The most popular online Visio alternative , Lucidchart is utilized in over countries by millions of users, from sales managers mapping out target organizations to IT directors visualizing their network infrastructure. Hierarchical org structure. Functional org structure. Pros Allows employees to focus on their role Encourages specialization Help teams and departments feel self-determined Is easily scalable in any sized company Cons Can create silos within an organization Hampers interdepartmental communication Obscures processes and strategies for different markets or products in a company 3.
Horizontal or flat org structure Horizontal or Flat Org Chart Example Click on image to modify online A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. Pros Gives employees more responsibility Fosters more open communication Improves coordination and speed of implementing new ideas Cons Can create confusion since employees do not have a clear supervisor to report to Can produce employees with more generalized skills and knowledge Can be difficult to maintain once the company grows beyond start-up status 4.
Market-based divisional org structure Divisions are separated by market, industry, or customer type. Market-Based Divisional Org Chart Example Click on image to modify online Product-based divisional org structure Divisions are separated by product line.
Product-Based Divisional Org Chart Example Click on image to modify online Geographic divisional org structure Divisions are separated by region, territories, or districts, offering more effective localization and logistics.
Geographical Divisional Org Chart Example Click on image to modify online Pros Helps large companies stay flexible Allows for a quicker response to industry changes or customer needs Promotes independence, autonomy, and a customized approach Cons Can easily lead to duplicate resources Can mean muddled or insufficient communication between the headquarters and its divisions Can result in a company competing with itself 5.
Matrix org structure. Pros Allows supervisors to easily choose individuals by the needs of a project Gives a more dynamic view of the organization Encourages employees to use their skills in various capacities aside from their original roles Cons Presents a conflict between department managers and project managers Can change more frequently than other organizational chart types 6.
Team-based org structure. Having and communicating a clear organizational structure helps your employees understand their roles and corresponding expectations and informs goal-setting. In this article, we define 10 common types of organizational structures along with their pros and cons to help you choose the right one for your business.
By establishing clear relationships between departments, organizational structures provide clarity, focus and efficiency to employees so that they know who they report to and what their goals are. Related: Organizational Structure: Definition and Types.
Here are 10 types of organizational structures commonly used by businesses with pros and cons for each:. In a hierarchical organizational structure, employees are grouped and assigned a supervisor.
It is the most common type of organizational structure. Employees may be grouped together by their role or function, geography or type of products or services they provide. This structure is often depicted as a pyramid because there are multiple levels or authority with the highest level of leadership at the top, their direct employees below them and so forth. Fostering employee development and promotion opportunities.
Related: Hierarchical Structure: Definition and Examples. In a functional structure, the organization is divided into groups by roles, responsibilities or specialties. For example, within an organization you may have a marketing department, finance department and sales department with each overseen by a manager who also, has a supervisor that oversees multiple departments. A functional structure can be beneficial because departments can trust that their employees have the skills and expertise needed to support their goals.
The matrix organizational structure resembles a grid in which employees with similar skills are grouped together and report to more than one manager. This often includes a functional manager who oversees projects and their progress and a product manager who is responsible for the company's strategy and success regarding product offerings.
The matrix structure is typically used by large, multinational organizations and promotes the sharing of skills and knowledge across departments to complete goals. Promoting open communication and shared resources across the business. Limiting efficiency of key performance indicators KPIs. In a flat organizational structure, most levels of middle management are removed so there is little separating staff-level employees from upper management.
Employees are given more responsibility and decision-making power without the usual hierarchical pressures or supervision and can often be more productive. This type of structure is mostly used by small companies and early-stage start-ups because they often have fewer employees and projects to manage. To ensure long-term viability, an organization must adjust its structure to fit new economic realities without diminishing core capabilities and competitive differentiation.
Organizational realignment involves closing the structural gaps impeding organizational performance. Rapid reorganization of business units, divisions or functions can lead to ineffective, misaligned organizational structures that do not support the business.
Poorly conceived reorganizations may create significant problems, including the following:. The importance of aligning the structure with the business strategy. The individuals responsible for developing and deploying the strategy and monitoring results. The structure, processes and operations by which the strategy is deployed.
The experience, skills and competencies needed to execute the strategy. An understanding of the interdependencies of these business elements and the need for them to adapt to change quickly and strategically are essential for success in the high-performance organization.
When these four elements are in sync, outstanding performance is more likely. Achieving alignment and sustaining organizational capacity requires time and critical thinking. Organizations must identify outcomes the new structure or process is intended to produce. This typically requires recalibrating the following:. Five elements create an organizational structure: job design, departmentation, delegation, span of control and chain of command.
These elements comprise an organizational chart and create the organizational structure itself. The company's strategy of managerial centralization or decentralization also influences organizational structures. Centralization is generally recommended when conflicting goals and strategies among operating units create a need for a uniform policy. Decentralization is recommended when conflicting strategies, uncertainty or complexity require local adaptability and decision-making.
Organizational structures have evolved from rigid, vertically integrated, hierarchical, autocratic structures to relatively boundary-less, empowered, networked organizations designed to respond quickly to customer needs with customized products and services. Today, organizations are usually structured vertically, vertically and horizontally, or with open boundaries.
Specific types of structures within each of these categories are the following:. See What are commonly-used organization structures? Two main types of vertical structure exist, functional and divisional. The functional structure divides work and employees by specialization. It is a hierarchical, usually vertically integrated, structure. It emphasizes standardization in organization and processes for specialized employees in relatively narrow jobs.
This traditional type of organization forms departments such as production, sales, research and development, accounting, HR, and marketing. Each department has a separate function and specializes in that area. For example, all HR professionals are part of the same function and report to a senior leader of HR. The same reporting process would be true for other functions, such as finance or operations. In functional structures, employees report directly to managers within their functional areas who in turn report to a chief officer of the organization.
Management from above must centrally coordinate the specialized departments. This structure works best for organizations that remain centralized i. Given the centralized decision-making, the organization can take advantage of economies of scale in that there are likely centralized purchasing functions.
An appropriate management system to coordinate the departments is essential. The management system may be a special leader, like a vice president, a computer system or some other format. Also a vertical arrangement, a divisional structure most often divides work and employees by output, although a divisional structure could be divided by another variable such as market or region.
For example, a business that sells men's, women's and children's clothing through retail, e-commerce and catalog sales in the Northeast, Southeast and Southwest could be using a divisional structure in one of three ways:. This type of structure is helpful when the product base expands in quantity or complexity. But when competition among divisions becomes significant, the organization is not adapting quickly enough, or when economies of scale are lacking, the organization may require a more sophisticated matrix structure.
A matrix structure combines the functional and divisional structures to create a dual-command situation. In a matrix structure, an employee reports to two managers who are jointly responsible for the employee's performance. Typically, one manager works in an administrative function, such as finance, HR, information technology, sales or marketing, and the other works in a business unit related to a product, service, customer or geography.
These disadvantages can be exacerbated if the matrix goes beyond two-dimensional e. Matrix structures are common in heavily project-driven organizations, such as construction companies.
These structures have grown out of project structures in which employees from different functions formed teams until completing a project, and then reverted to their own functions.
In a matrix organization, each project manager reports directly to the vice president and the general manager. Each project is, in essence, a mini profit center, and therefore, general managers usually make business decisions.
The matrix-structured organization also provides greater visibility, stronger governance and more control in large, complex companies. It is also well suited for development of business areas and coordination of complex processes with strong dependencies. Matrix structures pose difficult challenges for professionals charged with ensuring equity and fairness across the organization. Managers working in matrix structures should be prepared to intervene via communication and training if the structure compromises these objectives.
It is also the most confusing and the least used. This structure matrixes employees across different superiors, divisions, or departments. An employee working for a matrixed company, for example, may have duties in both sales and customer service. Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company's hierarchy but also allows the firm to layout the pay structure for its employees.
By putting the organizational structure in place, the firm can decide salary grades and ranges for each position. The structure also makes operations more efficient and much more effective.
By separating employees and functions into different departments, the company can perform different operations at once seamlessly. In addition, a very clear organizational structure informs employees how best to get their jobs done. For example, in a hierarchical organization, employees will have to work harder at buying favor or courting those with decision-making power.
In a decentralized organization, employees must take on more initiative and bring creative problem solving to the table. This can also help set expectations for how employees can track their own growth within a company and emphasize a certain set of skills—as well as for potential employees to gauge if such a company would be a good fit with their own interests and work styles.
The four types of organizational structures are functional, divisional, flatarchy, and matrix structures. Key elements of an organizational structure include how certain activities are directed in order to achieve the goals of an organization, such as rules, roles, responsibilities, and how information flows between levels within the company. An example of an organizational structure is a decentralized structure, which gives individuals and teams high degrees of autonomy without needing a core team to regularly approve business decisions.
There is no one best organizational structure, as it depends on the nature of the company and the industry it operates in. There are entire fields of study based on how to optimize and best structure organizations to be the most effective and productive.
Senior leaders should consider a variety of factors before deciding which type of organization is best for their business , including the business goals, industry, and culture of the company. American Journal of Industrial and Business Management. Business Essentials. Business Leaders. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance.
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