Business structure may seem to be a necessary but ultimately uninteresting part of middle market business on the surface: Build a company, create the necessary departments and chains of command and then focus on the real work. Yet, if you look at the world of large corporations, you'll see businesses periodically reorganize to address problems and strategic needs.

Many reorganizations prove to be a waste of time, because some executives fumble about to find a reason for poor performance. Other business structure reorganizations are critical, however, according to Mohanbir Sawhney of Northwestern University's Kellogg School of Management. To grow, a company needs an organization that can scale appropriately. "Beyond the organizational mindset and capabilities to support growth, middle market companies must also reinvent themselves through innovation," Sawhney writes.

To reinvent through innovation, a company and its executives must first recognize the need for change. A perfect example involves human resources: Many middle market companies have a single person who handles HR and reports to the CFO or CEO, but HR often represents an entire department with the resources to handle a range of issues. The company thus might have to invest in a full department with someone at the top who has experience in growing and running a larger group.

Logistics is another example. A manufacturer might, for an extended time, employ purchasing and warehouse departments. Past a certain point, though, success will demand an increased attention to logistics, which involves ensuring that materials arrive and goods depart efficiently. The business structure will then have to change to accommodate the implementation of this new department.

The need to restructure extends beyond such practical and simple examples. Companies eventually must consider how business structure affects sales. As Robert Simons of the Harvard Business School notes, no single organizational form is the best method for improving a company's overall success. Instead, the specifics of a company, including its markets, customers, environment and other factors, should influence the optimized design, which may not be obvious at first. In other words, your company might have to experiment with structure over time to find the right one. Here are some signs that you might have to consider an organizational change:

  • Operational problems. Some aspect of the company's operations begins to have problems that only increase in scope or intensity.
  • Competitors. You notice that the underlying business structures of competitors at the next level of scale have significant differences from yours.
  • New insight. Consultants, executives coming to your organization from outside or some other source suggest that your structure isn't adequate to support the next level of growth.
  • Conflict. Different departments find themselves in conflict about who should have authority over a certain function that isn't explicitly supported by a single department.

Not every problem or opportunity needs an organizational change. Every time you alter the business structure, it has hard and soft costs, and the change takes time to fully implement, which can cause disruptions in efficiency and effectiveness. The key question is whether the short-term pain will be minimized by the advantages that the company will see in the long term.

Do organizational changes always need to involve increased spending? Let us know what you think by commenting below.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc. and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.