9 Types of Organizational Structure Every Company Should Consider

Choosing the best organizational structure for your company, division, or team is a lot like picking out a new cable car .
At the most basic charge, you ‘re always looking for something road-worthy — something that can take you ( and your passengers ) from charge A to point B without a hitch .
But beyond that, there are a fortune of options to consider. Automatic or manual ? four-wheel drive or two ? built-in GPS ? Leather inner ? Flux capacitor ? ( only if you ‘re going back in meter, of course. ) → Download Now: The Illustrated Guide to Org Charts [Free Guide + Templates]
In the earth of organizational structures, the options you have to choose from include things like chain of control ( long or short ? ), couple of control ( wide or narrow ? ), and centralization ( centralized or decentralized decision-making ? ), just to name a few.

Organizational Structure

An organizational structure is a ocular diagram of a caller that describes what employees do, whom they report to, and how decisions are made across the occupation. organizational structures can use functions, markets, products, geographies, or processes as their steer, and provide to businesses of specific sizes and industries .
What ‘s the sharpen of an organizational structure ? As a business drawing card, do you even need one ? As I said, org structures help you define at least three keystone elements of how your commercial enterprise is going to run .
As your company gets bigger, an organizational social organization can besides be helpful for new employees as they learn who manages what processes at your company .
then, if you need to pivot or shift your leadership, you can visualize how the bring flows would work by adjusting your organizational structure diagrams .
To put it plainly, this chart is like a map that plainly explains how your company works and how its roles are organized .
here ‘s what each of those elements means to an arrangement :

Chain of Command

Your chain of control is how tasks are delegated and work is approved. An org structure allows you to define how many “ rungs of the ladder “ a particular department or business channel should have. In other words, who tells whom to do what ? And how are issues, requests, and proposals communicated up and down that run ?

Span of Control

Your span of control can represent two things : who falls under a coach ‘s, well, management … and which tasks fall under a department ‘s responsibility .

Centralization

Centralization describes where decisions are ultimately made. Once you ‘ve established your chain of command, you ‘ll need to consider which people and departments have a pronounce in each decisiveness. A business can lean toward centralized, where final decisions are made by just one or two entities ; or decentralized, where final decisions are made within the team or department in appoint of carrying out that decision .
You might not need an org structure veracious away, but the more products you develop and people you hire, the intemperate it ‘ll be to lead your company without this crucial diagram .
( To dive deep into what all of these different organizational structure components are, check out my earlier post, “ The 6 build Blocks of Organizational Structure. ” )

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In this military post, we ‘ll explore how you can combine those components to form different types of organizational structures. We ‘ll besides highlight the benefits and drawbacks of different structure types so you can evaluate which is the best choice for your company, division, or team. Let ‘s prima donna in .

Mechanistic vs. Organic Organizational Structures

organizational structures fall on a spectrum, with “ mechanistic ” at one end and
“ constituent ” at the other .
Take a attend at the diagram downstairs. As you ‘ll credibly be able to tell, the mechanistic structure represents the traditional, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach .
Mechanistic vs organic organizational structure, compared in two diagrams side by side
here ‘s a breakdown of both ends of the structural spectrum, their advantages and disadvantages, and which types of businesses are suited for them .

Mechanistic Structure

mechanistic structures, besides called bureaucratic structures, are known for having narrow spans of control, a well as high centralization, specialization, and formalization. They ‘re besides quite rigid in what particular departments are designed and permitted to do for the company .
This organizational social organization is much more formal than organic structure, using specific standards and practices to govern every decision the business makes. And while this exemplary does hold staff more accountable for their ferment, it can become a hindrance to the creativity and agility the organization needs to keep up with random changes in its market .
As daunting and inflexible as mechanistic structure sounds, the chain of command, whether long or inadequate, is always clear under this model. As a company grows, it needs to make sure everyone ( and every team ) knows what ‘s expected of them. Teams collaborating with early teams as needed might help get a occupation off the grate in its early stages, but sustaining that growth — with more people and projects to keep track of — will finally require some policymaking. In other words, keep mechanistic social organization in your bet on pocket … you never know when you ‘ll need it .

Organic Structure

organic structures ( besides known as “ apartment ” structures ) are known for their wide spans of master, decentralization, first gear specialization, and loose departmentalization. What ‘s that all mean ? This model might have multiple teams answering to one person and taking on projects based on their importance and what the team is capable of — preferably than what the team is designed to do .
As you can credibly tell, this organizational structure is much less ball than mechanistic, and takes a bit of an ad-hoc approach to clientele needs. This can sometimes make the chain of dominate, whether long or short, unmanageable to decipher. And as a leave, leaders might give certain projects the green light more promptly but cause confusion in a project ‘s division of undertaking .
however, the tractability that an organic structure allows for can be highly helpful to a business that ‘s navigating a fast-moving diligence, or plainly trying to stabilize itself after a approximate quarter. It besides empowers employees to try modern things and develop as professionals, making the organization ‘s work force more brawny in the long hunt. Bottom line ? Startups are frequently perfect for organic structure, since they ‘re simply trying to gain mark recognition and get their wheels off the footing .
nowadays, let ‘s uncover more specific types of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum .

Types of Organizational Structure

  1. Functional Organizational Structure
  2. Product-Based Divisional Structure
  3. Market-Based Divisional Structure
  4. Geographical Divisional Structure
  5. Process-Based Structure
  6. Matrix Structure
  7. Circular Structure
  8. Flat Structure
  9. Network Structure

Depending on the size of a business and its goals, the organizational social organization of the team will vary. Each type has its advantages and disadvantages ; however, there is a universal benefit to establishing a clear organizational structure. It helps employees understand their character within a company, which enables them to manage expectations and goals .

 

A business needs to have an organizational social organization in place to be successful. There are respective types of organizational structures normally used by companies, nine of which we expand upon below .

1. Functional Organizational Structure

One of the most park types of organizational structures, the running structure departmentalizes an constitution based on common job functions .
An arrangement with a functional org structure, for exemplify, would group all of the marketers together in one department, group all of the salesperson together in a offprint department, and group all of the customer military service people together in a third department .
types of organizational structures: functional
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The running structure allows for a high degree of specialization for employees, and is well scalable should the arrangement originate. besides this structure is mechanistic in nature — which has the likely to inhibit an employee ‘s increase — putting staff in skill-based departments can placid allow them to delve deep into their plain and find out what they ‘re dependable at .

Disadvantages

functional structure besides has the potential to create barriers between different functions — and it can be ineffective if the administration has a variety of different products or target markets. The barriers created between departments can besides limit peoples ‘ cognition of and communication with other departments, specially those that depend on early departments to succeed .

Advantages

running organization increases efficiency, provides constancy, and boosts accountability. It allows departments — with employees who contribution similar skills and cognition — to focus on their specialize tasks within their respective fields. Because the roles and responsibilities of this organizational structure exemplar rarely change, department employees can systematically work on similar assignments and hone their skills .
The fix structure of functional organization besides operates through management. It provides employees with a chain of command. It guides communication between the team and keeps the team accountable .

2. Product-Based Divisional Structure

A divisional organizational structure is comprised of multiple, smaller running structures ( i.e. each part within a divisional structure can have its own market team, its own sales team, and thus on ). In this case — a product-based divisional structure — each division within the organization is dedicated to a finical product line .
types of organizational structures: product-based Download this Template
This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. This allows humble businesses to go to market with fresh offerings fast .

Disadvantages

It can be difficult to scale under a product-based divisional social organization, and the administration could end up with extra resources as different divisions strive to develop new offerings.

Advantages

Companies and their employees can experience the benefits of the product-based divisional structure. If one division performs ailing, this does not mechanically translate across the organization. Because of their separation, divisions may flourish ( or fail ) concurrently. This system allows companies to mitigate risk .

3. Market-Based Divisional Structure

Another variety of the divisional organizational structure is the market-based structure, wherein the divisions of an organization are based around markets, industries, or customer types .
types of organizational structures: market-based Download this Template
The market-based structure is ideal for an organization that has products or services that are alone to specific market segments, and is peculiarly effective if that organization has advanced cognition of those segments. This organizational structure besides keeps the occupation constantly mindful of necessitate changes among its different hearing segments .

Disadvantages

excessively much autonomy within each market-based team can lead to divisions developing systems that are contrastive with one another. Divisions might besides end up unwittingly duplicating activities that other divisions are already handling .

Advantages

Because this organizational structure focuses on specific market segments, it provides each class with autonomy. The divisions work individually, which allows employees to work independently and enables them to focus on the needs of their particular industry .

4. Geographical Divisional Structure

The geographic organizational structure establishes its divisions based on — you guessed it — geography. More specifically, the divisions of a geographic structure can include territories, regions, or districts .
types of organizational structures: divisional geographical Download this Template
This type of structure is best-suited to organizations that need to be near sources of supply and/or customers ( e.g. for deliveries or for on-site support ). It besides brings together many forms of business expertness, allowing each geographic division to make decisions from more diverse points of watch .

Disadvantages

The main downside of a geographic org structure : It can be easy for decision- make to become decentralized, as geographic divisions ( which can be hundreds, if not thousands of miles away from corporate headquarters ) frequently have a great share of autonomy. And when you have more than one market department — one for each region — you run the risk of creating campaigns that compete with ( and weaken ) other divisions across your digital channels .

Advantages

geographic divisions allow companies the advantage of catering to a specific customer. Based on the differences in language, culture, and customs one would find across the world, companies can not inevitably expect the lapp operations to work in unlike locations. not only does it allow organizations to tailor their approach based on geography, but it allows the division to react cursorily and efficiently to any geographic market changes .

5. Process-Based Structure

Process-based organizational structures are designed around the throughout run of unlike processes, such as “ Research & Development, ” “ Customer Acquisition, ” and “ Order Fulfillment. ” Unlike a strictly running social organization, a process-based structure considers not alone the activities employees perform, but besides how those different activities interact with one another .
In order to amply understand the diagram below, you need to look at it from left to right : The customer acquisition work ca n’t start until you have a in full grow product to sell. By the lapp keepsake, the order fulfillment serve ca n’t start until customers have been acquired and there are product orders to fill .
types of organizational structures: process-based Download the Template
Process-based organizational structure is ideal for improving the accelerate and efficiency of a clientele, and is best-suited for those in quickly changing industries, as it is easily adaptable .

Disadvantages

similar to a few other structures on this tilt, process-based structure can erect barriers between the different action groups. This leads to problems communicating and handing off work to early teams and employees .

Advantages

As mentioned, one of the most significant benefits of the process-based social organization is that it increases efficiency and travel rapidly. If Department B can not start its processes until Department A finishes, this compels Department A to work promptly and proficiently. This organizational model besides promotes intradepartmental ( within the department ) and interdepartmental ( across multiple departments ) teamwork .

6. Matrix Structure

Unlike the early structures we ‘ve looked at so far, a matrix organizational structure does n’t follow the traditional, hierarchical model. rather, all employees ( represented by the greens boxes ) have double report relationships. typically, there is a functional report tune ( shown in gloomy ) a well as a product- based report lineage ( shown in yellow ) .
When looking at a matrix structure org chart, solid lines typify potent, direct-reporting relationships, whereas dotted lines indicate that the relationship is secondary, or not as strong. In our model below, it ‘s clear that functional report takes precedence over product-based report .
types of organizational structures: matrix Download the Template
The main appeal of the matrix structure is that it can provide both flexibility and more balance decision-making ( as there are two chains of command alternatively of fair one ). Having a single project oversee by more than one business line besides creates opportunities for these commercial enterprise lines to contribution resources and communicate more openly with each other — things they might not otherwise be able to do regularly .

Disadvantages

The primary pit of the matrix organizational structure ? Complexity. The more layers of approval employees have to go through, the more confused they can be about who they ‘re supposed to answer to. This confusion can ultimately cause frustration over who has authority over which decisions and products — and who ‘s responsible for those decisions when things go amiss .

Advantages

An advantage of a matrix structure is that it promotes collaboration and communication. This receptive line of communication ultimately allows businesses to share resources and allows employees to develop raw skills from working with unlike departments .

7. Circular Structure

While it might appear drastically unlike from the other organizational structures highlighted in this section, the round structure silent relies on hierarchy, with higher-level employees occupying the inner rings of the lap and lower-level employees occupying the out rings .
That being said, the leaders or executives in a round organization are n’t seen as sitting atop the arrangement, sending directives down the chain of command. rather, they ‘re at the center of the organization, spreading their vision outward .
types of organizational structures: circular
Download the Template
From an ideological perspective, a circular structure is meant to promote communication and the free flow of information between different parts of the organization. Whereas a traditional structure shows unlike departments or divisions as occupying individual, semi-autonomous branches, the round structure depicts all divisions as being depart of the same whole .

Disadvantages

From a practical position, the circular structure can be confuse, specially for raw employees. Unlike with a more traditional, top-down structure, a round structure can make it unmanageable for employees to figure out who they report to and how they ‘re meant to fit into the administration .

Advantages

Most examples of organizational structure have a top-down hierarchy. alternatively, this type of structure follows an outbound hang and contributes to information flowing freely across the business. Its benefits include keeping all employees aligned with the processes and goals of the company and encouraging employees to collaborate between departments .

8. Flat Structure

While a more traditional organizational structure might look more like a pyramid — with multiple tiers of supervisors, managers and directors between staff and leadership, the directly structure limits the levels of management so all staff are merely a few steps away from leadership. It besides might not constantly take the form or a pyramid, or any shape for that matter. As we mentioned earlier, It ‘s besides a form of the “ organic structure ” we noted above .
types of organizational structures: flat This structure is credibly one of the most detailed, It ‘s besides thought that employees can be more generative in an environment where there ‘s less hierarchy-related pressures. This social organization might besides make staff feel like the managers they do have are more wish equals or team members quite than intimidating superiors .

Disadvantages

If there ‘s a prison term when teams in a flat arrangement disagree on something, such as a project, it can be arduous to get aligned and back on track without administrator decisions from a leader or director. Because of how complicate the structure ‘s design is, it can be slippery to determine which director an employee should go to if they need approval or an executive decisiveness for something. thus if you do choose to have a flat organization, you should have a clearly marked tier of management or path that employers can refer to when they run into these scenarios .

Advantages

The elimination of middle management employees defines the compressed structure type. Its advantages are instantaneous. First, it reduces the expenses of the ship’s company. Second, it allows staff to build conduct relationships with upper management. And last, it shortens the decision-making process .

9. Network Structure

A network structure is often created when one company works with another to share resources — or if your company has multiple locations with different functions and leadership. You might besides use this structure to explain your company workflows if much of your staff or services is outsourced to freelancers or multiple other businesses .
The social organization looks closely the lapp as the Divisional Structure, shown above. however, rather of offices, it might list outsource services or satellite locations outside of the function .
If your company does n’t do everything under one ceiling, this is a great way to show employees or stakeholders how outsource of off-site processes work. For exemplar, if an employee needs help from a web developer for a blogging project and the party ‘s web developers are outsourced, the could look at this type of chart and know which office or which person to contact outside of their own work localization .

Disadvantages

The determine of the chart can vary based on how many companies or locations you ‘re working with. If it ‘s not preserve bare and unclutter, there may be a draw of confusion if multiple offices or freelancers do alike things. If you do outsource or have multiple office locations, make indisputable your org chart distinctly states where each specific function and job function lies so person can easily understand your basic party processes .

Advantages

The outsource nature of the network structure provides companies with the advantages of lower costs, more focus, and increased flexibility. Outsourcing leave organizations to save money, as they don ’ t have to bear the expense of setting up a department for the like aim. It besides gives companies the flexibility to change their processes and the ability to focus on their core functions .

Why is having an organizational structure important?

Imagine a business that has no organizational structure. instantaneously, questions arise about the systems and processes. Who makes the decisions ? How are employees held accountable ? What are the company ’ randomness goals ? These questions are practically impossible to answer without a running organizational structure .
organizational structure is necessary for running a successful business because it improves work flow and efficiency, promotes communication, identifies company needs, and aligns employees with company goals. It directly affects how a business operates daily. When a company establishes a structure that works, the unite efforts of its employees, in conjunction with its systems and processes, allow the company to make better decisions for its future .

Navigating Organizational Structures

organizational structures are central to a successful team. Employees can move comfortably, confidently, and efficiently when given a clear definition of their function within an organization.

structure types will vary from occupation to business, so it ’ mho crucial to remember that these structures are not one size fits all. Every type may not suit your organization, but chances are, one of them will. Use this post to determine which organizational structure works for you, and then it ’ south time for the substantial exercise to begin .
Editor ‘s note : This post was originally published in December 2014 and has been updated for comprehensiveness .
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source : https://www.peterswar.net
Category : Finance

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