Organizational Structure

1. Understand why an organizational structure is necessary. 2. Understand organizational principles. 3. Explain the guidelines for organizing a small business. 4. Describe the different forms of organizational structure and how

they apply to small businesses.

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Organizing consists of grouping people and assigning activities so that job tasks and the

mission of a business can be properly carried out. The result of the organizing process should be

an overall structure that permits interactions among individuals and departments needed to

achieve the goals and objectives of a business. [1] Although small business owners may believe

that they do not need to adhere to the organizing principles of management, nothing could be

farther from the truth.

Principles represent guidelines that managers can use in making decisions. They are

not laws etched in stone. At times, principles can be used exactly as the way they are

stated; at other times they should be modified or even completely ignored. Small

business owners must learn through experience when and where to use

[the] principles or to modify them [emphasis added]. Principles when used

effectively and in the right context often bring organizational efficiencies and thus

result in the growth of the business. Some organizing principles…would apply to

small businesses as well as they would to large enterprises and would lead to similar

benefits. [2]

There is no single best way to organize. Rather, the organization decision is based on a

multitude of factors, including business size, market, product mix, competition, the number of

employees, history, objectives and goals, and available financial resources. [3] Each small

business must decide what organizational design best fits the business.


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