The requirement for an organizational structure increases in direct proportion to the size of the organization in question. The smaller the company, for example, the less need for a rigidly structured organizational plan, as individuals are more likely to be working in close proximity to each other and with clearly defined responsibilities. In addition, interpersonal communications within a small organization are smoother and less prone to interruptions, barring personality conflicts that impeded communications.
As an organization or business grows, however, the need for a well-defined structure with clearly delineated lines of authority and of responsibility becomes much more important. That growth is almost always accompanied by complicating factors, including the obvious increase in personnel and in the number of offices or cubicles utilized by employees. Communications become more complicated, involving increased types of communication, for example, emails, phones, intercoms, where before oral communications directly between two or more personnel were the norm.
In addition, the larger the organization, the greater the probability of miscommunications and of tension between divisions or offices. Consequently, each employee needs to know where he or she fits into the larger picture, and that communications that cross functional boundaries need to go through the proper channels. Employees of all ranks within the organization must be aware of the relevant chains of command and of the requirement to work upwards through the stovepipe unless or until authorized by management to cross boundaries at lower levels of responsibility, a frequently necessary or logical request.
Organizational structure also helps employees to better understand the direction in which the company is moving, both in good times and in bad times. Market changes or product transformations can necessitate the elimination of boxes on the organizational chart or, conversely, can see them expand as business opportunities or customer orders expand. Most important, however, is that a well-defined organizational structure lends discipline and clarity to the operation. All employees, from top down, should be able to view the organizational chart and immediately grasp the broader picture of where the organization is headed, and where they fit into the broader picture.