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Most businesses and organizations have a system by which they govern themselves and dictate operations. The role of organizational structure is to provide this system, along with a measure of checks-and-balances in a company. Different types of structures exist in the private and public sectors of an economy. A company is often able to create its organizational structure and define its role based on size, needs and other factors. The factors that affect this structure include function, geography, products and customers.
Without a well-defined role of organizational structure, most companies or institutions would be a collection of chaotic activities. Organizational structure typically defines the head that guides a company and provides links to all individuals. For example, a public company will often have shareholders, a board of directors and chief executives at the company’s head. The links that follow include operational managers, supervisors and employees. Organizations that are considered to be "tall" have more management layers than "flat" organizations.
The most common role of organizational structure is to define who is responsible for whom. For example, a functional structure often separates a company into departments, defined by functions. These include functions such as accounting, production, marketing, human resources or others that are necessary to run the company. In most cases, a manager is at the head of the function, followed by employees who handle specific functions. Changes are necessary when new functions start or old functions go away.
Companies often have flexibility when defining the role of organizational structure. These often include roles that include a focus on geography, products or customers. A geographical structure separates a company into roles that have restrictions based on physical location. Product structures include dividing lines on the products or product lines that a company manufactures or sells. The customer role of organizational structure typically has divisions along the line of individual consumers, government agencies and private-sector businesses.
Through these basic and well-defined roles, an organization expects to produce goods and services in an efficient and effective manner. This provides the business with the ability to remain competitive in the economy and achieve high levels of sales or profitability. Although for-profit businesses typically have singular goals in mind for their operations, other organizations might not have these same goals. The role of organizational structure is again flexible. The organization can create or define a role for whatever purpose is at hand, whether offering public services or bettering the community around the organization.