Importance of (good) Organizational Structures PDF Print Email
Written by Vladimir Collak   
Friday, 06 July 2007

In the world of business, there are no guarantees for success. No matter how many resources, how many experienced managers, and great products does a business have, the results can still be disastrous. Though there are no guarantees in the world of business, there are several things a business can do to strive for survival. One of the keys for such survival is the organizational structure of a business. Though a structure varies from business to business, in general an organizational structure needs to be flexible, focused, and streamlined.

The business world as the real world is; full of constant change. There is only one constant in the world and that is change. A perfect organizational structure today maybe a failure of tomorrow. Any organizational structure that is not flexible, or at least willing to change is doomed for death. A perfect example of this theory is the economy and the businesses of the former eastern European countries. The businesses in Eastern Europe were for years controlled by governments. Because of inflexibility of the government itself, most businesses in that region were in decay after the fall of communism.

For years, the organizational structures, processes, and operations of these companies would not change. When the time to compete with western counterparts came, these businesses could not even begin to compare. To fix the problem, a radical change was necessary. For example, in Slovakia at the end of 1997, Eat Slovak Ironworks (VSZ) was in the path of destruction. The saving grace of the company became Pittsburgh-based US Steel, which acquired VSZ in 1998. US Steel’s first task was getting rid of exclusive suppliers. By introducing competition in the supply chain, the cost of inputs was lowered. Secondly, the level of management was streamlined making the organization more flexible. Another tribute to flexibility is Nav Canada – a private air traffic controller of Canada’s air space. As in many countries, the air-traffic service was always controlled and operated by the government. In 1995, the Canadian government relinquished the control over its airspace to a privately held corporation known as Nav Canada. The upcoming years were a battle of organizational restructuring. Prior to privatization, the organization was mismanaged as many governmental organizations are; the personnel was rigid, micromanaged and often a conflict of interest was prevalent. Nav Canada centralized the management, slimed down the organization, and improved the communication process. The changes brought more flexibility to the organization as well as profitability and lower costs. Without flexibility, no organization can survive long term. In addition to flexibility, a focused organizational structure is necessary for an organizational success.

In the era of information age, news and information travels as fast as the click of a mouse. Managers are constantly bombarded by new ideas, a new sure way of fixing any organizational problems, a sure hit for success. Without focus, managers tend to jump around from one next big thing to another never really improving health of their organization. When