High angle shot of a businesswoman explaining a concept during a presentation to work colleagues in a boardroom.
A company organizational structure helps ensure clarity and effectiveness for roles, responsibilities and chain of command in a company. — Getty Images/PeopleImages

A company reporting or organizational (org) structure helps employees stay organized, work productively and coordinate to achieve the overall mission of the business. The reporting structure provides clarity when an employee faces an issue: who should they go to for help? Who should they approach for a key decision?

An effective reporting structure also creates checks and balances to help ensure the business is compliant and staying on budget. Here’s how to set up a reporting structure that is clear and efficient and keeps your business running smoothly.

[Read more: How to Structure Your Management Team]

Define how you want your business to run

There are many ways to structure your chain of command. Understanding which model works best for your business requires zooming out on the big picture. The purpose of an organizational structure is to help you define how your business is going to run — starting with three key elements:

  1. Chain of command: How are tasks delegated, and how is work approved?
  2. Span of control: Who manages which employees, and what tasks fall under that department’s responsibilities?
  3. Centralization: Where are decisions made? Which people and departments have a say in each decision?

Considering each of these questions for your business can help you determine the type of reporting structure that will work for your specific business. For instance, if you work in a highly regulated industry, you may decide to keep decision-making centralized to the most senior staff: the C-suite or director-level employees who have the most industry experience.

[Read more: Executive Job Titles: What Do They Mean?]

Consider different org models

There are many organizational structures you can implement with these three elements in mind. Options include a flat reporting structure, product reporting structure, line-and-staff reporting structure and network organization structure, for example.

Generally, most org models fall on the spectrum between "mechanistic" and “organic." Mechanistic reporting structures tend to be more hierarchical, taking a top-down traditional approach to reporting, managing and delegating. Organic structures are more collaborative and flexible.

There are pros and cons to each. As you design your reporting structure, think about your company goals. A startup aiming to quickly develop a new product will require a different reporting structure than a more established company that is focused on daily sales. Your organizational structure should consider how communication will flow to ease the completion of tasks and operations. “For example, a vertical structure can ensure that all your retail store employees know and do their assigned work efficiently,” noted Indeed.

This transparency saves time and increases efficiency, as workers can consult your organizational chart and determine exactly who to speak with when faced with a given issue.


Document roles and responsibilities clearly

No matter which type of structure you choose, it’s paramount to make sure your reporting structure is clear. An official organization chart allows you to officially distribute tasks and establish a reporting structure so that each role knows its purpose in the organization.

This clarity helps avoid confusion as the business grows and makes it easier for new employees to understand where they fit in. “This transparency saves time and increases efficiency, as workers can consult your organizational chart and determine exactly who to speak with when faced with a given issue,” wrote Nerdwallet.

Documenting your reporting structure also makes it easy to spot where there’s a bottleneck due to the lack of resources or an overloaded manager. Reporting structures should be revisited from time to time as the business grows. Don’t be afraid to differentiate functions into divisions to allow members to work productively. A marketing team, for instance, can be divided into design and SEO, with two separate managers to oversee those specialized functions.

Integrate tools to enable cross-functional communication

The right tools can help teams collaborate more easily. Whether you choose a vertical reporting structure or a flat reporting structure, you’ll need a way to organize tasks and give every team member visibility into the company workflow. Project management tools such as Asana, Trello, and Jira help keep every team aligned. Slack, Teams and other chat options can also make it easy for managers to check in with their direct reports throughout the day.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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