Selecting the very best organizational structure on your company, division, or team is so much like picking out a latest automobile.
At probably the most basic level, you are all the time in search of something road-worthy — something that may take you (and your passengers) from point A to point B and not using a hitch.
But beyond that, there are numerous options to think about. Automatic or manual? 4-wheel drive or two? Built-in GPS? Leather interior? Flux capacitor? (Only in the event you’re going back in time, in fact.)
On the earth of organizational structures, the choices you have got to pick from include things like chain of command (long or short?), span of control (wide or narrow?), and centralization (centralized or decentralized decision-making?), simply to name a number of.
An organization’s organizational structure is the hierarchy of the business’s teams, leaders, managers, and individual contributors. Organizational structures determine what employees do, whom they report back to, and the way decisions are made. At a minimum, an org structure chart should include employees’ titles and basic relationships across teams.
Organizational structures can use functions, markets, products, geographies, or processes as their guide, and cater to businesses of specific sizes and industries.
What is the point of an organizational structure? As a business leader, do you even need one? As your organization gets greater, an organizational structure can be helpful for brand new employees as they learn who manages what processes at your organization.
Then, if you must pivot or shift your leadership, you’ll be able to visualize how the workflows would work by adjusting your organizational structure diagrams.
To place it simply, an organizational structure is sort of a map that simply explains how your organization works and the way its roles are organized.
4 Basic Elements of Organizational Structure
An organizational structure typically has 4 essential elements; you’ll be able to add more constructing blocks or components, depending on your corporation needs.
Regardless of what, make sure you include the next basic elements:
Chain of Command
Your chain of command is how tasks are delegated and work is approved. An org structure permits you to define what number of “rungs of the ladder” a specific department or business line must have. In other words, who tells whom to do what? And the way are issues, requests, and proposals communicated up and down that ladder?
Departmentation is one of the vital necessary elements of your organizational structure. It clusters your teams by similar roles and responsibilities and permits you to understand how each department connects to 1 one other.
Span of Control
Your span of control can represent two things: who falls under a manager’s, well, management … and which tasks fall under a department’s responsibility. Having an outlined span of control not only avoids double-work out of your different teams, but helps you discover gaps in your structure.
Centralization describes where decisions are ultimately made. Once you’ve got established your chain of command, you will need to think about which individuals and departments have a say in each decision. A business can lean toward centralized, where final decisions are made by only one or two entities; or decentralized, where final decisions are made throughout the team or department answerable for carrying out that call.
You may not need an org structure immediately, however the more products you develop and folks you hire, the harder it’ll be to steer your organization without this significant diagram.
Below, we’ll explore how you’ll be able to mix those components to form several types of organizational structures. We’ll also highlight the advantages and disadvantages of various structure types so you’ll be able to evaluate which is the very best option on your company, division, or team. Let’s dive in.
Mechanistic vs. Organic Organizational Structures
Organizational structures fall on a spectrum, with “mechanistic” at one end and
“organic” at the opposite.
Take a have a look at the diagram below. As you’ll likely find a way to inform, the mechanistic structure represents the normal, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach.
Here’s a breakdown of each ends of the structural spectrum, their benefits and downsides, and which forms of businesses are suited to them.
Mechanistic structures, also called bureaucratic structures, are known for having narrow spans of control, in addition to high centralization, specialization, and formalization. They’re also quite rigid in what specific departments are designed and permitted to do for the corporate.
This organizational structure is way more formal than organic structure, using specific standards and practices to control every decision the business makes. And while this model does hold staff more accountable for his or her work, it may possibly grow to be a hindrance to the creativity and agility the organization needs to maintain up with random changes in its market.
As daunting and inflexible as mechanistic structure sounds, the chain of command, whether long or short, is all the time clear under this model. As an organization grows, it must be sure everyone (and each team) knows what’s expected of them. Teams collaborating with other teams as needed might help get a business off the bottom in its early stages, but sustaining that growth — with more people and projects to maintain track of — will eventually require some policymaking. In other words, keep mechanistic structure in your back pocket … you never know if you’ll need it.
Organic structures (also generally known as “flat” structures) are known for his or her wide spans of control, decentralization, low specialization, and loose departmentalization. What’s that each one mean? This model may need multiple teams answering to 1 person and taking up projects based on their importance and what the team is able to — moderately than what the team is designed to do.
As you’ll be able to probably tell, this organizational structure is way less formal than mechanistic, and takes a little bit of an ad-hoc approach to business needs. This may sometimes make the chain of command, whether long or short, difficult to decipher. And because of this, leaders might give certain projects the green light more quickly but cause confusion in a project’s division of labor.
Nonetheless, the flexibleness that an organic structure allows for could be extremely helpful to a business that is navigating a fast-moving industry, or just attempting to stabilize itself after a rough quarter. It also empowers employees to try latest things and develop as professionals, making the organization’s workforce more powerful in the long term. Bottom line? Startups are sometimes perfect for organic structure, since they’re simply trying to realize brand recognition and get their wheels off the bottom.
Now, let’s uncover more specific forms of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum.
Sorts of Organizational Structure
- Functional Organizational Structure
- Product-Based Divisional Structure
- Market-Based Divisional Structure
- Geographical Divisional Structure
- Process-Based Structure
- Matrix Structure
- Circular Structure
- Flat Structure
- Network Structure
Depending on the scale of a business and its goals, the organizational structure of the team will vary. Each type has its benefits and downsides; nevertheless, there may be a universal profit to establishing a transparent organizational structure. It helps employees understand their role inside an organization, which enables them to administer expectations and goals.
A business must have an organizational structure in place to achieve success. There are several forms of organizational structures commonly utilized by firms, nine of which we expand upon below.
1. Functional Organizational Structure
One of the vital common forms of organizational structures, the functional structure departmentalizes a company based on common job functions.
A company with a functional org structure, as an illustration, would group the entire marketers together in a single department, group the entire salespeople together in a separate department, and group all of the client service people together in a 3rd department.
The functional structure allows for a high degree of specialization for workers, and is definitely scalable should the organization grow. Also this structure is mechanistic in nature — which has the potential to inhibit an worker’s growth — putting staff in skill-based departments can still allow them to delve deep into their field and discover what they’re good at.
- Functional structure has the potential to create barriers between different functions — and it may possibly be inefficient if the organization has a wide range of different products or goal markets.
- The barriers created between departments may also limit peoples’ knowledge of and communication with other departments, especially people who rely on other departments to succeed.
- Functional organization increases efficiency, provides stability, and boosts accountability.
- It also allows departments — with employees who share similar skills and knowledge — to give attention to their specialized tasks inside their respective fields.
- Since the roles and responsibilities of this organizational structure example rarely change, department employees can consistently work on similar assignments and hone their skills.
The fixed structure of functional organization also operates through management. It provides employees with a series of command. It guides communication between the team and keeps the team accountable.
2. Product-Based Divisional Structure
A divisional organizational structure is comprised of multiple, smaller functional structures (i.e. each division inside a divisional structure can have its own marketing team, its own sales team, and so forth). On this case — a product-based divisional structure — each division throughout the organization is devoted to a specific product line.
Any such structure is right for organizations with multiple products and will help shorten product development cycles. This enables small businesses to go to market with latest offerings fast.
- It could actually be difficult to scale under a product-based divisional structure.
- The organization could find yourself with duplicate resources as different divisions strive to develop latest offerings.
- Firms and their employees can experience the advantages of the product-based divisional structure.
- If one division performs poorly, this doesn’t mechanically translate across the organization.
- Due to their separation, divisions may flourish (or fail) concurrently. This technique allows firms to mitigate risk.
3. Market-Based Divisional Structure
One other number of the divisional organizational structure is the market-based structure, wherein the divisions of a company are based around markets, industries, or customer types.
The market-based structure is right for a company that has services or products which can be unique to specific market segments, and is especially effective if that organization has advanced knowledge of those segments. This organizational structure also keeps the business always aware of demand changes amongst its different audience segments.
- An excessive amount of autonomy inside each market-based team can result in divisions developing systems which can be incompatible with each other.
- Divisions may also find yourself inadvertently duplicating activities that other divisions are already handling.
- Because this organizational structure focuses on specific market segments, it provides each division with autonomy.
- The divisions work individually, which allows employees to work independently and enables them to give attention to the needs of their particular industry.
4. Geographical Divisional Structure
The geographical organizational structure establishes its divisions based on — you guessed it — geography. More specifically, the divisions of a geographical structure can include territories, regions, or districts.
Any such structure is best-suited to organizations that should be near sources of supply and/or customers (e.g. for deliveries or for on-site support). It also brings together many types of business expertise, allowing each geographical division to make decisions from more diverse points of view.
- It could actually be easy for decision- making to grow to be decentralized, as geographic divisions (which could be a whole lot, if not hundreds of miles away from corporate headquarters) often have an excellent deal of autonomy.
- When you have got multiple marketing department — one for every region — you run the danger of making campaigns that compete with (and weaken) other divisions across your digital channels.
- Geographical divisions allow firms the advantage of catering to a selected customer. Based on the differences in language, culture, and customs one would find internationally, firms cannot necessarily expect the identical operations to work in numerous locations.
- Not only does it allow organizations to tailor their approach based on geography, nevertheless it allows the division to react quickly and efficiently to any geographical market changes.
5. Process-Based Structure
Process-based organizational structures are designed across the end-to-end flow of various processes, corresponding to “Research & Development,” “Customer Acquisition,” and “Order Success.” Unlike a strictly functional structure, a process-based structure considers not only the activities employees perform, but in addition how those different activities interact with each other.
In an effort to fully understand the diagram below, you must have a look at it from left to right: The client acquisition process cannot start until you have got a totally developed product to sell. By the identical token, the order success process cannot start until customers have been acquired and there are product orders to fill.
Process-based organizational structure is right for improving the speed and efficiency of a business, and is best-suited for those in rapidly changing industries, because it is definitely adaptable.
- Much like a number of other structures on this list, process-based structure can erect barriers between different process groups.
- It might result in problems communicating and handing off work to other teams and employees.
- As mentioned, one of the vital significant advantages of the process-based structure is that it increases efficiency and speed. If Department B cannot start its processes until Department A finishes, this compels Department A to work promptly and proficiently.
- This organizational model also promotes intradepartmental (throughout the department) and interdepartmental (across multiple departments) teamwork.
6. Matrix Structure
Unlike the opposite structures we have checked out thus far, a matrix organizational structure doesn’t follow the normal, hierarchical model. As a substitute, all employees (represented by the green boxes) have dual reporting relationships. Typically, there may be a functional reporting line (shown in blue) in addition to a product- based reporting line (shown in yellow).
When a matrix structure org chart, solid lines represent strong, direct-reporting relationships, whereas dotted lines indicate that the connection is secondary, or not as strong. In our example below, it’s clear that functional reporting takes precedence over product-based reporting.
The fundamental appeal of the matrix structure is that it may possibly provide each flexibility and more balanced decision-making (as there are two chains of command as a substitute of only one). Having a single project overseen by multiple business line also creates opportunities for these business lines to share resources and communicate more openly with one another — things they may not otherwise find a way to do repeatedly.
- The first pitfall of the matrix organizational structure? Complexity. The more layers of approval employees need to undergo, the more confused they could be about who they’re imagined to answer to.
- This confusion can ultimately cause frustration over who has authority over which decisions and products — and who’s answerable for those decisions when things go incorrect.
- A bonus of a matrix structure is that it promotes collaboration and communication.
- This open line of communication ultimately allows businesses to share resources and allows employees to develop latest skills from working with different departments.
7. Circular Structure
While it would appear drastically different from the opposite organizational structures highlighted on this section, the circular structure still relies on hierarchy, with higher-level employees occupying the inner rings of the circle and lower-level employees occupying the outer rings.
That being said, the leaders or executives in a circular organization aren’t seen as sitting atop the organization, sending directives down the chain of command. As a substitute, they’re at the middle of the organization, spreading their vision outward.
From an ideological perspective, a circular structure is supposed to advertise communication and the free flow of data between different parts of the organization. Whereas a conventional structure shows different departments or divisions as occupying individual, semi-autonomous branches, the circular structure depicts all divisions as being a part of the identical whole.
- From a practical perspective, the circular structure could be confusing, especially for brand new employees.
- Unlike with a more traditional, top-down structure, a circular structure could make it difficult for workers to work out who they report back to and the way they’re meant to suit into the organization.
- Most examples of organizational structure have a top-down hierarchy. Alternatively, this kind of structure follows an outward flow and contributes to information flowing freely across the business.
- Its advantages include keeping all employees aligned with the processes and goals of the corporate and inspiring employees to collaborate between departments.
8. Flat Structure
While a more traditional organizational structure might look more like a pyramid — with multiple tiers of supervisors, managers and directors between staff and leadership, the flat structure limits the degrees of management so all staff are only a number of steps away from leadership. It also may not all the time take the shape or a pyramid, or any shape for that matter. As we mentioned earlier, It is also a type of the “Organic Structure” we noted above.
This structure might be one of the vital detailed, It is also thought that employees could be more productive in an environment where there’s less hierarchy-related pressures. This structure may also make staff feel just like the managers they do have are more like equals or team members moderately than intimidating superiors.
- If there is a time when teams in a flat organization disagree on something, corresponding to a project, it may possibly be hard to get aligned and back on the right track without executive decisions from a pacesetter or manager.
- Due to how complicated the structure’s design is, it may possibly be tricky to find out which manager an worker should go to in the event that they need approval or an executive decision for something.
- If you happen to do decide to have a flat organization, you need to have a clearly marked tier of management or path that employers can consult with once they run into these scenarios.
- The elimination of middle management employees defines the flat structure type. Its benefits are instantaneous. First, it reduces the expenses of the corporate.
- Second, it allows staff to construct direct relationships with upper management.
- Lastly, it shortens the decision-making process.
9. Network Structure
A network structure is commonly created when one company works with one other to share resources — or if your organization has multiple locations with different functions and leadership. You may also use this structure to clarify your organization workflows if much of your staffing or services is outsourced to freelancers or multiple other businesses.
The structure looks nearly similar to the Divisional Structure, shown above. Nevertheless, as a substitute of offices, it would list outsourced services or satellite locations outside of the office.
If your organization doesn’t do all the things under one roof, that is an excellent method to show employees or stakeholders how outsourcing of off-site processes work. For instance, if an worker needs help from an internet developer for a blogging project and the corporate’s web developers are outsourced, the could have a look at this kind of chart and know which office or which person to contact outside of their very own work location.
- The form of the chart can vary based on what number of firms or locations you are working with. If it isn’t kept easy and clear, there could also be numerous confusion if multiple offices or freelancers do similar things.
- If you happen to do outsource or have multiple office locations, be sure your org chart clearly states where each specific role and job function lies so someone can easily understand your basic company processes.
- The outsourcing nature of the network structure provides firms with the benefits of lower costs, more focus, and increased flexibility.
- Outsourcing allows organizations to lower your expenses, as they don’t need to bear the expense of establishing a department for a similar purpose.
- It also gives firms the flexibleness to vary their processes and the power to give attention to their core functions.
Organizational Structure Examples
Organizational structure can each consult with your organization’s structure at large, or your individual teams. Regardless of what, you often need to have a distinct structure for every department, on account of the distinct needs and functions of each.
We’ll start with organizational structure examples for each firms and nonprofits, then delve into team-specific charts.
1. Company Organizational Structure Example: Matrix Type
This matrix organizational structure example for an imaginary engineering company starts with the CEO on the helm. Nevertheless, as a substitute of including a C-suite (corresponding to a chief marketing officer, a chief finance officer, a chief technology officer, and so forth), it includes vice presidents who then oversee individual contributors.
Each contributor works cross-collaboratively with members of others teams on a selected customer project. That is a superb example to follow in the event you run a small-to-medium company in a project-based or region-based firm.
2. Nonprofit Organizational Structure Example: Flat Type
Nonprofits are structured in another way than an organization, and are frequently much smaller and scrappier. On this nonprofit organizational structure example, we see a flat-type of structure, where every worker is just just a number of steps away from the director. There aren’t any internal movement opportunities, which works well at most nonprofits. As a substitute, the main focus is on steering the organization to satisfy its program goals.
Notice that the leader is just not the director, but moderately the board, who interfaces directly with the director to relay organizational decisions.
3. Marketing Organizational Structure Example: Functional Type
A marketing team’s organizational structure will vary depending on the scale of an organization. In this instance, we see a functional structure type, where the teams are split based on job function. Here, the marketing team is headed by a chief marketing officer (CMO), who overlooks smaller departments divided into six functions: Social media, content, product, search engine marketing, website, and acquisition.
Your marketing team, nevertheless, may also adopt a matrix organizational structure in the event you laterally divide your individual contributors and managers based on region, country, project, or one other factor.
4. Sales Organizational Structure Example: Functional Type
In lots of sales organizations, organizational structures are deeply hierarchical, where a vice chairman of sales overlooks a director of sales, after which the director of sales overlooks a team of sales managers, and the sales managers overlook a team of sales representatives, and so forth.
In this instance of a sales organizational structure, roles should not as hierarchically structured, and as a substitute divided based on function. The VP of sales overlooks a varied team, which incorporates a director of sales, a sales development manager, a director of revenue operations, a sales enablement manager, and an account enablement manager.
While these are each at different stages of their careers, they’re all at the identical level and are answerable for a selected function throughout the team.
5. IT Organizational Structure Example: Functional Type
That is one other functional org chart example, but this time, it’s for IT. In this instance from the University of Michigan, the IT department is split based on function. Overseen by a Chief Technology Officer, three directors supervise security, infrastructure, and operations; applications; and institutional research and effectiveness.
Inside each team is a specialization. As an illustration, the director of applications oversees each the appliance team and the CRM team. If you happen to run an IT org, you’ll be able to take an analogous approach, or divide your leadership based on specific processes, corresponding to system maintenance or IT services.
6. Product Organizational Structure Example: Divisional Type
For product organizations, probably the most common organizational structure is divisional, where teams are divided based on the product they’re working on. Inside each product team, there’s typically a product manager, an engineer, a marketer, and even a customer support manager. Depending on how big or small your organization is, you might have multiple product managers for one product.
Conversely, if there’s just one product, then the whole company could also be a product organization. This time, the organization could be structured based on process, like the instance below.
Within the above example, the corporate is split by processes corresponding to product management, sales and marketing, product development, service and support, and operations. That is a superb example to follow if your organization is small.
7. HR Organizational Structure Example: Matrix Type
This HR organizational chart is a superb example of the matrix structure type. Here, the VP of HR oversees three different regions, all of which have an HRBP, two recruiters, and one trainer. Horizontally, the HRBPs, recruiters, and trainers are all aligned.
This is a superb example to follow if your organization is a big enterprise with hiring operations in numerous regions. It’s especially useful if there are different hiring laws in each region where you use.
Organizational Structure: Things to Know
What’s an organizational structure chart?
An organizational structure chart is a diagram that shows your departments, ranging from C-Suite leaders to individual contributors, in addition to your organization’s order of command and decision-making flow.
Why is having an organizational structure necessary?
Imagine a business that has no organizational structure. Immediately, questions arise concerning the systems and processes. Who makes the choices? How are employees held accountable? What are the corporate’s goals? These questions are practically unimaginable to reply and not using a functional organizational structure.
Organizational structure is needed for running a successful business since it improves workflow and efficiency, promotes communication, identifies company needs, and aligns employees with company goals. It directly affects how a business operates every day. When an organization establishes a structure that works, the combined efforts of its employees, at the side of its systems and processes, allow the corporate to make higher decisions for its future.
What’s the very best organizational structure?
The most effective organizational structure varies from business to business and largely will depend on your team size, company type, and product offerings. That said, a functional organizational structure (also named “traditional line organizational structure” or “hierarchical structure”) is a superb place to start out in the event you’re undecided which org structure is correct for you.
What are the 4 basic types of organizational structure?
The 4 basic types of organizational structure are functional, divisional, matrix, and flat structures.
Functional organizational structures divide your organization teams based on job functions and responsibilities.
Divisional organizational structures groups your teams based on products, markets, or regions, with smaller organizational structures for every division of your corporation.
Matrix organizational structures divide your organization teams in a grid-based fashion, where every team has dual reporting relationships with the C-Suite and one other team.
A flat organizational structure keeps hierarchy to a minimum by eliminating middle management and keeping individual contributors as close as possible to leadership.
How do businesses determine organizational structure?
Businesses determine organizational structure by taking stock of their current workforce and teams, then fastidiously aligning their company strategy, worker feedback, and leadership goals with a selected structure.
Some firms can have naturally fallen right into a functional org structure, wherein case it’s only a matter of making an org diagram. Others could also be within the means of creating one. Listed here are the steps to find out an org structure from scratch:
- Audit your organization’s teams and roles. First, it’s essential to know which teams and roles exist already inside your corporation. If your corporation is latest, create a listing of planned teams and hires.
- Draft an organization strategy. Your org structure should support your strategy, not detract from it. In case your strategy is to launch X latest products available in the market, then a product-based divisional structure might work well for you.
- Gather feedback from existing employees. Your existing employees are a gold mine of data when creating an organizational structure. Some employees might need to be closer to leadership; others might want advancement opportunities. For the primary, a flat structure would fit, and for the second, a functional structure could be best.
- Gather feedback from other leaders. Just as employees’ voices matter, so, too, do leaders’ voices matter. Understand their key goals and the support they should do their best work at your firm.
- Align your organization strategy, worker feedback, and leadership feedback with an org structure. Take a have a look at organizational structure types and check out to align them with the information and observations you’ve collected. Sometimes, the choice might be clear; other times, you’ll must proceed interviewing and gathering data to seek out the very best structure for you.
- Create an org chart. Now that you just’ve chosen the appropriate org structure, it’s time to create a visible chart that shows your organization’s chain of command, departmentation, span of control, and centralization at a minimum. Share this chart over email and make sure to keep it in a straightforward place for all employees to access.
Navigating Organizational Structures
Organizational structures are central to a successful team. Employees can move comfortably, confidently, and efficiently when given a transparent definition of their role inside a company.
Structure types will vary from business to business, so it’s necessary to keep in mind that these structures should not one size suits all. Every type may not fit your organization, but likelihood is, one among them will. Use this post to find out which organizational structure works for you, after which it’s time for the actual work to start.
Editor’s note: This post was originally published in December 2014 and has been updated for comprehensiveness.