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Learn how to develop a framework that gives members clear guidelines on building organizational structure, and keeping the organization functional. |
Why should you develop a structure for your organization, when should you develop a structure for your organization.
By structure, we mean the framework around which the group is organized, the underpinnings which keep the coalition functioning. It's the operating manual that tells members how the organization is put together and how it works. More specifically, structure describes how members are accepted, how leadership is chosen, and how decisions are made.
It is important to deal with structure early in the organization's development. Structural development can occur in proportion to other work the organization is doing, so that it does not crowd out that work. And it can occur in parallel with, at the same time as, your organization's growing accomplishments, so they take place in tandem, side by side. This means that you should think about structure from the beginning of your organization's life. As your group grows and changes, so should your thinking on the group's structure.
While the need for structure is clear, the best structure for a particular coalition is harder to determine. The best structure for any organization will depend upon who its members are, what the setting is, and how far the organization has come in its development.
Regardless of what type of structure your organization decides upon, three elements will always be there. They are inherent in the very idea of an organizational structure.
Rules by which the organization operates
The first element of structure is governance - some person or group has to make the decisions within the organization.
Another important part of structure is having rules by which the organization operates. Many of these rules may be explicitly stated, while others may be implicit and unstated, though not necessarily any less powerful.
Distribution of work
Inherent in any organizational structure also is a distribution of work. The distribution can be formal or informal, temporary or enduring, but every organization will have some type of division of labor.
There are four tasks that are key to any group:
Every group is different, and so each will have slightly different terms for the roles individuals play in their organization, but below are some common terms, along with definitions and their typical functions.
For example, from the director of a coalition to reduce violence in a medium-sized city: "Currently, we have three operational task forces. Members of each have an ongoing dialogue with members of the coordinating council, and also with their action committees. The oldest was formed with the goal of eliminating domestic violence about fifteen years ago, when a local woman was killed by her husband. Then, after several outbreaks of violence in the schools a few years back, our group offered to help, and a second task force sprung up around reducing youth violence. We've just started a third, with the goal of increasing gun safety. "All of it is interrelated, and all of it applies to our mission of increasing the safety of residents of South Haven, as well as that of our visitors. But each task force is contributing to that mission in vastly different ways, with different objectives, and using different strategies. 'Cause, you know, the strategies you use to stop a ninth grader from bringing a gun to school just aren't the same as the ones you use to stop a 40-year-old man on unemployment from beating his wife."
For example, the task force on domestic violence mentioned above has the following action committees: A government and law enforcement committee . Members include police officers, lawyers, a judge, and a state representative. Currently, they are trying to pass laws with stronger penalties for those convicted of domestic violence, especially repeat offenders. They are also training officers to be better able to spot an abusive relationship, and better able to inform a victim of his or her options. A social services committee . Members (who include representatives from most of the service agencies in town) work to assure that staff members know where to send someone for the resources he or she needs. They are also trying to increase the number of trained volunteer counselors who work at the battered women's shelter. A media committee . Members include local journalists, writers, and graphic designers. They keep the project and the issue in the public's minds as much as possible with editorials, articles and news clips of events, as well as advertisements and public service announcements.
Although this list is pretty extensive, your organization may only use two or three of the above mentioned roles, especially at the beginning. It's not uncommon for a group to start with a steering committee, ask others to serve as board members, and then recruit volunteers who will serve as members of action committees. In this broad spectrum of possibilities, consider: Where does your organization fit in? Where do you want to be?
So how can all of these pieces be put together? Again, the form a community group takes should be based on what it does , and not the other way around. The structures given are simply meant to serve as examples that have been found to be effective for some community-based organizations; they can and should be adapted and modified for your own group's purposes.
Example - The Ste. Genevieve's Children's Coalition The Ste. Genevieve's Children's Coalition is a relatively large community-based group. They have a coordinating council, a media committee, and three task forces, dealing with adolescent pregnancy, immunization, and child hunger. Each of the task forces has action committees as well. For example, the adolescent pregnancy reduction task force has a schools committee that focuses on keeping teen parents in school and modifying the human sexuality curriculum. A health organizations committee focuses on increasing access and use of the youth clinic. The media committee works to keep children's issues in the news, and includes professionals from the local television stations, radio stations, newspaper, and a marketing professional. The coordinating council is composed of the executive director, her assistant, the media committee chair, and the chairs of each of the three task forces. A board of directors has been invaluable in helping keep the coalition financially viable.
In diagram form, a complex organization might look like this:
And in diagram form:
As smaller size means fewer people, these groups are usually less complex, as they have less need for a formal hierarchy and instead have governance that is consensus-based. A diagram of such a small group might look something like this, with each of the circles representing an individual member:
First, decide upon the formality your organization will have. The following table, adapted from The Spirit of Coalition Building can help you make this first decision.
Stage of organization development | The organization is just starting | The organization is in later stages of development |
Prior relationships among members | Many such relationships already exist | Few such relationships already exist |
Prior member experience in working together | Many such experiences have occurred | Few such experiences have occurred |
Member motivation to be part of the organization | Motivation is high | Motivation is low |
Number of organization tasks or issues (broadness of purpose) | There is a single task or issue | There are multiple tasks or issues |
Organization size | The organization is small | The organization is large |
Organization leadership | The leadership is experienced | The leadership is inexperienced |
Urgency for action | There is no particular urgency to take action now | There is strong urgency to take action now |
Organizational structure is something that is best decided upon internally, through a process of critical thinking and discussion by members of the group.
In your discussions, your answers to the following list of questions may guide your decisions.
Structure is what ensures that your organization will function smoothly and as you intended. You should think about structure early in the development of your organization, but be aware that the type that fits best may change as your organization grows.
Online Resources
How to Develop an Organization Structure , by Tara Duggan, Demand Media, is an informational article on how to develop organization structure with a short step-by-step analysis.
It's All About the Base: A Guide to Building a Grassroots Organizing Program from Community Catalyst.
Module 2: Organizational Structure , by Pathfinder International, is a concise manual describing pros and cons, together with suggestions for how one might change the organizational structure one has.
Print Resources
Berkowitz, W., & Wolff, T. (1999). The spirit of coalition building. Washington , DC: American Public Health Association.
Unterman, I. & Davis, R. (1984). Strategic management of not-for-profit organizations: From survival to success . New York, NY: Praeger.
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Blog Graphs and Charts Organizational Structure: What is it, Types, Tips & Examples
Written by: Joan Ang Jul 05, 2023
Every company, whether large or small, needs an organizational structure that defines how it operates.
And if you know a thing or two about company structures, I’m sure you’ve heard about functional, divisional, matrix, and flat organizational design (and if you haven’t, I’ll teach you very soon!).
Each org structure type has its pros and cons, so it’s important to choose the right one for success.
In this post, I’ll walk you through the different types of organizational structures, help you figure out the best one for your business, and show you how to build an organizational structure.
If you’re worried about your design skills, don’t stress. With our Organizational Chart Maker , you can create org structures without hassle.
Another option is to customize our organizational chart templates for beautiful structures in minutes.
Click to jump ahead:
7 types of organizational structures, which organizational structure is best for what type of business.
Which organizational structure is right for you, what is organizational structure.
An organizational structure is a system of rules and relationships that govern how an organization is run.
An organizational structure defines how a company operates.
Since different divisions in a company have specific roles, an organizational structure helps determine how decision-making is distributed, how work gets done, and how information flows.
Here’s an example of an organizational chart:
Moreover, studying organizational behavior is also critical.
At its basic level, an organizational structure examines the impact of social and environmental factors on how individuals or groups work.
A well-designed and successful organizational structure outlines how people interact, communicate, and collaborate.
They help companies run smoothly and efficiently, as you can see from this internal structure chart.
There are many different types of organizational structures, which are guided by certain behavior, and each has its own advantages and disadvantages.
But they all have the same goal: to help the company run like clockwork. What the best organizational structure is for your own company will depend on its unique needs and circumstances.
An organizational structure is important because they define how responsibilities are divided, and coordinated.
If an organizational chart is not drawn correctly, the entire system will fail.
For example, the organizational structure of government agencies, business units, or private companies always has a well-defined chain of command and operating procedures.
Whether it’s the public or private sector, an administrative structure based on policies, rules, and hierarchy is necessary.
The organizational structure is also critical when it comes to growth.
Employees are more likely to perform better when a system is in place. The structure helps define who is responsible for what and who the employees can turn to for help.
An org chart helps everyone understand their role in the business as can be seen in this example.
According to Organizational Behaviour (Bobbins, Judge, & Campbell, 2012), the six key elements to an org structure are:
Chain of command, span of control, centralization, formalization, work specialization or division of labor.
Work specialization refers to how operations are divided into separate roles.
Work specialization not only increases production efficiency and production, but it also increases boredom, weariness, and stress. This can lead to low output, poor quality, increased absenteeism, and high turnover.
Hence, this tendency towards specialization has shifted as people realize broadening the scope of tasks can increase productivity.
Departmentalization refers to the process by which jobs are grouped together.
This can be done by function, product, geography, process, or customer.
Functional departmentalization divides tasks into categories based on their functions, such as engineering, accounting, or human resources. There are project management software for accountants that you can invest in which can help streamline communication between these different departments.
The chain of command is the line of authority that runs from the top to the bottom, defining who reports to whom.
The right of a boss to issue orders and expect them to be followed is referred to as authority.
The span of control refers to the number of employees that can be managed by one manager.
A narrow span of control fosters a more intimate and hands-on work environment as a manager only controls a small number of employees.
But a wide span of control puts numerous employees under one manager, assuming that daily tasks and processes are clearly defined.
The optimal control span will vary depending on the situation.
Centralization refers to decision-making concentrated in a single place in the organization.
Top management makes crucial decisions in a centralized structure with little or no involvement from lower-level employees.
A decentralized structure, on the other hand, allows lower-level employees to provide input or even make choices.
Formalization aids the creation of processes, relationships, and operational procedures which outlines procedures, rules, and duties for individual employees, units, groups, teams, and the company as a whole.
When it comes to the types of organizational structure , businesses are spoiled for choice.
Here’s an overview of 7 common org structures used by companies today:
In a functional organizational structure, employees are grouped together according to function or role.
Similarly, internal departments are organized around core competencies required to accomplish a strategic goal.
These org structures generally start at high-level positions and work down from there.
In this hospital org structure example, the organizational chart establishes a clear chain of command from top to bottom.
A divisional organizational structure splits a company into self-contained divisions based on products, services, or locations.
These divisions are semi-autonomous and have control over their resources and act as an independent company within a larger one.
In this org chart example, a corporation is organized into divisions based on client segments.
A matrix organizational structure is a hybrid of functional and divisional structures. In this structure, employees are grouped based on functional expertise and/or specific projects.
Managers in a matrix org structure have more than one reporting line, which includes both individuals to manage and lines of responsibility.
Depending on project demands and priorities, it might be possible to “switch” from one boss to another.
A flat organizational structure, also known as a horizontal or decentralized structure, has few or no levels of management between employees and top leadership.
In a flat organization, traditional layers of authority and decision-making are minimized to empower employees.
A flat structure is often used in startups until they grow big enough to have different departments.
A team-based organizational structure, also known as a team structure, emphasizes the formation of well, self-managed teams.
In this type of structure, an organization is composed of multiple teams such as Scrum or Innovation teams that have their own set of responsibilities and goals.
A hierarchical organizational structure, also known as a traditional or pyramid structure, is a system in which authority flows in a linear fashion from top to bottom.
With this structure, employees are organized into various tiers, each with a different level of authority and responsibility.
At higher levels, there is more decision-making power, while the lower levels carry out specific tasks and report to superiors.
A network organizational structure, also known as a networked organization or network model, is a relatively new approach to organizing businesses.
In a network structure, the organization has a decentralized network of interconnected entities, both internal and external, that collaborate to achieve common goals.
For different types of enterprises, different structures can work.
A functional organizational structure, for example, may not be right for a company with a lot of products or services because it doesn’t illustrate how they’re related and arranged.
In this scenario, a divisional structure could be more appropriate.
However, if a company only sells one product or service and employs a small number of people (say, less than 100), a flat structure is the better option since it allows employees to communicate easily with each other and with supervisors.
When an organization demands change or when difficulties occur, organizational structures must be updated.
For instance, if a leader wishes to make structural changes to be more responsive to changing consumer needs, they can transition from a functional to a matrix structure.
When leaders find that staff is spending too much time in meetings or dealing with internal issues rather than executing their tasks, they should consider switching from a divisional to a flat structure.
Depending on the demands of the business, an organizational structure can also be a mix of two or more types.
It’s also critical for project managers or management teams to examine their culture to implement necessary changes.
These design changes begin with actions that best match culture rather than what makes sense from a purely economic perspective.
Organizations should select change management techniques that enable them to attain their desired cultures while also allowing them to successfully implement new designs.
Define the organizational structure and levels.
The first step in creating organizational structures is to designate management and employee levels.
This includes creating management layers and reporting links, cross-functional processes, and workflows, and clear lines of authority and accountability that enable staff to spot and fix issues before they become a problem.
When designing organizational structures, the company’s philosophy should be clearly articulated.
A philosophy defines the driving ideas for how your company will operate, so it should be expressed in plain language that everyone can understand.
Employees must understand the type of company they work for to know what actions are required of them at all times.
The organizational structure you select should be based on what works best for your business, given its unique demands and objectives.
Everything must be taken into account when developing a structure to guarantee that all employees understand their positions in the company.
The needs, competitive business climate, culture, communication patterns and processes, worker capabilities, and firm size are all elements to consider.
Because managers are in charge of allocating resources within units, they must be heavily involved in the development of organizational structures.
They should always be aware of how employees interact with each other when performing activities, as well as the impact changes in an org structure, will have on their function.
Changes in the structure influence everyone in the organization, so it’s critical to convey them clearly and frequently.
Employees will be more successful in accomplishing duties if they have a better understanding of organizational structures.
This will not only enhance employee morale but will also create stronger teams that properly manage their time and perform tasks per their needs.
When creating an organizational structure, numerous critical components such as design, chart, job descriptions, and workflows must be taken into account.
Venngage takes care of many of these requirements with organizational chart templates like the one below that you can customize.
Venngage also has a business feature called My Brand Kit that enables you to add your company’s logo, color palette, and fonts to all your designs with a single click.
For example, you can make your organizational structure reflect your brand by uploading your logo, fonts, and color palette using Venngage’s branding feature.
Not only are Venngage’s organizational chart templates free to use and professionally designed, but they are also tailored for various use cases and industries to fit your exact needs and requirements.
A business account also includes a real-time collaboration feature , so you can invite members of your team to work simultaneously on a project.
We’ve already seen the advantages and disadvantages of different org structures.
But generally, large organizations can benefit from divisional structures since they can be organized by product line or market segment, resulting in a clear reporting chain.
However, if not handled appropriately, it can lead to silos, which is a problem when separate divisions compete against one another rather than collaborate.
On the other hand, smaller companies or teams will benefit from a flat org structure since everyone can contribute while being close to the boss.
But, on the other hand, employees may believe they lack the resources of larger organizations or authority to effectively provide value.
Venngage simplifies the process of creating organizational structures with stunning org charts .
The examples provided in this post can be used by companies to create structures that are best suited to their goals and available resources.
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Discover the different organizational structures, their benefits, and how they can shape your company's success in 2024 and beyond.
Organizational structure aligns and relates parts of an organization, so it can achieve its maximum performance. The structure chosen affects an organization's success in carrying out its strategy and objectives. Leadership should understand the characteristics, benefits and limitations of various organizational structures to assist in this strategic alignment.
Overview Background Business Case Key Elements of Organizational Structures Types of Organizational Structures
Matrix organizational structures, open boundary structures (hollow, modular virtual and learning).
The Impact of Growth Stages on Organizational Structure Metrics Communications and Technology Global Issues Legal Issues
This article addresses the following topics related to organizational structure:
Organizational structure is the method by which work flows through an organization. It allows groups to work together within their individual functions to manage tasks. Traditional organizational structures tend to be more formalized—with employees grouped by function (such as finance or operations), region or product line. Less traditional structures are more loosely woven and flexible, with the ability to respond quickly to changing business environments.
Organizational structures have evolved since the 1800s. In the Industrial Revolution, individuals were organized to add parts to the manufacture of the product moving down the assembly line. Frederick Taylor's scientific management theory optimized the way tasks were performed, so workers performed only one task in the most efficient way. In the 20th century, General Motors pioneered a revolutionary organizational design in which each major division made its own cars.
Today, organizational structures are changing swiftly—from virtual organizations to other flexible structures. As companies continue to evolve and increase their global presence, future organizations may embody a fluid, free-forming organization, member ownership and an entrepreneurial approach among all members. See Inside Day 1: How Amazon Uses Agile Team Structures and Adaptive Practices to Innovate on Behalf of Customers .
A hallmark of a well-aligned organization is its ability to adapt and realign as needed. 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 key to profitable performance is the extent to which four business elements are aligned:
Leadership. The individuals responsible for developing and deploying the strategy and monitoring results.
Organization. The structure, processes and operations by which the strategy is deployed.
Jobs. The necessary roles and responsibilities.
People. 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:
See Meeting the Challenges of Developing Collaborative Teams for Future Success.
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. "Departmentation" refers to the way an organization structures its jobs to coordinate work. "Span of control" means the number of individuals who report to a manager. "Chain of command" refers to a line of authority.
The company's strategy of managerial centralization or decentralization also influences organizational structures. "Centralization," the degree to which decision-making authority is restricted to higher levels of management, typically leads to a pyramid structure. "Centralization" is generally recommended when conflicting goals and strategies among operating units create a need for a uniform policy. "Decentralization," the degree to which lower levels of the hierarchy have decision-making authority, typically leads to a leaner, flatter organization. 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.
A functional organizational chart might look something like this:
Advantages of a functional structure include the following:
Disadvantages center on coordination or lack thereof:
This structure works best for organizations that remain centralized (i.e., a majority of the decision-making occurs at higher levels of the organization) because there are few shared concerns or objectives between functional areas (e.g., marketing, production, purchasing, IT). 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:
A divisional organizational structure might look like this:
The advantages of this type of structure are the following:
The disadvantages of this structure include the following:
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.
A typical matrix organizational structure might look like this:
Advantages of the matrix structure include the following:
Disadvantages of matrix organizations include the following:
These disadvantages can be exacerbated if the matrix goes beyond two-dimensional (e.g., employees report to two managers) to multidimensional (e.g., employees report to three or more managers).
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. Furthermore, leadership should monitor relationships between managers who share direct reports. These relationships between an employee's managers are crucial to the success of a matrix structure.
More recent trends in structural forms remove the traditional boundaries of an organization. Typical internal and external barriers and organizational boxes are eliminated, and all organizational units are effectively and flexibly connected. Teams replace departments, and the organization and suppliers work as closely together as parts of one company. The hierarchy is flat; status and rank are minimal. Everyone—including top management, managers and employees—participates in the decision-making process. The use of 360-degree feedback performance appraisals is common as well.
Advantages of boundary-less organizations include the following:
Disadvantages include the following:
Boundary-less organizational structures can be created in varied forms, including hollow, modular and virtual organizations.
Hollow organizations. Hollow structures divide work and employees by core and noncore competencies. Hollow structures are an outsourcing model in which the organization maintains its core processes internally but outsources noncore processes. Hollow structures are most effective when the industry is price competitive and choices for outsourcing exist. An example of a hollow structure is a sports organization that has its HR functions (e.g., payroll and benefits) handled by outside organizations.
Advantages of this type of structure include the following:
Disadvantages include:
Modular organizations. Modular structures differ from hollow organizations in that components of a product are outsourced. Modular structures may keep a core part of the product in-house and outsource noncore portions of the product. Networks are added or subtracted as needs change. For a modular structure to be an option, the product must be able to be broken into chunks. For example, computer manufacturer Dell buys parts from various suppliers and assembles them at one central location. Suppliers at one end and customers at the other become part of the organization; the organization shares information and innovations with all. Customization of products and services results from flexibility, creativity, teamwork and responsiveness. Business decisions are made at corporate, divisional, project and individual team member levels.
Advantages include the following:
Disadvantages include concerns about the actions of suppliers outside the control of the core management company. Risk occurs if the partner organization removes itself form the quality check on the end product or if the outsourced organization uses a second outsourced organization. Examples of supplier concerns include the following:
Virtual organizations. A virtual organization (sometimes called a network structure) is cooperation among companies, institutions or individuals delivering a product or service under a common business understanding. Organizations form partnerships with others—often competitors—that complement each other. The collaborating units present themselves as a unified organization.
The advantages of virtual structures include the following:
The disadvantages of virtual organizations include the following:
Virtual structures are collaborative and created to respond to an exceptional and often temporary marketing opportunity. An example of a virtual structure is an environmental conservancy in which multiple organizations supply a virtual organization with employees to save, for example, a historic site, possibly with the intent of economic gain for the partners.
Understanding the organizational environment is crucial in open boundary models. For example, some industries cannot outsource noncore processes due to government regulation. (For example, health insurance organizations may be unable to outsource Medicare processes). Or, in some cases, outsourcing may have to be negotiated with a union.
The key to effective boundary-less organizations is placing adaptable employees at all levels. Management must give up traditional autocratic control to coach employees toward creativity and the achievement of organizational goals. Employees must apply initiative and creativity to benefit the organization, and reward systems should recognize such employees.
Learning organizations. A learning organization is one whose design actively seeks to acquire knowledge and change behavior as a result of the newly acquired knowledge. In learning organizations, experimenting, learning new things, and reflecting on new knowledge are the norms. At the same time, there are many procedures and systems in place that facilitate learning at all organization levels.
The advantages of learning organizations include the following:
The disadvantages of learning organizations include the following:
Organizations typically mature in a consistent and predictable manner. As they move through various stages of growth, they must address various problems. This process creates the need for different structures, management skills and priorities.
The four stages of development in an organization's life cycle include the following:
The beginning stage of development is characterized by an inconsistent growth rate, a simple structure and informal systems. At this stage the organization is typically highly centralized. "Dotcom" companies are a good example of startup companies.
The expansion stage is evidenced by rapid, positive growth and the emergence of formal systems. Organizations at this stage typically focus on centralization with limited delegation.
The consolidation stage is characterized by slower growth, departmentalization, formalized systems and moderate centralization.
The diversification stage occurs when older, larger organizations experience rapid growth, bureaucracy and decentralization.
As an organization grows or passes from one stage of development to another, carefully planned and well-conceived changes in practices and strategies may be necessary to maximize effectiveness. There are no guarantees that an organization will make it from one stage to the next. In fact, a key opportunity for leadership is to recognize indicators that suggest an organization is in a risky or unhealthy stage and to make appropriate structural adjustments.
The art of organizational design is assessing the environment's essential aspects and their meaning for the organization's future. Translating those characteristics into the right structure is critical to increasing efficiency and controlling costs. When selecting the best structure for the organization, company leaders should examine and evaluate current key structural dimensions and contextual factors. See How do I determine which HR metrics to measure and report?
Leaders can develop an understanding of the organization's internal environment through measurement and analysis of its structural dimensions. Key dimensions, which are usually measured through a survey, include:
Specialization. The extent to which an organization's activities are divided into specialized roles.
Standardization. The degree to which an organization operates under standard rules or procedures.
Formalization. The extent to which instructions and procedures are documented.
Centralization. The degree to which leaders at the top of the management hierarchy have authority to make certain decisions.
Configuration. The shape of the organization's role structure, which includes:
A review of contextual factors will provide a better understanding of the external environment and the relationship between the internal and external environment. Some of the significant contextual factors to consider in this review include:
Origin and history. Was the organization privately founded? What changes have occurred in ownership or location?
Ownership and control. Is the organization private or public? Is control divided among a few individuals or many?
Size. How many employees does the organization have? What are its net assets? What is its market position?
Location. How many operating sites does the organization maintain?
Productsand services. What types of goods and services does the organization manufacture and provide?
Technology. Are the organization's work processes effectively integrated?
Interdependence. What is the degree to which the organization depends on customers, suppliers, trade unions or other related entities?
After examining the structural dimensions and contextual factors and developing an understanding of the connection between an organization's structure and strategy, organization leaders can consider alternative structures. They may use diagnostic models and tools to guide the design process.
The last few years have seen an unprecedented expansion and improvement of online communication. Software has pushed the boundaries of workplace communication beyond e-mail into collaborative social media platforms and innovative intranets. The decline in traditional communication methods and the dramatic increase in cyber communication has had a major impact on the workplace and is leading to restructuring.
As organizations continue to restructure to remain competitive, communications can drive the transition to an effective new organizational structure. Research suggests that companies can positively affect their credibility with employees through various organizational communication programs.
In establishing internal communication channels, leadership must be aware of the advantages and shortcomings of communication technologies and match them to the organization's needs, strategic goals and structure. Employers should also be cognizant of, and be prepared to deal with, the common communication challenges in various organizational structures. For example, communications technology has enabled organizations to create virtual workplaces and teams. In a virtual team, members from various geographical locations work together on a task, communicating via e-mail, instant messaging, teleconferencing, videoconferencing and web-based workspaces.
Although virtual teams have significant advantages—most notably reduced travel costs and flexibility in staffing and work schedules—they also pose challenges. Virtual teams often find coordinating team logistics and mastering new technologies difficult. Communication is also a major challenge because of the absence of visual (body language) and verbal (intonation) clues. Research suggests that organizations can overcome these challenges through effective support and training.
Organizational structures often need to change as companies expand around the globe. An organization's leaders should plan carefully before opening offices in another country.
Many issues arise when an employer plans to open an international branch, hire international workers and formulate a globalized strategy. Among the questions that must be answered are:
Unless employers have a sound HR strategy ready before leaping into another country, they could fail.
When an organization opens international offices, HR professionals and other business leaders should be able to communicate as effectively with workers across the globe as around the corner. That can be a challenge. Having a robust intranet and using videoconferencing are alternatives to face-to-face communication.
As rapid changes in technology affect global communication, employees must be aware of linguistic, cultural, religious and social differences among colleagues and business contacts. The organization should train all employees (not just managers and CEOs who travel) in cultural literacy.
Moreover, employers should be aware that language difficulties, time‐and‐distance challenges, the absence of face‐to‐face contact, and, above all, the barriers posed by cultural differences and personal communication styles make global virtual work far more complex than local structures. These practices can enhance global virtual team relationships:
Regardless of the type of structure, employers must ensure compliance with legal requirements in the countries where their organizations operate. Some of those requirements will be quite extensive (for example, public companies must ensure compliance with the Sarbanes-Oxley Act, and most organizations must ensure compliance with the Fair Labor Standards Act and its related state laws).
When organizational structures change, or if the chain of command is weak or fails to keep up-to-date with changes in the business, a company may have compliance problems because the structure has not been evaluated with regard to these laws. Imagine, for example, a restructuring that reduces the number of direct reports for an entire layer of management, which perhaps leads to those individuals no longer being exempt.
As an organization moves internationally, laws in the host countries must also be evaluated and a plan put in place for compliance before the expansion occurs. Employers must anticipate and plan for laws affecting all aspects of the employee experience, including hiring, benefits, leaves and termination.
HR must always include human intelligence and oversight of AI in decision-making in hiring and firing, a legal expert said at SHRM24. She added that HR can ensure compliance by meeting the strictest AI standards, which will be in Colorado’s upcoming AI law.
The proliferation of artificial intelligence in the workplace, and the ensuing expected increase in productivity and efficiency, could help usher in the four-day workweek, some experts predict.
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In one of our previous articles, we discussed organizational chart best practices . Now let’s take a look at types of organizational chart structures which can be used in different scenarios. And you don’t have to worry about creating them too. Our organizational chart software supports all the types mentioned below.
1) hierarchical structure.
The hierarchical model is the most popular organizational chart type. There are a few models that are derived from this model.
In a hierarchical organization structure, employees are grouped with every employee having one clear supervisor . The grouping is done based on a few factors, hence many models are derived from this. Below are a few of those factors
These are some of the most common factors, but there are many more factors. You can find org chart examples for most of these types in our diagramming community.
This is the dominant mode of organization among large organizations. For example Corporations, Governments, and organized religions are hierarchical organizations with different levels of management, power or authority.
In a Matrix organizational structure, the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager to report to (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts).
For example, all engineers may be in one engineering department and report to an engineering manager. But these same engineers may be assigned to different projects and might be reporting to those project managers as well. Therefore some engineers might have to work with multiple managers in their job roles.
This is an organizational chart type mostly adopted by small companies and start-ups in their early stage. It’s almost impossible to use this model for larger companies with many projects and employees.
The most important thing about this structure is that many levels of middle management are eliminated . This enables employees to make decisions quickly and independently. Thus a well-trained workforce can be more productive by directly getting involved in the decision-making process.
This works well for small companies because work and effort in a small company are relatively transparent. This does not mean that employees don’t have superiors and people to report to. Just that decision-making power is shared and employees are held accountable for their decisions.
So in summary, when deciding on a suitable organizational chart, it is important to have an understanding of the current organizational structure of your company.
Network organizational structure helps visualize both internal and external relationships between managers and top-level management. They are not only less hierarchical but are also more decentralized and more flexible than other structures.
The idea behind the network structure is based on social networks. Its structure relies on open communication and reliable partners; both internal and external. The network structure is viewed as agiler than other structures because it has few tires, more control, and a bottom flow of decision making.
Using a Network organizational structure is sometimes a disadvantage because of its complexity. The below example of a network org chart shows the rapid communication between entities.
Divisional types of organizational charts have their own division which corresponds to either products or geographies. Each division contains the necessary resources and functions needed to support the product line and geography.
Another form of divisional org chart structure is the multi-divisional structure. It’s also known as M-form. It’s a legit structure in which one parent company owns several subsidiary companies, each of which uses the parent company’s brand and name.
The main advantage of the divisional structure is the independent operational flow, that failure of one company does not threaten the existence of the others.
It’s not perfect either. There can be operational inefficiencies from separating specialized functions. An increase in accounting taxes can be seen as another disadvantage.
Creating org chart with pictures using Creately
Line organizational structure is one of the simplest types of organizational structures . Its authority flows from top to bottom. Unlike other structures, specialized and supportive services do not take place in these organizations.
The chain of command and each department head has control over their departments. The self-contained department structure can be seen as its main characteristic. Independent decisions can be taken by line officers because of its unified structure.
The main advantage of a line organizational structure can be identified as effective communication that brings stability to the organization.
Team-based organizational structures are made of teams working towards a common goal while working on their individual tasks. They are less hierarchical and they have flexible structures that reinforce problem-solving, decision-making, and teamwork.
Team organization structures have changed the way many industries work. Globalization has allowed people in all industries around the world to produce goods and services cooperatively. Especially, manufacturing companies must work together with suppliers around the globe while keeping the cost to a minimum while producing high-quality products.
The ones shown above are the most commonly used types of Organizational Charts or organogram structure types as some call them. But there are plenty more models which have various advantages and disadvantages based on the situation and organization. You can easily experiment with different models using our org chart software .
Have questions? Feel free to ask them in the comments or you can reach to us via our social media channels.
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it is very helpful.
Which of the organizational type does Toyota belong to?
limitations of organisation charts
Hi which type of the mentioned organization charts is useful for an eCommerce business?
eCommerce are typically smaller operations as opposed to ‘brick and mortar’ businesses, so they will be more likely to have Horizontal/Flat organisational structure
Im doing MBA in HR. Can someone share the organizational structure of HR department of a large IT Company.
the organizational structure of an IT company is basically Flat!
Back in the day (yep, I am showing my age) I used to dread creating organisational charts. With the technology available now, it’s so much easier to create even the most complex of charts, no matter which of the above options best suits your business.
Is there a post on the advantages and disadvantages of using the above mentioned organizational charts ? Please direct me to it, THanks.
You can check advantages and disadvantages of org charts here https://creately.com/blog/diagrams/advantages-disadvantages-organizational-charts/
your chart is very helpfull for students,and your article with helping material for every professional person.
What factors determine the type of organization chart to use???
Iam doing distance MBA from NMIMS
I have to solve an assignment where the question is:
Study organization structure of two IT companies and prepare a report comprising of the type of chart, positions, levels, functions, process and qualities in the organization.
Can you please help me about the type of content that should be covered in this?
Please enter an answer in digits: 13 + eight =
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Many company organizational structures are pretty linear — or, more accurately, pretty triangular. The traditional “org chart” images of a pyramid depict companies with a few powerful individuals at the top of the company. Under that is a slightly wider level that reports to them. Each subsequent level gets wider and wider, with a large base of entry-level employees at the “bottom.”
However, just because many organizations are structured in this way doesn’t mean that yours should be. Depending on the size of your team and how your workflows are structured, you may benefit from any number of alternative organizational structures. It can also give you some insight into areas of fraction and possible opportunities for development. If your teams are not delivering the outcomes you need, the organizational structure is one possible culprit. Outcomes are the way to assess whether your systems and structures are working as intended.
Choosing the right structure for your team requires you to think about how your team currently works and where you’re going. Before you draw up that org chart or start proposing new headcount, read on. We’ll dig into the various types of organizational structures, what they are, and ways to implement them.
An organizational structure is the way that a company, organization, or team is set up. It can be hierarchical, with different levels of management. Or it can be divisional, with different product lines and divisions. Sometimes, there’s little to no hierarchy at all. Every company and team has an organizational structure, even if it’s not formally defined.
An organizational structure defines how job titles, roles, and responsibilities are assigned within a company. It helps determine who reports to whom, and who makes decisions about what.
Startups often have a matrix organizational structure, with different departments working together on projects. Large organizations usually have a hierarchical structure with a clear chain of command.
Most people only think of organizational structure as it relates to entire companies. But the same structural concepts also apply to how teams get organized within a function, department, or business unit. Organizational structures and restructuring are largely about decision-making authority, information flows, priorities, and allocating resources.
Each organization is unique (and has unique needs). Even so, each organizational structure will have a few key components in common.
No matter the organization’s size, certain aspects of workplace decision-making and processes need to be clear. Many small businesses handle these designations informally. As a company grows, though, it’s helpful to revisit and clarify these hierarchies (or lack thereof). At the minimum, each organization needs to designate:
Work specializations are less formally known as roles or job descriptions. They outline what a person is responsible for within an organization or on a smaller team. Clear work specializations allow you to make the best use of talent. They make it clear what an individual person’s responsibilities and measures of success are, and help safeguard against a thinning of resources..
If your organization, like many, relies on a mix of people managers and individual contributors , you need to establish a chain of command. This gives people clear direction on who they should reach out to for support. When people from other departments need to check on the status of cross-functional projects, it makes it easy to find out who’s driving them.
Compartmentalizing people into departments creates teams of people whose jobs are organized around a specific type of work. A department could be human resources, sales, marketing, or IT. People in these departments often share common skill sets and work together frequently on projects. Each department is typically led by an executive.
The number of team members that report to a given manager is formally referred to as “span of control.” If a manager has a large number of direct reports , the team is often subdivided into smaller departments. This happens often at large companies, where multiple people may fill a similar job function.
Better thought of as “ top-down vs. bottom-up management ,” the terms centralization and decentralization refer to how much influence upper-level leaders have over an organization. Of course, all leaders have power over their organizations. But decentralized management structures tend to have more agile decision making happening at all levels. Employees are empowered to perform their roles and make decisions as they see fit.
Formalization determines how much standardizing there is across the organization. It may affect functions, systems, job descriptions, and the flow of information. Organizations with high formalization are often more mature and highly systematized. Done well, this kind of structure should boost innovation, not stifle it.
Organizational structures are important because they help businesses implement efficient decision-making processes. By assigning specialized roles to lower-level employees, businesses can make better decisions faster.
Additionally, organizational structures provide a clear org chart that helps businesses keep track of their human resources. When your company is small, it’s hard to imagine that you’d ever lose track of what everyone is doing. After all, in startups and small businesses, it often feels like everyone is doing everything .
As you grow, these silos become more distinct from each other. At that point, an organizational structure helps you identify gaps in skills and support within your business. People’s roles become more specialized and individual teams grow bigger. Revisiting the allocation of work prevents the duplication of effort and reflects business priorities.
Keep in mind, however, that behind these flowcharts are real people. The leaders and employees represented in an organizational chart each work best under different circumstances and with different leadership styles. If you don’t keep them included in the what and why of your organizational shifts, they’re more likely to resist changes when they occur.
Since change is inevitable, it’s a good idea to communicate early and often as things shift. Strive for as much transparency in the workplace as possible. And if you do make changes in your organization, make time to check in with the people being affected. You can try to minimize the impact to them and help create a transition plan if need be.
There are several different types of organizational structures, each with its own advantages and disadvantages. The most common are functional , divisional , matrix , project team , flat , and network .
Functional organizational structures are best for small businesses because they allow for clear decision-making hierarchies. Each team operates as an individual “silo.” Once teams grow, they benefit from making these functional structures less rigid. Teams often move faster and collaborate better with more overlap.
Divisional structures are best for large businesses because they allow for more specialization. For example, a global company might divide their business into regions (such as EMEA/APAC), or broad service categories (like B2B/D2C).
In the matrix structure , employees work in both functional and project teams which may be structured differently. Employees then typically report to two bosses: one who oversees their day-to-day work, as well as another boss that oversees larger projects or tasks.
A project team approach would include any number of functions working together on a specific project without a permanent hierarchy. Employees report up through their individual bosses. But they also contribute to team efforts led by managers from other departments on the team as needed.
Flat organizations have as little hierarchical structure as possible. Middle managers are largely absent from staff. Instead, the workforce often reports directly to managers or leaders at the “highest” level. Highly-autonomous employees often thrive in these environments. The lack of hierarchy motivates people to make decisions, take ownership, and facilitates problem-solving.
In a network structure , individual freelancers, groups, or associations work together. They each work as separate functional teams, but may share an overarching entity. Professional associations often have this type of structure.
When it comes to organizational structures, there is no one-size-fits-all solution. The best way to choose an organizational structure for your company is to first assess your business needs and goals. From there, you can match those needs with one of the common organizational structures.
Although there isn’t a “right” answer, some organization structures are a better fit for your team than others. And while we normally advocate for trying several solutions until you find what works, that doesn’t work as well with organizational development .
Company reorganizations (especially repeated ones) tend to destroy employee morale . Even when handled well, reorgs create uncertainty and stress on employees. Since they’re often a precursor to layoffs, people tend to fear losing their jobs — even when the changes are generally positive. And if there’s a pattern of other major changes rapidly coming down the line? That’s a recipe for cynicism and workplace burnout .
When deciding on an organizational structure, it’s important to keep these four factors in mind:
The structure you choose will depend on the type of company you run. For example, companies that rely on a number of front-line employees are structured a lot differently than nonprofit organizations. Each will have a different organizational chart based on what they do and where they need to prioritize their efforts.
To build an effective organization , you need to know which team members are there to facilitate the work of the people in the field and which employees support the leaders. For example, C-suite executives often have a team dedicated to supporting their efforts. But the customer service team exists to support the end user. Some roles, like marketing or product development, sit squarely in the middle. Your allocation of resources needs to reflect a balance between these two sets of needs.
Company size is critical to consider when determining a formal organizational structure. Smaller companies often have a high deree of overlap in roles. They have less formalized structures. This lack of standardization can present some challenges, but it frees teams to grow rapidly.
On the other hand, larger organizations tend to grow faster with a more centralized, formal structure. Why? It makes it easier for people to know where to find information, who to talk to in order to get things done, and avoid duplicating efforts needlessly. The challenges and unique strengths of each differently sized organization help inform the best type of arrangement.
In order to create standardized systems, there (usually) needs to be something to systematize. It’s pretty hard — or deceptively easy — to develop systems for a business that has no clients, no services, and no employees.
In the early stages, not only do small companies benefit from a less formalized structure — they don’t need one. Once workflows emerge, patterns arise, and problems occur, they can reflect those learnings as a formal process. The need for reporting relationships and divisional structure arises as the need for systems does.
Organizations at every stage — even with just one person — tend to organize their work by function. There’s accounting, marketing, and service right from day one. When this work is handled by a single person, there’s no need to articulate systems. More people means more need to define how, when, and why teamwork happens.
Both the existing and desired systems play a role in organization structure. If you need or want faster collaboration and communication across teams, you’ll want to design a “flatter” structure. If leaders need to be removed from day-to-day activities, it will help to have a structure that delegates authority and accountability to others .
Building a healthy organization means more than just functioning well — although that is important. It means creating plans to support your employees and the workplace in their growth. Giving some thought to the types of authority that currently exist can help you choose the right organizational structure. But knowing where you want to go and the outcomes you want to achieve in the future will help you get there.
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Organizations of all sizes require an established, organized structure to drive business outcomes. However, not all companies function best with a traditional, hierarchical organizational structure.
A lack of organizational structure (or choosing the wrong type of structure) leads to miscommunication, work delays, poor process flows, tepid employees, and other serious consequences that stunt business growth. In contrast, a robust organizational structure enables employees to coordinate teamwork, understand their tasks and responsibilities, reduce conflicts, and boost productivity.
How do you design an organizational structure that’s right for your company?
Organizational structure is the backbone of all operating procedures and workflows at any company. It determines each employee’s place and role in the business and is key to organizational development .
A clear structure allows every team member to be involved. When employees know what they’re responsible for and who they report to – which isn’t the case in many fast-growing companies – they’re more likely to take ownership of their work.
Having a documented organizational structure in place enables employes to improve efficiency and provides clarity for each individual employee and business unit. With this clarity, departments can become more focused on how their actions and goals drive business outcomes.
To build an org structure, you need to consider your business size, life cycle, goals, and positioning. Apart from considering the current environment your company operates in, you should also think of where you want to see the organization in five years, a sign of organizational health .
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An organizational structure is based on a range of elements, including:
Span of control.
Work specializations define how responsibilities are split between employees based on the job description. It’s used to split projects into smaller work activities and assign digestible tasks to individual employees. The most common results of improper specialization are low efficiency and burnout.
Documentation is an act of grouping specialists on the basis of the job description, skills, location, or other factors that connect them.
The biggest challenge is choosing the criteria for departmentation. In many cases, it’s no more enoug h to apply functional departmentation – where employees are grouped based on the tasks they perform. Startups often go for matrix departmentation that involves combining two types of departmentation and takes the best out of both worlds. For instance, functional departmentation can be joined by geographical departmentation to better serve clients in different locations.
Chain of command represents a system for passing instructions and reporting within an organization. Ideally, it distributes the power, supports knowledge sharing , and encourages employee accountability .
The traditional chain of command makes decision-making more complex and does not allow for much flexibility. On the contrary, modern approaches strive to enhance employee autonomy and avoid micromanagement.
Span of control regulates the number of direct reporters managed by a single supervisor. It heavily depends on the three aforementioned elements of organizational structure. Furthermore, to identify the right span of control, you need to evaluate your leaders’ capacity, workplace size, and experience level of employees.
Centralization and decentralization are the concepts defining how managers, as well as employees, give input on company goals and strategy. While centralization gives leaders the ultimate control over decision-making processes, decentralization allows employees to impact business decisions.
Formalization determines to which extent business processes, policies, and job descriptions are standardized. It may regulate communication between employees and managers, workplace culture, operational procedures, etc.
All organizational structures are either centralized or decentralized. When designing an organizational structure, leaders must decide which is best for your company. Here are the differences between the two:
In a centralized organizational structure, decisions are made by high-level managers and are distributed down the chain of command.
Centralized organizational structures have a range of advantages, like clear responsibilities, better process governance , and a straightforward chain of command. It places decision-making responsibilities on leadership who can foresee the long-term impact of important decisions.
The biggest drawback of a centralized organizational structure is the time the decision-making process takes in large companies. For example, individual team managers must run requests up the chain of command before going forward.
For GTM and customer-facing teams, this can slow down the customer experience, resulting in missed opportunities and poor service. It can also hamper companies’ ability to innovate, with centralized organizations being less agile and nimble than decentralized ones.
Often, it’s recommended that early-stage startups and small businesses design a centralized organizational structure.
In a decentralized structure, lower-level employees identify issues and make decisions without communicating them up the chain of command to upper management. Greater autonomy empowers employees to take action, eliminating process delays, enabling employees with confidence to make decisions, and driving growth.
Even in decentralized organizations, clear hierarchies still exist. The c-suite, directors, and other leadership roles still operate at a higher capabilities than new and entry-level employees. However, teams can make decisions without approval from centralized leadership, allowing them to act fast and take ownership of their areas of expertise.
This type of structure is common for f ast-growing companies, companies with regional markets, and emerging industries. A decentralized structure makes it more accessible for employees to navigate different roles and work on what’s most impactful at that time in a company’s lifecycle.
One high-level management body at the top of the command creates company strategies, builds procedures, assigns roles and acts as decision-makers. | Directors and management at different levels (whether that’s regional-based, department-based, subsidiary-based) makes decisions for their specific department and teams. | |
Information and decisions come from the top down. Employees down the org chart follow orders from c-suite and executives. | Inter-departmental communication happens openly and freely. Allows for different teams to experiment and share results with other business units. | |
Overall company strategy (and success) comes from a small group of c-suite executives who design and execute this vision with little input or feedback from others. | Department leaders, managers, and employees are all responsible for the success of the company. Enables employees to innovate, share input, and provide feedback. | |
Best for smaller organizations. | Best for large organizations with sprawling business units. |
The key purpose of any organizational structure is to make decision-making processes straightforward and provide clear definitions for roles and responsibilities. However, there are many ways to achieve that.
Let’s look at seven common types of enterprise organizational structures to help you decide what’s best for your company and its various departments and teams.
A functional structure groups employees into different departments by work specialization. Each department has a designated leader highly experienced in the job functions of each employee supervised by them.
Most often, it implements a top-down (centralized) decision-making process where department managers report to upper management. Ideally, leaders of different teams communicate regularly and coordinate their strategies while lower-level employees have little idea of the processes taking place outside their department.
The main challenge companies with a functional structure face is the lack of coordination between departments. Employees may lose the larger company context when focusing on specific tasks and failing to interact with members of other departments.
You’ll need to train leaders to foster collaboration across departments to create a functional organizational structure.
Best For: Companies that require a high degree of specialization and efficiency within each department, like manufacturing firms.
Pros of a functional organizational structure:
Cons of a functional org structure:
In a divisional organizational structure, the company is divided into different business units that have complete control of their budget, resources, and strategy – essentially acting as an independent company. Each division can have its own dedicated marketing, sales, product, and IT teams.
A divisional structure works well with large enterprises who have multi-product offerings, have acquired or merged with multiple business entities, service many geographical regions, and serve different industries.
Examples of companies applying a divisional structure are McDonald’s Corporation and Disney. These brands can’t help but split the entire organization by location to be able to adjust their strategies for audiences representing different markets.
These smaller groups are relatively independent and mainly follow a decentralized framework. Still, the leaders of each department are likely to operate under centralized corporate management. This means that the company culture is dictated by top management, but operational decisions can be made independently by each division.
Divisional organizational structures can be divided according to a few different factors, including:
Best for: Large enterprises that operate in multiple markets, such as multinational companies or conglomerates, as it allows each division to focus on its specific market or product line .
Pros of a divisional organizational structure:
Cons of a divisional structure:
Within a matrix organizational structure, team members report to several managers at once. Wait, what’ s the point?
Having multiple supervisors allows for company-wide interaction and faster project delivery. For instance, when answering to functional managers and project managers, employees have a chance to collect experience outside their team. While functional managers can help to solve job-specific issues, project managers can bring in knowledge or talents from other departments.
If you go after a matrix organizational structure, you’ll need to find a way to avoid authority confusion and prevent conflicts between managers.
Best For: Organizations that need to balance the benefits of functional and divisional structures, like project-based companies, consulting firms, or companies involved in complex projects requiring cross-functional collaboration.
Pros of a matrix organizational structure:
Cons of a matrix structure:
A team-based organizational structure creates small teams focusing on delivering one product or service – often via Scrum or tiger teams. These teams can solve problems and make decisions without bringing in third parties.
Team members are responsible for managing their workload and have full control over the project. Team-based organizations are distinguished by little formalization and high flexibility. This structure works well for global organizations and manufacturers.
Best For: Companies prioritizing flexibility, innovation, and quick response to market changes, like tech startups or creative agencies, where collaboration and teamwork are essential.
Pros of a team-based organizational structure:
Cons of a team-based structure:
A network structure goes far beyond your internal company structure. It’s the act of joining the efforts of two or more organizations to deliver one product or service. Typically, a network organization outsources independent contractors or vendors to complete the work.
In a network organization, teams are built from full-time employees as well as freelance specialists – this way, in-house workers can spend most of their time focusing on the work they specialize in. Such an approach allows companies to adapt to market changes and obtain the skills they need quickly.
Working with individuals not integrated into your company culture results in lower formalization and higher agility.
Best For: Companies that outsource business functions and rely on external partners, like businesses with extensive supply chains and franchises, or companies that focus on core competencies while leveraging partnerships for other operations.
Pros of a network structure:
Cons of a network structure:
A hierarchical structure is the most common type of organizational structure. This pyramid-shaped structure follows a direct chain of command from the top (the CEO) and flows down the org chart through individual teams and entry-level employees.
The chain of command goes from the C-suite to senior management to team leaders to lower-level employees. The highest-level executive (typically the CEO) has the most power and authority on the decision-making process.
On one hand, this structure enables organizations to streamline business processes, develop clear career paths, and reduce conflicts. A company hierarchy leaves no place for challenging managers’ authority, which can sometimes be a good thing.
On the other hand, a hierarchical structure slows down decision-making and may hurt employee morale. Poor leadership – or even a bad CEO – can lead to the downfall of an organization with a hierarchal structure.
Best For: Traditional, stable organizations with clear authority lines and a need for uniformity and control. Examples include government agencies, large corporations, or military organizations.
Pros of a hierarchal structure:
Cons of a hierarchal structure:
Due to its simple nature, a flat organization structure, also called a “flatarchy” or a horizontal structure, is typically used by small businesses and startups. Organizations often start with a flat structure and then transition to a different type of org structure late in their maturity.
In a flat organizational structure, there are few middle managers between employees and top managers. The structure requires less supervision, increases employee involvement, and boosts trust in the workplace.
Best for: Smaller companies and startups that require faster decision-making and a collaborative culture, accelerating innovation and flexibility.
Pros of a flat structure:
Cons of a flat structure:
Of course, organizational design can be reconstructed if needed. The business landscape is constantly evolving, and keeping to a structure that has worked for years might simply become inefficient.
To adapt to market changes, you might need to resort to organizational transformation which affects not only your strategy but also the structure. Whether you want to build an organizational structure from scratch or want to revisit the existing one, you’ll need to get down to the basics.
Whatever structure you choose, you’ll need to make an effort to implement it. Here are eight simple steps towards designing an organizational structure from scratch.
First of all, you need to prepare documentation.
You need a project charter outlining the purpose of building a clear structure, key stakeholders, and their responsibilities. This is your rough plan for implementing an organizational structure that should give you a direction for your next steps.
When creating a charter, you’ll be able to answer the following questions:
To build a structure from scratch, you’ll need to start by outlining a long-term strategy and mapping out goals. Your future vision of your company determines which type of organizational structure will work best for you.
When ideating your company strategy and organizational structure, consider your company’s various contextual elements, traits, characteristics, and challenges. These will help you choose the appropriate organizational structure for your company. Consider the following factors:
If your business has already been operating for quite some time, take a look at your current strategy and try to highlight the areas of improvement. Do you need to revisit your core ideology and company culture? You can only answer this question by talking to your employees and managers.
When you know where you stand and have a clear vision of what you want to achieve, creating an organizational direction shouldn’t be a problem.
A clear understanding of your company’s strategy lets you filter out irrelevant organizational structure types and pick the one that fits with your core values, mission, and goals.
Choose one of the seven organizational structures and use it as a template for designing a custom organizational chart. This chart is also known as an organogram – it’s a diagram used to visualize the relationships between individuals, teams, and departments within an organization
Next, it’s time to design an optimal workflow for implementing or switching to a new structure.
Talk to the stakeholders and decide on the deadlines for establishing a brand new organizational structure. Prepare a list of recommendations for top managers and team leaders that will help to communicate the change to the rest of the organization.
From there, leaders should create an implementation plan that includes training their teams to adopt new roles and skills, as well as how to follow a new decision-making and reporting framework. Week by week, employees will become accustomed to their new organizational structure and adapt to the change .
The transition process might take months, and it’s very likely that the performance of individual employees or even entire teams will go down at some point. However, you can assess the impact of a new structure in action only after the transition is complete.
With a new organizational structure in place, run the performance review and talk to executives. It’s important that you monitor the contribution of each individual department – chances are the changes don’t work equally well for everyone at the company.
Again, once you implement an organizational structure, it’s never too late to make adjustments. Alongside performance checks, survey your employees to learn how they feel about a new structure. It can be that their input will help you fine-tune the organizational design without extra cost and effort.
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Organizational structure for companies with examples and benefits.
Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.
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An organizational structure is a system that outlines how certain activities are directed to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.
The organizational structure also determines how information flows between levels within the company. Decisions flow from the top down in a centralized structure. Decision-making power is distributed among various levels of the organization in a decentralized structure. Having an organizational structure in place allows companies to remain efficient and focused.
Businesses of all shapes and sizes heavily use organizational structures. They define a specific hierarchy within an organization. A successful organizational structure defines each employee's job and how it fits within the overall system. The organizational structure lays out who does what so the company can meet its objectives.
This structuring provides a company with a visual representation of how it's shaped and how it can best move forward in achieving its goals. Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid where the most powerful members of the organization sit at the top and those with the least amount of power are at the bottom.
Not having a formal structure in place can prove difficult for certain organizations. Employees may have difficulty knowing to whom they should report. That can lead to uncertainty as to who is responsible for what in the organization.
Having a structure in place can help with efficiency and provide clarity for everyone at every level. An effective organizational structure should result in each department within the organization becoming more focused and productive.
An organizational structure is either centralized or decentralized. Organizations have traditionally been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure with a long and specific hierarchy of superiors and subordinates. There are very clear responsibilities for each role in a centralized organizational system with subordinate roles defaulting to the guidance of their superiors.
More people play a role in decision-making with a decentralized organizational structure, Mid- and lower-level managers as well as regular employees have more of a say in what goes on and can help call the shots.
There's been a rise in decentralized organizations. This approach is popular among many technology startups and is viewed as enabling them to remain fast, agile, and adaptable with everyone able to throw ideas around.
Johnson & Johnson is renowned for its decentralized structure. As a large company with many business units and brands that function in sometimes very different industries, each operates autonomously. Another well-known company that gives employees a high level of personal agency is Spotify.
Decentralized structures are becoming more common and are popular among tech startups.
Built-in hierarchies usually still exist in decentralized companies such as the chief operating officer operating at a higher level than an entry-level associate. Teams are empowered to make their own decisions and come to the best conclusion without necessarily getting "approval" from up top, however.
Four types of common organizational structures are typically implemented.
The first and most common is a functional structure. It's also referred to as a bureaucratic organizational structure . It breaks up a company based on the specialization of its workforce.
Most small-to-medium-sized businesses implement a functional structure. Dividing the firm into departments consisting of marketing, sales, and operations uses a bureaucratic organizational structure.
This type is common among large companies with many business units. It's called the divisional or multidivisional (M-Form) structure.
A company that uses this method structures its leadership team based on the products, projects, or subsidiaries it operates. Johnson & Johnson is a good example of this structure. The company has thousands of products and lines of business. It structures itself so each business unit operates as its own company with its own president.
Divisions may also be designated geographically in addition to specialization. A global corporation might have a North American Division and a European Division.
Team-based organizations segregate into close-knit teams of employees that serve particular goals and functions, similar to divisional or functional structures. Each team is a unit that contains both leaders and workers, however.
Flatarchy, also known as a horizontal structure, is used among many startups. It flattens the hierarchy and chain of command as the name implies. It gives its employees a great deal of autonomy. Companies that use this type of structure have a high speed of implementation.
Firms can also have a matrix structure. This is the most confusing and the least used. It matrixes employees across different superiors, divisions, or departments. An employee working for a matrixed company may have duties in both sales and customer service .
Circular structures are hierarchical but they're said to be circular because they place higher-level employees and managers at the center of the organization with concentric rings expanding outward. They contain lower-level employees and staff. Organizing this way is intended to encourage open communication and collaboration among the ranks.
The network structure organizes contractors and third-party vendors to carry out certain key functions. It features a relatively small headquarters with geographically dispersed satellite offices along with key functions outsourced to other firms and consultants.
Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company's hierarchy but it allows the firm to lay out the pay structure for its employees. The firm can decide salary grades and ranges for each position by putting the organizational structure in place.
The structure also makes operations more efficient and much more effective. The company can seamlessly perform different operations at once by separating employees and functions into separate departments.
A very clear organizational structure also informs employees on how best to get their jobs done. Employees will have to work harder at buying favors or courting those with decision-making power in a hierarchical organization.
Employees must take on more initiative and bring creative problem-solving to the table in a decentralized organization. This can also help set expectations for how employees can track their growth within a company and emphasize a certain set of skills. It can help potential employees gauge whether such a company would be a good fit with their interests and work styles.
Organizational structures take on many forms. Examples include functional, multi-divisional, flat, and matrix structures as well as circular, team-based, and network structures.
Key elements of an organizational structure include how certain activities are directed to achieve the goals of an organization. They include rules, roles, responsibilities, and how information flows between levels within the company.
A decentralized structure is an example of an organizational structure. It gives individuals and teams high degrees of autonomy without requiring a core team to regularly approve business decisions. Spotify with its "squads," "tribes," and "guilds" and Google with its independent companies are loosely run this way,
Organizational structures are normally illustrated in some sort of chart or diagram. A pyramid could be used in a centralized structure with the most powerful members of the organization sitting at the top and the least powerful at the bottom.
There's no one best organizational structure. It depends on the nature of the company and the industry in which it operates.
Entire fields of study are 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's goals, industry, and culture.
Johnson & Johnson. " Our Heritage ."
The Wharton School of the University of Pennsylvania. " Johnson & Johnson CEO William Weldon: Leadership in a Decentralized Company ."
Johnson & Johnson. " Our Leadership Team ."
Medium. " Unlocking the Spotify Model: Why your Guild is Failing ."
USU. " The Spotify Model: Magic Bullet or Overrated? "
COMMENTS
The organization I work for is planning on changing its organizational structure to address management and communication issues easily. Therefore, the structure below has the desired characteristics. The chart above shows a new ranking of the work culture in the same company. Here I have updated this and made a decentralization of power.
Organizational Structures assignment (.docx) Organizational Structures assignment (PDF) Read the structure descriptions in the left column and the answer choices in the answer choices pool. Complete the table by inserting the correct answer choices in the two columns on the right.
A functional—or role-based—structure is one of the most common organizational structures. This structure has centralized leadership and the vertical, hierarchical structure has clearly defined ...
Organizational Structures assignment (.docx) Organizational Structures assignment (PDF) Read the structure descriptions in the left column and the answer choices in the answer choices pool. Complete the table by inserting the correct answer choices in the two columns on the right. Each table entry has only one correct answer and answers are not ...
To achieve organizational goals and objectives, individual work needs to be coordinated and managed. Structure is a valuable tool in achieving coordination, as it specifies reporting relationships (who reports to whom), delineates formal communication channels, and describes how separate actions of individuals are linked together.
Note the continuum in Exhibit 4.6, showing the earliest form of organizational structure, functional, evolving with more complex environments to divisional, matrix, team-based, and then virtual.This evolution, as discussed above, is presented as a continuum from mechanistic to organic structures—moving from more simple, stable environments to complex, changing ones, as illustrated in Exhibit ...
Assignment: Organizational Structures. Step 1: To view this assignment, click on Assignment: Organizational Structures. Step 2: Follow the instructions in the assignment and submit your completed assignment into the LMS.
An organization with a horizontal structure is also known as a flat organization because it often features only a few levels of organizational hierarchy. The principles of bureaucracy outlined earlier can be applied in different ways, depending on the context of the organization and the managers' objectives, to create structures that have ...
An organization chart is a visual representation of the structured relationships among tasks and the people given the authority to do those tasks. In the organization chart in Exhibit 7.4, each figure represents a job, and each job includes several tasks. The sales manager, for instance, must hire salespeople, establish sales territories ...
Organizational structure refers to how individual and team work within an organization are coordinated. To achieve organizational goals and objectives, individual work needs to be coordinated and managed. Structure is a valuable tool in achieving coordination, as it specifies reporting relationships (who reports to whom), delineates formal communication channels, and describes how separate ...
The best structure for any organization will depend upon who its members are, what the setting is, and how far the organization has come in its development. Regardless of what type of structure your organization decides upon, three elements will always be there. They are inherent in the very idea of an organizational structure. They are:
6.13: Introduction to Current Trends in Organization and Job Design 6.14: Current Trends in Organization and Job Design This page titled 6: Organizational Structures is shared under a CC BY 4.0 license and was authored, remixed, and/or curated by Lumen Learning via source content that was edited to the style and standards of the LibreTexts ...
6-3 Assignment: Organizational Structure s. The hum an resources department has asked me to recommend a new organi zational . structure a ddressing identified management and communicati on concerns to assist in changing . the c ompany culture. Currently, the company has a formalized traditional management st ru cture.
Speaker Notes For Module 7 week 7 assignment 7-3. Journal Module 1-3. BUS210 - Module 2 Assignment. BUS210 - Module 4 Assignment. 1-6 Writing notes - Assignment. Mod 2 Assignment Management approaches. Grade A 70/70 new organization structure have changed the original organizational structure to matrix structure. according to our webtext ...
org chart. short for organizational chart, a visual depiction of a group's framework showing levels of authority, roles, and lines of communication. organizational structure. how a group is arranged in regard to leadership, governance, rules for operation and decision making. strategy.
A network organizational structure, also known as a networked organization or network model, is a relatively new approach to organizing businesses. In a network structure, the organization has a decentralized network of interconnected entities, both internal and external, that collaborate to achieve common goals. Source.
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 ...
Joshua Alexander BUS-210-H Instructor Fenlason October 7, 2021 6-3 Assignment: Organizational Structures. ... My recommendation for changing the organizational structure is as follows. Below, I will cover the explanation of changes that were made to the organization, the impact on the corporate communications, and lastly, the effect it will ...
Organizational structure types used across various organizations in many industries. These include the most common org chart types plus the various org chart models derived from the main ones. ... I have to solve an assignment where the question is: Study organization structure of two IT companies and prepare a report comprising of the type of ...
An organizational structure defines how job titles, roles, and responsibilities are assigned within a company. It helps determine who reports to whom, and who makes decisions about what. Startups often have a matrix organizational structure, with different departments working together on projects.
It's difficult to know who has final approval. 6. Hierarchical structure. A hierarchical structure is the most common type of organizational structure. This pyramid-shaped structure follows a direct chain of command from the top (the CEO) and flows down the org chart through individual teams and entry-level employees.
REORGANIZATIONAL CHART Page 1. Updated Reorganization Chart Explanation Becky Pituch BUS 210: Managing/Leading in Business Ms. Lynda Plante Dec 18, 2020 In reorganizing my structure my goal was to achieve a tall structure with a decentralization organizational chart with a dash of departmental structure. My goal is to provide management and employees better tools to make decisions at their levels.
An organizational structure organizes a company's activities. Explore four types of organizational structures: functional, divisional, flatarchy, and matrix.