9 Types of Organizational Structure Every Company Should Consider
Choosing the best organizational construction for your company, division, or team is a lot like picking out a new car.
At the most basic level, you’re always looking for some thing road-worthy — something that can take you (and your passengers) from point A to point B without a hitch. But beyond that, there are a lot of options to consider. Automatic or even manual? Four-wheel drive or 2? Built-in GPS? Leather interior? Flux capacitor? (Only if you’re going back in time, of course. )
In the world of organizational structures, the choices you have to choose from include things like string of command (long or even short? ), span of control (wide or thin? ), and centralization (centralized or decentralized decision-making? ), just to name a few.
An organizational structure is a visual diagram of a firm that describes what workers do, whom they are accountable to, and how decisions are made across the business. Organizational structures can use functions, markets, products, geographies, or processes as their instruction, and cater to businesses associated with specific sizes and sectors.
Exactly what is the point of an organizational structure? As a business leader, would you even need one? As I said, org structures help you establish at least three key elements showing how your business is going to run.
As your company gets bigger, a good organizational structure can also be ideal 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 work flows would work simply by adjusting your organizational structure diagrams.
To put it simply, this graph like a map that basically explains how your company functions and how its roles are usually organized.
Here’s what each of those elements means to a business:
Chain of Command
Your own chain of command is usually 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 line should have. Put simply, who tells whom to do what? And how are problems, requests, and proposals disseminated up and down that ladder?
Period of Control
Your period of control can signify two things: who drops under a manager’s, well, management… and which tasks fall under a department’s responsibility.
Centralization describes where choices are ultimately made. Once you’ve established your chain associated with command, you’ll need to consider which usually people and departments have a say in each decision. A business can lean toward centralized, where final choices are made by just one or two organizations; or decentralized, where last decisions are made within the team or department in charge of performing that decision.
You might not need an org structure right away, however the more products you create and people you hire, the particular harder it’ll be to direct your company without this important diagram.
(To dive much deeper into what all of these different organizational structure components are, check out my earlier write-up, “The 6 Building Blocks of Organizational Structure. “)
In this post, we’ll explore how you can combine those parts to form different types of organizational constructions. We’ll also highlight the benefits and drawbacks of different structure types so you can evaluate that is the best option for your company, department, or team. Let’s dive in.
Mechanistic vs . Natural Organizational Structures
Organizational structures fall on a spectrum, along with “mechanistic” at one finish and
“organic” at the other.
Take a look at the particular diagram below. As possibly be able to tell, the mechanistic structure represents the traditional, top-down approach to organizational structure, while the organic structure signifies a more collaborative, flexible method.
Here’s a breakdown of both ends of the structural spectrum, their advantages and disadvantages, plus which types of businesses are suited for them.
Mechanistic structures, also called bureaucratic buildings, are known for having narrow spans of control, as well as high centralization, specialization, and formalization. They’re also quite inflexible in what specific departments are made and permitted to do for the company.
This organizational framework is much more formal than natural structure, using specific requirements and practices to govern every decision the business can make. And while this model does hold staff more accountable for their work, it can become a hindrance to the creativity and agility the organization needs to keep up with random changes in its marketplace.
As daunting and unbending as mechanistic structure noises, the chain of command, whether long or short, 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 other groups as required might help get a business off the ground in its early stages, but sustaining that growth — with more people plus projects to keep track of — will eventually require several policymaking. In other words, keep mechanistic structure in your back pocket… you never know when you’re looking for it.
Natural structures (also known as “flat” structures) are known for their wide spans of control, decentralization, low specialization, and loose departmentalization. What’s that all imply? This model might have several teams answering to one person and taking on projects based on their importance and what the team is capable of — rather than what the team is made to do.
As you can probably tell, this organizational structure is much less formal than mechanistic, and takes a bit of a good ad-hoc approach to business needs. This can sometimes make the string of command, whether long or short, difficult to decipher. And as a result, frontrunners might give certain projects the green light more quickly yet cause confusion in a project’s division of labor.
Nevertheless, the flexibility that an organic framework allows for can be extremely helpful to a company that’s navigating a fast-moving industry, or simply trying to stabilize itself after a rough one fourth. It also empowers employees to test new things and develop since professionals, making the company workforce more powerful in the long run. Bottom line? Startups are often perfect for natural structure, since they’re simply looking to gain brand recognition and get their wheels off the ground.
Right now, let’s uncover more specific forms of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum.
Types of Company Structure
- Functional Organizational Structure
- Product-Based Divisional Structure
- Market-Based Divisional Structure
- Geographical Divisional Framework
- Process-Based Structure
- Matrix Structure
- Circular Structure
- Flat Framework
- Network Structure
1 . Functional Organizational Construction
One of the most common types of company structures, the functional structure departmentalizes an organization based on typical job functions.
An organization with a functional org structure, for instance, would group all of the marketing experts together in one department, group all of the salespeople together within a separate department, and group all of the customer service people together in a third department.
The functional structure allows for a high degree of specialization to get employees, and is easily scalable should the organization grow. Also this structure is mechanistic in nature — which has the potential to inhibit an employee’s growth — placing staff in skill-based sections can still allow them to get deep into their field and find out what they’re good at.
Functional structure also has the to create barriers between different functions — and it can be inefficient if the organization includes a variety of different products or target markets. The obstacles created between departments may also limit peoples’ knowledge of plus communication with other departments, especially those that depend on other sections to succeed.
2 . Product-Based Divisional Structure
A divisional organizational structure is comprised of multiple, smaller functional structures (i. e. each division within a divisional structure can have its own marketing team, its own sales force, and so on). In this case — a product-based divisional framework — each division inside the organization is dedicated to a specific product line.
This type of structure is ideal for organizations with several products and can help shorten product development cycles. This allows small businesses to go to market with new offerings fast.
It can be difficult to scale under a product-based divisional structure, and the organization could end up with duplicate resources as different divisions strive to create new offerings.
3. Market-Based Divisional Structure
Another variety of the divisional organizational structure is the market-based structure, wherein the divisions of an firm are based around marketplaces, industries, or customer varieties.
The market-based construction is ideal for an organization that has products or services that are unique to particular market segments, and is particularly efficient if that organization has advanced knowledge of those sections. This organizational structure also keeps the business constantly aware of demand changes among its different audience segments.
Too much autonomy within every market-based team can lead to sections developing systems that are incompatible with one another. Divisions might also finish up inadvertently duplicating activities that other divisions are already managing.
4. Geographical Divisional Structure
The geographical organizational framework establishes its divisions based on — you guessed it — geography. More specifically, the divisions of a physical structure can include territories, regions, or districts.
This kind of structure is best-suited in order to organizations that need to be near sources of supply and/or customers (e. g. for deliveries or for on-site support). It also brings together many kinds of business expertise, allowing every geographical division to make choices from more diverse points associated with view.
The main problem with a geographical org framework: It can be easy for decision- producing to become decentralized, as geographic divisions (which can be hundreds, if not thousands of miles away from corporate headquarters) often have a great deal of autonomy. And when you have several marketing department — a single for each region — a person run the risk of creating campaigns that will compete with (and weaken) additional divisions across your digital channels.
5. Process-Based Construction
Process-based organizational structures are made around the end-to-end flow of different processes, such as “Research & Development, ” “Customer Obtain, ” and “Order Satisfaction. ” Unlike a firmly functional structure, a process-based structure considers not only those activities employees perform, but also exactly how those different activities interact with one another.
In order to fully understand the diagram below, you need to look at it from left to right: The customer acquisition process can not start until you have a completely developed product to sell. By same token, the purchase fulfillment process can’t begin until customers have been acquired and there are product purchases to fill.
Process-based organizational structure is ideal for improving the speed and efficiency of the business, and is best-suited for those in rapidly changing industrial sectors, as it is easily adaptable.
Similar to a few other structures about this list, process-based structure can erect barriers between the various process groups. This leads to problems communicating and handing off work to other teams plus employees.
6. Matrix Framework
Unlike the other structures we have looked at so far, a matrix organizational structure doesn’t the actual traditional, hierarchical model. Rather, all employees (represented by green boxes) have dual reporting relationships. Typically, there is a functional reporting line (shown in blue) as well as a product- based reporting line (shown in yellow).
When looking in a matrix structure org graph, solid lines represent solid, direct-reporting relationships, whereas filled lines indicate that the relationship is secondary, or not since strong. In our example below, it’s clear that functional reporting takes precedence more than product-based reporting.
The primary appeal of the matrix framework is that it can provide both flexibility and more balanced decision-making (as there are two chains associated with command instead of just one). Aquiring a single project overseen simply by more than one business line also creates opportunities for these business lines to share resources plus communicate more openly with each other — things they might not really otherwise be able to do regularly.
The primary pitfall of the matrix organizational structure? Difficulty. The more layers of approval employees have to go through, the greater confused they can be about who also they’re supposed to answer to. This particular confusion can ultimately result in frustration over who has power over which decisions and products — and who’s accountable for those decisions when stuff go wrong.
7. Circular Framework
While it might appear significantly different from the other organizational structures highlighted in this section, the circular structure still depends on hierarchy, with higher-level workers occupying the inner rings of the circle and lower-level employees occupying the external rings.
That being said, the frontrunners or executives in a circular organization aren’t seen as sitting down atop the organization, sending assignments down the chain of command. Instead, they’re at the middle of the organization, spreading their vision outward.
Through an ideological perspective, the circular structure is meant to advertise communication and the free movement of information between different parts of the organization. Whereas a traditional structure displays different departments or sections as occupying individual, semi-autonomous branches, the circular construction depicts all divisions to be part of the same whole.
From a practical perspective, the particular circular structure can be confusing, especially for new employees. In contrast to with a more traditional, top-down framework, a circular structure can make it difficult for employees to determine who they report to and how they’re meant to fit into the business.
8. Flat Structure
Whilst a more traditional organizational structure may look more like a pyramid — with multiple tiers of supervisors, managers plus directors between staff and leadership, the flat framework limits the levels of administration so all staff are only a few steps away from leadership. Additionally, it might not always take the form or a pyramid, or any shape for that matter. As we mentioned earlier, It’s also a form of the “Organic Structure” we noted over.
This structure is most likely one of the most detailed, It’s also thought that all employees can be more effective in an environment where there may be less hierarchy-related pressures. This structure might also make personnel feel like the managers they are doing have are more like equates to or team members rather than overwhelming superiors.
If you will find a time when teams within a flat organization disagree upon something, such as a project, it could be hard to get aligned and back on track without professional decisions from a leader or even manager. Because of how complicated the structure’s design is certainly, it can be tricky to determine which usually manager an employee should go to if they need approval or even an executive decision with regard to something. So if you do choose to have a flat organization, you should have the clearly marked tier of management or path that employers can refer to when they run into these scenarios.
9. Network Structure
A system structure is often created whenever one company works with an additional to share resources — or even if your company has multiple locations with different functions and leadership. You might also use this framework to explain your company workflows if much of your staffing or services is outsourced in order to freelancers or multiple other businesses.
The structure looks nearly the same as the particular Divisional Structure, shown above. However , instead of offices, it may list outsourced services or even satellite locations outside of the workplace.
If your company doesn’t do everything under one roof, this is a great way to show employees or stakeholders how outsourcing of off-site processes work. For example , if an employee needs help from a web developer for a blogging project and the company’s web developers are outsourced, the could look at this kind of chart and know which office or which individual to contact outside of their own function location.
The shape from the chart can vary based on how several companies or locations if you’re working with. If it’s not kept simple and clear, there may be lots of confusion if multiple workplaces or freelancers do similar things. If you do outsource or have multiple office locations, make sure that your org chart clearly states where each specific part and job function lies so someone can easily understand your basic company procedures.
Navigating Organizational Constructions
That concludes our hunt for different types of organizational structures. Remember that what we’ve just looked over are simply archetypes — in real-world applications, organizations often use hybrid structures, which could borrow elements from several structure types.
Want to see several real-world examples of marketing group org structures from businesses like GitHub and Repent La La? Download the entire resource, An Illustrated Facts Organizational Structures.
To learn more about working on a marketing team, check out the 6 Building Blocks associated with Organizational Structure [Diagrams].
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