7 types of organizational structures (+ org charts for implementation)Reading time: about 7 min Show
Posted by: Shannon Williams
At some point, you have likely seen an organizational chart for your company. And we can probably guess what it looked like. The typical org chart looks like a pyramid, your C-level executives at the top with lines stretching down to middle management and finally staff-level employees. But not every company functions best with a hierarchical organizational structure. Many types of organizational charts exist because many types of organizational structures exist. Let’s go through the seven common types of org structures and reasons why you might consider each of them. 1. Hierarchical org structureThe pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. It’s the most common type of organizational structure—the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor. Pros
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2. Functional org structureSimilar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. Each separate department is managed independently. Pros
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3. Horizontal or flat org structureA horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees. Pros
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4. Divisional org structureIn divisional organizational structures, a company’s divisions have control over their own resources, essentially operating like their own company within the larger organization. Each division can have its own marketing team, sales team, IT team, etc. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives. Depending on your organization’s focus, there are a few variations to consider. Market-based divisional org structureDivisions are separated by market, industry, or customer type. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) from its food or logistics divisions. Product-based divisional org structureDivisions are separated by product line. For example, a tech company might have a division dedicated to its cloud offerings, while the rest of the divisions focus on the different software offerings—e.g., Adobe and its creative suite of Illustrator, Photoshop, InDesign, etc. Geographic divisional org structureDivisions are separated by region, territories, or districts, offering more effective localization and logistics. Companies might establish satellite offices across the country or the globe in order to stay close to their customers.
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5. Matrix org structureA matrix organizational chart looks like a grid, and it shows cross-functional teams that form for special projects. For example, an engineer may regularly belong to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager). The matrix org chart accounts for both of these roles and reporting relationships. Pros
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6. Team-based org structureIt’ll come as no surprise that a team-based organizational structure groups employees according to (what else?) teams—think Scrum teams or tiger teams. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control. Pros
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See why forming tiger teams is a smart move for your organization. Learn more 7. Network org structureThese days, few businesses have all their services under one roof, and juggling the multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get confusing. A network organizational structure makes sense of the spread of resources. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy. Pros
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Consider the needs of your organization, including the company culture that you want to develop, and choose one of these organizational structures. Once you've chosen the right org structure to pursue, learn the steps in the company reorganization process. Read more What is product division structure?What is a product-based structure? In a product-based structure (also known as a divisional structure), you assign employees into self-contained divisions according to: the particular line of products or services they produce. the customers they deal with. the geographical area they serve.
What are the four types of divisional structures?The four types of organizational structures are functional, multi-divisional, flat, and matrix structures.
When an organization has a divisional structure it is divided into?5. Divisional structure. In a divisional structure, organizations are split into divisions based on specific products, services or geographies. For this reason, this structure is typically used by large companies that operate in wide geographic areas or own separate, smaller companies.
What is an example of a division in a customer structure?Product-based divisional structure
For example, supermarkets typically offer a wide variety of products. Because of this, a store may separate into departments, each with its own team leaders and organizational structure.
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