9 Basic Types of Organizational Structure

Organizational structure is a system that abstracts how certain activities are directed in order to achieve the goals of an organization. These activities can include roles, responsibilities and rules.

It also outlines how activities like coordination, task allocation, and supervision are aimed at achieving organizational goals. Maintaining an organizational structure enables firms to stay efficient and focused.

Companies of various types and sizes utilize organizational structures for their development. There exists a distinct hierarchy within an organization. A well-defined organizational structure clarifies each employee’s role and its place within the overall system.

This layout offers a visual depiction of a company’s shape and optimal path towards its objectives. Within organizational hierarchies, the most influential individuals occupy the top positions, while those with lesser authority are situated at the bottom.

The absence of a clear organizational framework can pose challenges for some entities, leading to reporting issues for employees.

Establishing a structured setup within an organization can offer transparency across all levels, enhancing productivity within each department. This focus can lead to improved efficiency in utilizing energy and time.

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Here are the 9 basic types of organizational structures.

1. Bureaucratic Structures

Pre-bureaucratic Structures:

Pre-bureaucratic structures lack social controls over tasks. This structure is the shortest organizational structure and is used to solve simple tasks, such as sales. It is a centralized structure. Most communication is done by one-on-one conversations and the strategic leader makes all important decisions. It is also called the entrepreneurial structure, as it allows the founder to control growth and development.

Bureaucratic Structures:

The bureaucratic structure has a certain level of standardization. This structure delineates the clear roles and responsibilities of each employee. It is a hierarchical system based on merit. Due to its multiple levels, decision-making authority must navigate through more layers compared to flatter organizations. One drawback of bureaucratic structures is their potential to stifle innovation and creativity within the organization. This type of structure is typically employed in larger organizations.

Post-bureaucratic Structures:

This type of structures has a long and strict hierarchy with the flexibility in using modern management techniques. This structure is focused on how simple structures can be used to engender organizational adaptations. It is quite simple and stretched like a network.

2. Hierarchical Organizational Structure

The hierarchy phenotype model of the organizational structure depicts an organization with both community and hierarchy within the same framework. A hierarchical organizational structure is illustrated as a pyramid-shaped chart with the board of directors at the top and workers at the bottom level. This is a widely used organizational structure where each employee reports to a supervisor.

Some advantages of this structure are- it gives every employee a speciality and creates a healthy working environment. It motivates employees with chances for promotion. Above all, it better defines levels of authority and responsibility.

Some of the major disadvantages are – it can slow down innovation due to increased bureaucracy. Employees show interest in their own departments rather than the whole company. It can make lower-level employees think that they have less authority to express their ideas for the company.

3. Functional Organizational Structure

A functional organizational structure involves activities such as task allocation, supervision, and coordination. It resembles a hierarchical structure, with the most responsible person at the top and employees placed based on their skills and specialties. Each department operates independently.

Some advantages of this structure are – It allows employees to focus on their role help teams and departments feel self-determined. It also encourages specialization, and it is scalable.

Some of the important disadvantages are – it can affect interdepartmental communication and create silos within an organization.

4. Divisional Organizational Structure

Divisional organizational structure is one of the smartest organizational structure ever. In this structure, an organization is separated into some divisions, and each division has control over its own resources and operations. This structure is specially designed for large companies.

Geographic Divisional Organizational Structure:

Divisions are separated by districts, territories and regions offering more effective localization and logistics. Companies might set up satellite offices around the country in order to stay close and connected to their customers.

Market-Based Divisional Organizational Structure:

The divisions are separated by industry, market and customer types. The market-based structure is ideal for an organization that has product or services that are incomparable to specific market segments, and it is especially effective if that organization has advanced knowledge of those segments. This structure also keeps the business constantly conscious of demand changes among its different audience segments.

Product-Based Divisional Organizational Structure:

In a product-based divisional organizational structure, each division within the organization is dedicated to a particular product. This type of structure id very suitable for organizations with multiple products and can help to shorten product development cycles. This structure helps small businesses to go to market with new offerings.

Advantages & Disadvantages of Divisional Structure:

The major advantages of the divisional structure are- it helps large companies to stay flexible, and it promotes autonomy and a customized approach. It also allows for a faster response to customer needs.

Now let’s discuss some disadvantages of the divisional structure. First of all, duplicate resources can dominate easily and result in a company competing with itself.

5. Matrix Structure

The matrix structure organizes employees by function and product simultaneously. It resembles a grid, showcasing cross-functional teams for project collaboration, departing from the conventional hierarchy. This setup entails dual reporting relationships, aiming to offer flexibility and equitable decision-making.

For instance, an engineer could be part of the technical department led by an engineering director while contributing to a project overseen by a project manager.This matrix structure promotes teamwork, innovation, and knowledge sharing across different departments. By breaking down silos and encouraging collaboration, employees can leverage their expertise and skills to tackle complex projects more effectively. Additionally, this setup allows for better communication and coordination among team members, leading to improved decision-making and problem-solving capabilities.

Some advantages of the matrix structure are, it lets supervisors easily choose individuals through the needs of a project. It shows the more kinetic view of the organization and it inspires employees to use their ability or skills in various capacities aside from their original roles.

And the disadvantages are – it can create a conflict between project managers and departmental managers. It can also change more frequently than other organizational structures.

6. Flat or Horizontal Organizational Structure

A flat or horizontal structure can fit companies with few levels between upper-level management and lower-level employees. Basically, startup businesses use this type of structure to grow. This structure is completely free of hierarchy related pressure so that employees can be more productive.

Some of the advantages of this structure are – it gives employees more responsibility and provides a better opportunity to grow. It also promotes more open communication and improves coordination.

Some disadvantages are – it can be difficult to maintain when the company grows beyond the startup state. It produces employees with more generalized skills and knowledge. It can also create confusion between employees of different level.

7. Circular Organizational Structure

The appearance of circular organizational structure is different from the rest of organizational structures but it still relies on the hierarchy, in which higher-level employees occupying the inner rings of the circle while the lower-level employees occupying outer rings.

The advantages of circular organizational structure are – It meant to promote communication and free flow of information between different parts of the organization.

Now here are some disadvantages of the circular organizational structure. The circular structure can be confusing for the new employees. Unlike a hierarchical structure, a circular structure makes it difficult to find out whom to report and how they’re meant to fit into the organization.

8. Team-based Organizational Structure

The team is the newest organizational structure developed in the 20th century. In a small business, the team-based structure defines the entire organization. It can be both horizontal and vertical. A team organizational structure is meant to disrupt the traditional hierarchy, giving employees more control, cooperation and focusing more on problem-solving.

Advantages of this structure are – it increases performance, productivity and transparency within an organization. It values experience rather than seniority and promotes an aggressive business mindset. It requires minimal management and can fit anywhere.

Now let me discuss some disadvantages of this type of organizational structure. The promotional path is less clear in this structure. It goes against the traditional hierarchical system.

9. Network-Based Organizational Structure

Network Structure is a modern concept. The network organization contract out any business function that can be done better and more cheaply. Managers in this structure spend most of their time coordinating and controlling external relations. It makes sense of the spread of resources.

The advantages of this structure are – it focuses more on open communication rather than hierarchy and allows companies to be more flexible. It gives all employees the power to collaborate and make decisions. It also helps employees to understand workflow and processes deeply.

Some disadvantages of this type of structure are – It can become complex when dealing with an offsite process. It can be more difficult for employees to know whom to say.

Conclusion

The choice of organizational structure is a critical decision for any company. Each structure offers advantages and disadvantages, and the best fit depends on factors like company size, industry, and goals. Hierarchical structures provide clear leadership but can be slow to adapt. Flat structures foster collaboration but may lack direction. Ultimately, the most effective structure is the one that balances clear roles and responsibilities with flexibility and innovation. By understanding the different types of structures and their characteristics, companies can make informed decisions to optimize their operations and achieve success.