Everyone is talking about agile. Many companies strive for an agile organizational structure. But what does that mean exactly? We’re happy to explain the details here.
Table of Contents
Eight characteristics that characterize an agile organization
It is not for nothing that agile forms of organization have conquered the world, because there are a number of advantages that set them apart from other forms of organization. An agile organization…
- Is flexible and adaptable.
- Is capable of learning and is continuously improving.
- Is open to changes and innovations.
- Is decentralized and networked.
- Is structured horizontally and avoids hierarchies.
- Works self-organized in small, flexible teams.
- Uses modern means of communication and information.
- Is value-oriented and geared towards the needs of its customers and employees.
If organizations are to become more agile, hierarchies must be reduced to their core function. Hierarchies are not the best solution for developing people’s potential, optimizing work processes or representing customer interests. A loose network alone is not enough to achieve the required compliance. The consequence: Agile organizations are always both hierarchical and networked. A network organization has many advantages and ensures that organizations can react flexibly and quickly to changes. However, it is not the perfect solution for every business. If there are legal regulations that prevent an organization from forming networks, for example at banks), the combination of hierarchical structures with network elements represents an elegant solution. The technical term for this is ambidexterity . The advantages of both structures are combined.
An important aspect of ambidexterity is the separation of exploration and exploitation phases. The exploration phase is all about developing and trying out new ideas. It is important to be experimental and open to new things. In the exploitation phase, the best ideas are further developed and refined. It is important to be consistent and focused.
A successful company is able to live both sides of the ambidexterity. It invests in improving the existing business while remaining open to new ideas. This combination of focus and flexibility enables the company to be successful over the long term.
What is an organizational structure?
“And in the beginning was the…” organizational structure. Because it defines the relationships between the employees of a company. It describes the structural structure, the structure and usually also the hierarchy. Last but not least, the structure also determines the way information flows within an organization. Efficiency is required here. Ideally, the organizational structure corresponds to the size, industry and goals of the company.
In any case, an organizational chart is helpful because it shows the horizontal and vertical relationships between the structural units of a company and thus also the composition of teams. Important: In order to achieve an optimal level of flexibility while maintaining effective control, it is crucial to regularly review and adapt the organizational structure. After the agile organizational form, we now want to introduce you to other forms.
Types of organizational structures
Of course, there are as many forms of organization as there are companies – in theory. However, some common ones are very practical and we would like to introduce them to you here:
Hierarchical organizational structure
A hierarchical organizational structure is a classic structure in which each employee reports to a direct manager. There are clear lines and channels of communication here, running from top management to frontline personnel. The advantage of hierarchical organizations is clear responsibilities and that tasks are transparently assigned to specific people. The disadvantage, however, is that hierarchies are often rigid and inflexible. This often makes it difficult to react quickly to changes. In addition, there can also be political power struggles within the organization.
Functional organizational structure
In this type of structure, the different areas of the company are organized according to their function. For example, in a manufacturing company, production is organized in one department, research and development in another department, and sales in another department. These departments work together to achieve the company goal.
Cross-departmental organizational structure
Departments can be separated by market, industry, or customer type, such as consumer goods such as clothing, electronics, furniture, etc. Or departments can be separated by product lines, such as creams for different skin types. A subdivision of the departments according to regions, areas or districts, which enables more effective localization and logistics, is also conceivable.
Horizontal or flat organizational structure
Horizontal organizational structures are suitable for companies that have few hierarchical levels. This is often the case with start-up companies, which usually also establish different departments as they grow. However, some organizations stick with the flat structure because it requires less oversight and encourages participation from all employees, which is a key contributor to agility.
Team-based organizational structure
A team-based organizational structure is not a new concept and has already helped many companies to be more successful. Working in teams allows for a greater level of control for employees and a greater focus on problem solving and collaboration, which ultimately serves the company’s success.
Network Organizational Structure
According to Wikipedia : “Network organization can be described as an ‘organization with relatively autonomous members who are long-term connected by common goals and work together in a coordinated manner’.” Networks offer many advantages that are important for agile organizations:
- Networks are fast. This is a major advantage over conventional, hierarchically organized companies.
- Networks are adaptable. Due to the numerous connections between the individual actors, networks can adapt flexibly to new challenges.
- Networks are robust. Hierarchical organizations are prone to disruption because they are based on rigid processes and structures. Networks, on the other hand, can react flexibly to disruptions due to their variety of connections.
- Networks work In order to remain fast and adaptable, information in the network is transparent and accessible. In this way, everyone understands all the connections and can make adjustments where it is possible and necessary.
However, when considering networks, one should also consider the disadvantages. Networks require a high communication effort . The many links between stakeholders mean that constant communication is needed to keep all stakeholders informed.
Whether agile or network, whether horizontal or functional – it is important that the organizational structure fits your company, its goals and employees. Only then will you be successful in the future.