New business owners do not ask themselves how they should organize their business. Rather, they organize by objective: what does it take to get a job done, meet a goal or create wealth. How owners organize a company depends on a multitude of factors: for example, are certain tasks performed in-house or out-sourced? Are people (staff and management) with the necessary skills available?
Business scholars have categorized various organizational structures as described below. However, do not assume that a growing business must at one point or another assume one of these structures. Rather, smart entrepreneurs constantly tweak their organizations to remain agile to take advantage of new opportunities or respond to new challenges. Sometimes the changes necessary to move from a small to larger business require gut wrenching decisions: for example, personnel that might have played key roles in establishing a new business might not be the right fit for a larger, more structured organization.
As the business grows, its organizational structure is heavily influenced by function (people grouped with similar responsibilities), process (people involved in similar processes), product (people building a specific product) or projects (members of a project). 1 A firm's structure might be influenced by some or all of these types of departmentation. Large firms usually employ a variety of departmentation styles, selecting the most appropriate form for each subsystem.