How does organisational structure evolve as a company grows?

As a company grows, its organisational structure evolves from simple to more complex, often becoming more hierarchical and departmentalised.

In the early stages of a company's growth, the organisational structure is typically simple and informal. The founder or a small group of leaders make all the decisions and everyone else in the company reports to them. This is often referred to as a flat structure, where there are few or no levels of middle management between staff and executives.

However, as the company grows, this structure can become inefficient. The number of decisions that need to be made increases, and the founders or leaders may not have the time or expertise to make all of them. This is when the company may start to introduce a more hierarchical structure, with different levels of management. This allows for decision-making to be delegated to managers who have specific areas of responsibility.

At the same time, the company may also become more departmentalised. This means that it is divided into different departments, each of which focuses on a specific area of the business, such as marketing, finance, or production. This allows for more specialised knowledge and skills to be utilised within each department.

As the company continues to grow, it may also introduce a matrix structure. This is where employees have dual reporting relationships - generally to both a functional manager and a product manager. This structure can help to balance the needs of both the company and the individual projects it is working on.

Finally, in very large companies, a divisional structure may be introduced. This is where the company is divided into semi-autonomous units or divisions, each of which operates as a separate business. This allows for greater flexibility and responsiveness to local conditions or specific market demands.

In summary, as a company grows, its organisational structure evolves to become more complex and hierarchical, allowing for more efficient decision-making and the utilisation of specialised knowledge and skills.