What factors affect organizational infrastructure?

Although a business may be running with their organizational infrastructure secured, there may come a time when that structure is affected by internal or external factors. These factors can change how a company functions moving forward, even altering the infrastructure completely.

Organizational infrastructure, as I mentioned in my last article on the topic is how a company functions. It’s hierarchical in nature and focuses on not just the interactions between the various members of the company, but also on the charities and other agencies that the business operates. However, what happens when those factors within the company become too much? What if the current structure fails? In an article by Bizfluent titled “Factors that Influence Organizational Structure,” writer Fraser Sherman notes that there are several factors that could hamper a business’ structure, including:

Size and Time
State and Federal Laws
The type of organizational structure
Business environment

Note, this isn’t the only article that focuses on the factors that could affect an organization’s structure. However, these four factors were the most commonly mentioned across a variety of articles and are therefore the ones I’ve chosen to focus on.

Size and Time

How big or small a business is affects how it will structure itself and the duties it will take on. Factoring in time only adds pressure.. If a business has four to five employees, everyone knows their roles and what’s expected of them when performing their tasks. Everyone will be able to complete the tasks they are assigned and use their individual skills to help the business grow. However, once a business begins growing, it becomes easier for new employees to be lost and for expectations to become cloudy.

Time also plays a major role in an organization’s choice of structure. If a business that was once small begins to grow rapidly, everything becomes a panic. Where there were once four to five employees, now there are 10-30. This shift can occur within a year, or even just a few months. How do you adjust for such a rapid shift? If a business has been steadily growing, then the shift won’t feel as rapid as it will for a business that just started out a few months ago.

State and Federal Laws

According to the Bizfluent article, “If you want to incorporate [form an official corporation], for example, you have to meet your state’s legal requirements: a formal charter, a board of directors and bylaws.” (Sherman) This part of the article makes sense in terms of the business sector. If a company wants to become official, they have to make sure that not only do they draw up a contract signaling their incorporation but also create a list of their shareholders, according to Investopedia.

The laws that talk about partnerships should also be considered. If a business has two partners, then each partner needs to not only understand their role but also have equal authority. These factors can play a big role in not only how the company is structured, but also how the business interacts with its clients and employees.

Type of Organizational Structure

As I mentioned in my last article on organizational infrastructure, how a business is structured can either benefit or hinder a company. A more “chain-of-command” structure could be a benefit to a business that has hundreds of employees across the U.S. But if a company only has a couple hundred or less employees, the “chain-of-command” style of organization might not be the best fit.

How a business structures themselves plays into the longevity of the company as well. According to the Bizfluent article, there are two types of organizational structure that businesses generally utilize. One we talked about is the hierarchical structure. Another is the “flat structure.” Sherman argues that, with a flat structure, there is no hierarchy between the leaders and the employees. He also argues that:

“[It gives] employees greater responsibility and greater independence.”
“Flat organizations allow quick communication between top and bottom levels.”
“Flat organizations can work well with small groups, but they become cumbersome as the number of employees [expands.]”

Although understanding the basics of flat and hierarchical structures make for a better understanding of what kind of structure a certain business has, these basics can be implemented in a variety of ways, based on a company’s needs and how it is affected by the factors I’ve discussed. These factors can shift how a company interacts with its employees, managers and other workers across the U.S. If a business that was small and once flat suddenly shifts and grows rapidly, that can affect the dynamic between the employer and other managers and employees, necessitating a change in structure.

Business Environment

How a business functions, not just in the context of the business industry, but also its relations with other businesses, the market, their clients, etc. is important. It can also be a major factor when looking at how a business engages with their employees. The environment of a business can tell a potential client, investor or their “competitors” how the business is doing, not only according to its employees, but how they perceive themselves.

“Some companies operate in stable, settled markets, selling products such as copier paper or household cleaners that don’t change much over time” (Sherman). These businesses likely won’t see major changes in their environment. Smaller companies trying to get off the ground, or companies like Zoom which found its services suddenly in high demand during the COVID-19 pandemic, are much more likely to have to deal with changes in how they function and the environment they provide.

If businesses are unsure if the structure they currently have in place is working, I would suggest that they look at the organizational structures of their fellow businesses and see how they are operating. Learning how other businesses are structured can be a great way for a fellow business to understand what is affecting their current organization.

Sources

Hayes, Adam. “Incorporation.” Investopedia, https://www.investopedia.com/terms/i/incorporate.asp. Accessed 13 April 2021.

Sherman, Fraser. “Factors That Influence Organizational Structure.” Bizfluent, https://bizfluent.com/list-6577868-factors-influence-organizational-structure.html. Accessed 13 April 2021.

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