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 defines how activities such as coordination, task allocation and supervision are directed toward the achievement of organizational goals.
Having an organizational structure allows companies to remain efficient and focused.
All Business of all categories, shapes and sizes use organizational structures for their growth. There is a specific hierarchy within an organization. An eminent organizational structure defines each employee’s job and how it fits within the entire system.
This structure provides a visual representation of a company of how it is shaped and how it can best move forward in achieving its goals. In the hierarchy of organizational structures, the most powerful members of the organization sit at the top, while the others with the least amount of power are positioned at the bottom.
Not having an organizational structure can create difficulties for certain organizations. In these types of situations, employees may face difficulties while reporting.
Having a structure in an organization can provide clarity for everyone at every level. So, each and every department can be more productive than before, as they are likely to be more focused on energy and time.
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Types of Organizational Structures
1. Bureaucratic Structures
Pre-bureaucratic structures lack social controls over the 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 the important decisions. It is also called the entrepreneurial structure, as it allows the founder to control growth and development.
The bureaucratic structure has some level of standardization. This structure defined the clear roles and responsibilities of every individual employee. It is a hierarchical structure, with respect to merit. It has many levels, so decision-making authority has to pass through more layers than flatter organizations. A disadvantage of bureaucratic structures is that they can discourage innovation and creativity within the organization. This type of structures is usually used in larger organizations.
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 shows an organization having both community and hierarchy in the same structure. A hierarchical organizational structure is a pyramid-shaped chart where the board of directors is at the top position and workers are at the bottom level. This is the most common type of organizational structure. Each employee has a supervisor in this organizational structure.
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 consists of activities like task allocation, supervision and coordination. Functional Structure is also like a hierarchical structure. A person with the highest level of responsibility positioned at the top and employees are positioned according to their skills and speciality. Each department here is managed 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 organizational structure groups employees by both function and product at the same time. This organizational chart looks like a grid and it displays cross-functional teams that form for specific projects. It doesn’t follow the traditional hierarchical model. In this structure, employees have dual reporting relationships. The main objective of this structure is to provide both flexibility and more balanced decision making.
For Example – An engineer may regularly belong to the technical department under the engineering director but work on a temporary project under the project manager.
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.