5 Types of Organizational Structures
By | Eilish Harrington
Organizational structures are a staple of businesses. They make it clear who does what and who reports to who. Most organizational structures are hierarchical, with executives at the top, department heads in the middle, and low-level employees at the bottom.
Essentially, these structures help define workflows and improve communication, making managing tasks and completing projects easier. However, some organizational structures are more useful than others. Below, The HR Suite, an HR consultancyexplore five of the most common organizational structures and why you should consider implementing them.
- Introducing the Hierarchical Structure
Hierarchical organizational structures are common in the business world. Sometimes referred to as a pyramid chart, they provide a top-down summary that typically starts with a CEO and filters down to entry-level employees.
A hierarchical organizational structure makes it clear who does what and the level of responsibility they hold. It’s also useful for streamlining communications and letting people know who they need to report.
According to a recent report from Guild, 41% of US workers left their positions over one 12-month period due to a lack of career progression. Therefore, a hierarchical structure serves as a visual aid that can help employee retention.
However, this approach to the organizational structure has its downsides. Heightened bureaucracy can be detrimental to innovation. Meanwhile, those on the bottom rung may feel undervalued and less inclined to contribute.
- Level the Playing Field with a Flat Organizational Structure
Otherwise known as a horizontal organizational structure, this approach is best for companies that have fewer tiers of management. They’re commonly used by start-ups with smaller teams and few departments. However, even the most successful companies choose to retain flat organizational structure years into operation.
With fewer levels separating management from low-level employees, a flat structure encourages more open communication. As well as being more accessible than other structures, it also makes employees more accountable. All of this fosters a culture of innovation.
While the likes of Google continue to use flat organizational structures, they’re not for everyone. As a business grows, clinging to a horizontal structure isn’t sustainable. As new departments and introduced and team numbers grow, it’s not always clear who needs to be reporting to whom. It can also lead to a homogeneous workforce, with few specialist skills represented.
- Focus on Skills with a Functional Organizational Structure
A functional organizational structure is like a hierarchical one. However, rather than being a simple top-down chart, it highlights the specific skills and responsibilities of individual employees. It also segments companies into individual departments, with individual management tiers outlined.
Unlike flat structures, the functional organization encourages specialist skills and knowledge. It also promotes individual responsibility and frees up individual teams and departments from bureaucratic red tape.
That being said, there’s a dark side to every benefit. While some departments will optimize and thrive autonomously, they can become isolated from the bigger picture. Communication can also suffer, especially if workflows differ greatly between departments.
- Embrace Flexibility with a Matrix Organizational Structure
Matrix management has been around for decades, but it wasn’t until the 1970s that this organizational structure became widely used. Unlike the pyramid charts encountered with other models, matrix management relies on a grid-style structure.
It’s the obvious choice for businesses that rely on interdepartmental communication to complete projects. It also allows for a great degree of manoeuvrability. Employees can be temporarily reassigned, with a clear illustration of their new role and who they’ll be reporting to.
For managers, a matrix structure provides a clear summary of the best available talent to complete special projects. They also promote innovation, allowing employees to leverage skills away from their core roles.
However, a more dynamic organizational structure requires constant revision. Even if a structure is frequently updated, conflict may arise between managers if employees are poached from their usual roles.
- Are Network Organizational Structures the Future?
More companies than ever are outsourcing. In the US alone, the outsourcing market is worth an estimated $62 billion. Even small to medium-sized businesses rarely manage all their services in-house. This creates an issue when it comes to internal structures.
The problem is compounded by the remote working revolution. By the end of 2021, more than 27 million Americans were working remotely. Although some have since returned to the office, it’s thought as many as 36.2 million will be working from home exclusively by 2025. Thankfully, a network organizational structure can help make sense of a fragmented workforce.
This model focuses less on hierarchical structures and instead prioritizes communication channels. It streamlines collaboration and allows employees at all levels to use their initiative. Furthermore, this agile approach is scalable. However, things become complicated when new processes are introduced. Additionally, there can be confusion around decision-making processes without a clear hierarchy in place.
Which Organizational Structure is Right for You?
There’s no one-size-fits-all approach when it comes to organizational structures. The classic hierarchical structure is ideal if you want to clearly define responsibilities. Consider a functional organisational structure if you want something scalable that prioritizes specialization. Looking to do away with red tape? A flat model can improve communication and inspire employees.
For a more dynamic operation, the matrix model is something to consider. Do you need to maintain complex relationships in-house and off-site? Network organizational structures can help make sense of things.