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How to Define Organizational Structure in Your Business Plan

Your company’s success hinges on the quality of the people around you, but it also depends on having an organization in your business plan that allows those people to work effectively and efficiently. By defining your organization, you define the relationship of employees to one another — who reports to whom, for example. You also define each employee’s access to important company resources.

Organization is a pretty straightforward issue for small companies, but in large companies, organization is more complicated. And if you don’t plan well, it can undermine the efforts of even the best staff.

Consider the saga of one of the biggest online health information and management companies. Part of the firm’s early strategy was to gobble up smaller online information providers, acquiring their assets and eliminating competition. Trouble was, each of these small companies had its own organizational structure and editorial procedure.

Before long, groups within the larger organization were unnecessarily duplicating efforts. No one was sure who was supposed to report to whom, and the company lost editorial control over the site. What’s more, content that should’ve taken only three weeks to produce began to require six and seven weeks. The result: The company bled money. The lesson: Organization matters.

To make the task of selecting an organizational model a bit easier, here are four basic models to consider, each one most appropriate for a specific company size.

You won’t find an absolute right or wrong way to organize your business, so use your instincts to come up with your organizational plan. And remember: An organization is a living thing that changes with business circumstances. Reevaluate your organizational structure if your company experiences rapid sales or staff growth, adds divisions or product lines, alters its production processes, or struggles to meet goals and objectives under its existing structure.

Your written plan needs to include a section on your company’s organization. Use charts or diagrams to help make a complicated organization a little clearer. For example, an organization chart can quickly illustrate who reports to whom or how the company’s divisions relate to one another. Don’t get hung up in the details; your goal is to present a coherent presentation of what your company’s organization looks like — and why.

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