Reorganisations, restructures and other major changes

Different business structures: by function and area

Every business, from the sole trader to the largest company, is organised in a particular way. You should review this structure regularly to ensure that it fits the objectives of the business.

Businesses can be organised by:

• function
• geographical area
• product
• project

Function

Businesses are traditionally organised into departments according to their role. Individuals, teams and line managers in sales, for example, will be grouped together and report to the head of department, ie the sales director.

The advantages of this type of structure are:

• specialisation - departments focus on one area of work
• accountability - there are clear lines of management
• clarity - employees understand their and others' roles

The disadvantages are:

• closed communication - the sales team may not interact much with other departments and be unaware of how their work affects or can be informed by the activities of other departments
• co-ordination may become difficult
• departments may become resistant to change

Area

Some businesses organise their activity according to geographical area. This is common in large multinational companies but it might be appropriate for medium-sized businesses, eg a group of taxi firms, a small retail chain or a fast-food chain with branches, as each site can operate according to local demand but still be directed by business policy.

The advantages are:

• divisions can better serve local needs and communicate with local customers
• you can encourage positive competition between departments

The disadvantages are:

• there may be conflict between local and central management
• potential duplication of resources and functions

See the page in this guide on the different business structures: by product and project for information on organising your business according to products or the matrix theory.

Subjects covered in this guide

• Introduction
• Reasons for changing the way your business is organised
• Different business structures: by function and area
• Different business structures: by product and project
• The importance of planning and communication
• Managing people
• Implementing change
• Systems for delivering change
• Financial considerations
• Special considerations for change
• Here's how I changed my management style as my business grew

 

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