How To Organize Departments (With Steps and Examples)

Updated January 1, 2024

Good departmental organization is a key aspect of keeping a business running efficiently. When businesses organize their departments in a way that streamlines their processes and optimizes their use of resources, it can keep operations running smoothly and productively toward their goals. Learning about strategies for organizing departments and the steps for creating organizational structures can help you design successful department structures for your business. In this article, we define what departmental organizational structure is, provide examples of business departments, outline steps for organizing departments and discuss how reorganization can solve departmental issues.

What is the departmental organizational structure?

Departmental organizational structure refers to how a business delegates specific tasks and responsibilities to its personnel. Creating a clear, formal structure helps employees understand their specific roles within the company so they can focus on completing their tasks with minimal confusion. When every member of an organization knows their role, it allows them to focus on performing their duties, which contributes to the overall success of their department. Having a formal structure helps businesses assess their personnel needs, manage a hierarchy of employees and ensure that it has the right staffing to support its key goals and functions.Related: 20 Essential Business Roles Within an Organization

Examples of department structures in business

When determining the right structure for your departments, it helps to know some common types of organizational structures. Here are some typical department structures to consider:

Hierarchal structure

One way to structure departments is by hierarchy. With this structure, there's a clear chain of command that includes leaders like managers who delegate tasks to members of their department team, and team members who report to a supervisor. Although the hierarchal structure can apply to another structure, some businesses use it independently. For example, a small business with relatively few employees may create a hierarchical structure in which the business owner oversees a general manager who supervises the sales team. This simple structure clarifies the chain of command and dictates the level of responsibility members have over each other.

Functional structure

A functional structure creates a network of departments that each focuses on one aspect of the business. For example, a business' IT department focuses only on providing services related to its technology systems, while the marketing department only works on tasks in advertising and market research. The number of departments a business has depends on its size, the type of business it is and its needs. For example, a large hospital may have many departments that offer services for different types of health conditions, like cardiology, labor and delivery and mental health, while a small clinic may have fewer departments.Related: Your Guide to Functional Structure for Business: Advantages and Disadvantages

Divisional structure

Finally, another way to organize departments is using a divisional structure. This structure is similar to the functional structure, but instead of creating independent departments focused on a specific aspect of business, each division has broader responsibilities. In a complex company that provides many kinds of products or services, a divisional structure can help organize these different aspects. For example, an international clothing brand may have divisions for each geographic region in which they operate. Within each division, they may have subdivisions that focus on different markets, like designing and marketing clothes for women, men and children.

How to organize departments

Here are six steps for how to organize business departments:

1. Define each department's purpose

The first step toward creating an effective organizational structure is to understand each department's key purpose. Understanding the department's overall goals and values can help you develop a structure that supports its mission. This involves meeting with the department leads and discussing what value their departments provide for the company. This meeting can take place as a structured conversation in which each member of the management team states what value their department brings to the company. Then, the meeting leader compiles these answers and works with the team to create definitions that express each department's mission.Related: 17 Business Structures To Consider for Incorporating Your Company or Organization

2. Identify core functions and job titles

Next, after gaining insight into the overall value of the departments, start identifying the key functions that allow the departments to produce value. These include the primary responsibilities and personnel that each department depends on for its operations. Creating a list of essential duties and job titles can help you assess what functions the department's new structure must support for it to succeed. Through this process, you can also identify nonessential processes that either support the effectiveness of the department or that you can eliminate to improve overall efficiency.

3. Collect data

Once you've identified the value of your departments and their key functions, collect data about your current processes and systems to determine how effective they are. For example, if you currently have a hierarchy within your department, assess how effectively it works to meet each department's production goals. You might ask the employees within each department to report how well they feel the department's current structure works for them. By collecting this data, you can analyze each department's organizational strengths and weaknesses, compare its productivity with its goals and identify opportunities to improve your departmental organizations.Related: What Is a Business Hierarchy and How Does It Work?

4. Plan your department's organizational structure

After collecting information about each department's values, core functions and current operations, begin planning how to reorganize your structure. For a small business with few employees looking to create some structure, a simple hierarchical organization can be effective. This structure clarifies the chain of command so all members of your team know who's responsible for delegating tasks and who to report to with questions or other considerations. For more complex businesses with many employees, a system that incorporates divisions, departments and hierarchies within each of those structures can help organize different teams who work on various projects within the company.

5. Implement the new structure

As part of your organizational plan, also consider how you're going to implement your new structure. Employees often need time to transition and settle into new organizational structures, so accounting for this transition period can help you ensure it goes smoothly. While developing your plan, anticipate any challenges that may arise during the transition and create additional plans for how to address them. Preparing for challenges before they occur allows you to respond quickly and show your ability to lead your team through obstacles. If your team is small, involve them in the transition process and ask for feedback throughout.

6. Evaluate the changes

Finally, throughout the implementation process and at strategic points after finalizing the transition, assess the effectiveness of the new structure. Review your goals for the organizational changes and gather data regarding how well the changes addressed your key areas of interest. For example, evaluate whether the changes improved the overall efficiency and productivity of your teams. If you created more structured hierarchies, assess whether it benefited the communication between team members and managers. As you evaluate the changes, look for further areas of improvement so you can continue to make adjustments and optimize your organizational structure.Related: Essential Department Manager Skills: A Guide for Job Seekers

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Solving common departmental issues

Here are some common departmental issues that may suggest the need for reorganization:

When an employee's workload surpasses their resources to manage their responsibilities, changing your departmental structure may help you distribute tasks so they're more manageable.
If members of your team express uncertainty about their roles, creating a more formal or defined structure can clarify individual responsibilities.
When employees don't have enough work to fill their hours, a structure change can help you distribute work equally between employees and departments.
If team members are unsure who to report to as their direct supervisor or manager, defining these roles clearly can help them communicate more effectively with their team leaders.
Teams that face higher turnover may benefit from a change in structure that improves their internal processes and encourages employee retention.
Departments that experience recurring issues with their productivity, output or management may benefit from a restructuring that improves the systems and workflows that are causing the problems.