of strategy-critical processes
â€¢ Can lead to inter-functional rivalry and conflict, rather than team-play
â€¢ Multi-layered management bureaucracies and centralized decision-making slow response time
â€¢ Hinders development of managers with cross-functional experience because the ladder of advancement is up the ranks within the same functional area