03 October 2022

Not all organizations are created similarly. Every firm has a unique set of strategic requirements. They need an organizational structure encouraging better business operations to meet those requirements.

What is Organizational Structure?

An organizational structure outlines how to direct activities like task allocation, coordination, and supervision toward attaining organizational goals. These activities may include rules, roles, and duties. An organization’s Structure affects how that organization performs various actions. That Structure forms the base on which operating procedures and routines stand.

This Structure determines how information is passed between levels and helps organizations to stay focused and efficient.

Furthermore, Organizational Structure defines a specific organizational hierarchy. A successful organizational structure clarifies the duties of each employee and how they relate to the larger system. Simply put, the organizational Structure establishes who is responsible for what so the business can achieve its goals.

The management can set up an organization in many different ways depending on its goals. The organizational structure will dictate how an organization performs and runs. Depending on the organizational Structure, a branch, department, workgroup, or individual may be expressly assigned responsibility for various duties and processes.

What Do Centralized vs. Decentralized Organizational Structures Mean?

In a centralized organizational structure, decisions are taken at the top and passed down the chain of command.

  • Pros

    Great control over corporate processes.

  • Cons.

    Lengthy decision-making process.

    Lower-level workers identify problems and reach choices in a decentralized organizational structure before informing top management.

  • Pros.

    Remove process delays.

  • Cons.

    Coordination issues.

Early-stage startups and small firms are frequently advised to pursue a centralized organizational structure. Businesses and organizations with rapid growth typically prefer decentralized frameworks.

Types of Organizational Structures.

1. Functional Structure

Functional Structure divides employees into various departments according to their areas of expertise. Each department has a designated leader with extensive knowledge of the duties performed by each individual under their supervision.

The decision-making process is typically top-down (centralized), with department heads reporting to top management. Lower-level employees are largely unaware of the activities occurring outside their department. However, the ideal scenario involves team leaders regularly communicating and coordinating their strategies.

2. Divisional or Multidivisional Structure

A divisional or multidivisional (M-Form) structure organizes employees around a similar product or geographical region. Teams within divisional organizations are focused on a specific product or market.

These smaller teams work mostly independently and according to a decentralized structure. However, the heads of each department are likely to work under centralized corporate administration. It indicates that operational choices can be made by each division independently.

3. Team Structure

A team-based organizational structure organizes small teams to offer a single product or service. Yet, each team is a unit that includes both leaders and workers. These teams can solve issues and reach conclusions independently.

Team members are in complete control of the project and responsible for managing their workloads. Little formalization and high flexibility are characteristics of team-based organizations, and manufacturers and multinational corporations benefit from this framework.

4. Hierarchical Structure

In a Hierarchical Structure, there is a chain of command that extends from top management to general employees via several executives at the departmental and team levels. The executive at the highest level has the most influence over decision-making.

On the one hand, this structure enables businesses to streamline operations, provide distinct career pathways, and lessen conflicts. A firm hierarchy prevents employees from questioning the authority of management, which might be advantageous in some circumstances.

5. Matrix Structure

Team members in a matrix organizational structure simultaneously report to many bosses.

For instance, employees can gain experience outside their team while reporting to functional and project managers. Project managers can contribute information or skills from other departments, whereas functional managers can aid with job-specific problems.

Suppose you want to pursue a matrix organizational structure. In that case, you’ll need to figure out how to minimize authority confusion and conflicts between managers.

6. Network Structure

The network structure organizes contractors and third-party vendors to perform specific core responsibilities to supply a single product or service.

Teams in a network company are comprised of full-time employees and independent contractors, allowing internal staff to concentrate primarily on their area of expertise. Such a strategy enables businesses to acquire the necessary skills and respond to market developments quickly.

7. Flat (Flatarchy) Structure

In a flat organizational structure, there are few middle managers between employees and top managers. Its employees have a lot of autonomy, demonstrating a flattened hierarchy and chain of command.

Less supervision is needed, employee involvement is higher, and this framework increases workplace trust. Businesses that use this Structure have a rapid implementation rate.

What Factors Should You Consider When Selecting a Structure?

Business people connecting with gears


The variables that affect organizational Structure differ from company to company. It’s acceptable to look outside the boundaries when choosing the proper Structure for your business. Your staff members have the chance to reach their personal and professional potential within the appropriate framework.

1. Company Size and Stage of Development

Does your organizational Structure allow all of your staff to complete their tasks effectively? And does it fit its size and stage of development well?

Startups frequently need to run with an “all hands on deck” mindset. In such an instance, having many levels of management is pointless if there isn’t even sufficient personnel to staff various departments.

An organizational hierarchy with managers and department heads helps rather than hinders business growth as organizations get bigger, more established, and add more specialized jobs.

2. Business Tactics

Your organizational design should be influenced by how you position your business. Are you conducting yourself in a way that enables that? What team and organizational structures could help your business achieve its goals?

For instance, innovation, speed and flexibility are critical for businesses in the software development sector to remain competitive because of the requirement for quick iteration. Cross-functional teams, such as Scrum teams, operate well in this business.

3. Location

We are in a global, technological era. All types of businesses need to consider how they will manage remote workers, staff at satellite offices or abroad, partners, freelancers, and the many complexities of the modern workplace. These are crucial organizational factors as well as logistical issues.

4. Technology

With technology, it is now simpler than ever to track different metrics, gather and analyze data, and interact with others. This simplicity modifies how companies conduct business.

There is a shift toward more “virtual” offices, which reduces costs. The number of managerial posts may decrease due to managers being able to supervise more employees thanks to more accessible communication and reporting. Furthermore, performance tracking enables companies to invest in the correct personnel and positions to aid their expansion and growth.

Are You Searching for the Ideal Organizational Structure for Your Company?

Making the right organizational structure choices for a company is crucial to achieving its objectives. Given the variety of structures, it can be helpful to better grasp each one and the aspects to consider before selecting one.

If you’re currently looking for the ideal Organizational Structure for your company, think about partnering with Sanmark. Our professional staff guarantees the finest result for your company.

Feature image source: https://www.freepik.com/free-photo/_970014.htm