Then, if you need to pivot or shift your leadership, you can visualize how the work flows would work by adjusting your organizational structure diagrams.
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 levels of management so all staff are only a few steps away from leadership. Four-wheel drive or two? 15 Great Small Business Ideas to Start in 2022, The Best Small Business Government Grants in 2022. Process-based organizational structures are designed around the end-to-end flow of different processes, such as "Research & Development," "Customer Acquisition," and "Order Fulfillment." This confusion can ultimately cause frustration over who has authority over which decisions and products and who's responsible for those decisions when things go wrong. Its complex, especially in regard to out-of-office processes. Typically, there is a functional reporting line (shown in blue) as well as a product- based reporting line (shown in yellow). After weighing these factors, youll likely know which organizational structure is best for you and if you get it wrong, its possible to switch to another organizational structure. Why You Need to Create a Fantastic Workplace Culture, 10 Employee Recruitment Strategies for Success, Best Accounting Software and Invoice Generators of 2022, Best Call Centers and Answering Services for Businesses for 2022, what each organizational structure entails, templates and examples of hierarchical structures. Business News Daily receives compensation from some of the companies listed on this page. Use this post to determine which organizational structure works for you, and then its time for the real work to begin. Allows supervisors to easily choose individuals by the needs of a project, Gives a more dynamic view of the organization, Encourages employees to use their skills in various capacities aside from their original roles, Presents a conflict between department managers and project managers, Can change more frequently than other organizational chart types. It could confuse employees, given the potential subversion of traditional executive and lower-level roles. The answer, as with many business matters, is that the right choice differs by company. This open line of communication ultimately allows businesses to share resources and allows employees to develop new skills from working with different departments. This centralized organization structure allows employees to move from one department to another as needed, as the horizontal lines in this matrix organization template indicate. With this intuitive, cloud-based solution, everyone can work visually and collaborate in real time while building flowcharts, mockups, UML diagrams, and more. Allows for a quicker response to industry changes or customer needs, Promotes independence, autonomy, and a customized approach, Can mean muddled or insufficient communication between the headquarters and its divisions, Can result in a company competing with itself. The main downside of a geographical org structure: It can be easy for decision- making to become decentralized, as geographic divisions (which can be hundreds, if not thousands of miles away from corporate headquarters) often have a great deal of autonomy.
It may encourage employees to prioritize their own department and direct supervisors instead of the whole company. These are the advantages of a team structure: These are some disadvantages of a team structure: A network structure is especially suitable for a large, multi-city or even international company operating in the modern era. See pricing, Marketing automation software. Organizational structures can use functions, markets, products, geographies, or processes as their guide, and cater to businesses of specific sizes and industries. Employees have more responsibility and independence. There are eight types of organizational structures, each of which is either centralized or decentralized in terms of who has the power. Read world-renowned marketing content to help grow your audience, Read best practices and examples of how to sell smarter, Read expert tips on how to build a customer-first organization, Read tips and tutorials on how to build better websites, Get the latest business and tech news in five minutes or less, Learn everything you need to know about HubSpot and our products, Stay on top of the latest marketing trends and tips, Join us as we brainstorm new business ideas based on current market trends, A daily dose of irreverent and informative takes on business & tech news, Turn marketing strategies into step-by-step processes designed for success, Explore what it takes to be a creative business owner or side-hustler, Listen to the world's most downloaded B2B sales podcast, Explore strategies that drive revenue, customer engagement, and retention, Free ebooks, tools, and templates to help you grow, Learn the latest business trends from leading experts with HubSpot Academy, All of HubSpot's marketing, sales CRM, customer service, CMS, and operations software on one platform. The different departments have some flexibility to operate separately from the company at large. Free and premium plans, Content management software. Compare this functional structure template with the hierarchical structure template to understand the specific differences between these two organizational structures. The matrix org chart accounts for both of these roles and reporting relationships.
In this case a product-based divisional structure each division within the organization is dedicated to a particular product line. Supervisors have the flexibility to choose the best employees for a project. In this centralized organizational structure, project managers act as supervisors, not just resource allocators and decision-makers. Employees lack or dont develop specialized skills. It boosts individual departments and employees self-sufficiency and innovation. You might also use this structure to explain your company workflows if much of your staffing or services is outsourced to freelancers or multiple other businesses. Each separate department is managed independently.
each division within a divisional structure can have its own marketing team, its own sales team, and so on). In a hierarchical structure, a staff director often supervises all departments and reports to the CEO. Choosing the best organizational structure for your company, division, or team is a lot like picking out a new car. Try another search, and we'll give it our best shot. What does HR actually do? What's the point of an organizational structure? Bottom line? It allows a dynamic org chart with varying responsibilities for employees. The Best Medical Billing Services of 2022. Now that you know the eight types of organizational structures, youre probably wondering which one is best for your business. An organization with a functional org structure, for instance, would group all of the marketers together in one department, group all of the salespeople together in a separate department, and group all of the customer service people together in a third department. Because the roles and responsibilities of this organizational structure example rarely change, department employees can consistently work on similar assignments and hone their skills. Instead, they're at the center of the organization, spreading their vision outward. This organizational structure is much more formal than organic structure, using specific standards and practices to govern every decision the business makes. It increases employee flexibility and versatility. Functional organization increases efficiency, provides stability, and boosts accountability. When looking at a matrix structure org chart, solid lines represent strong, direct-reporting relationships, whereas dotted lines indicate that the relationship is secondary, or not as strong. This model might have multiple teams answering to one person and taking on projects based on their importance and what the team is capable of rather than what the team is designed to do. Advertising Disclosure. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. More specifically, the divisions of a geographical structure can include territories, regions, or districts. Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. It hides key details of departmental processes and strategies from employees outside that department. Similar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Shannon Williams graduated from BYU in English and then turned to the world of marketing. At some point, you have likely seen an organizational chart for your company. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees. Its faster to implement new practices or ideas, with less risk of error. Companies and their employees can experience the benefits of the product-based divisional structure. The elimination of middle management employees defines the flat structure type. See why forming tiger teams is a smart move for your organization. Written by Erik Devaney However, the role of a staff director instead falls to each department head in other words, each department has its own staff director, who reports to the CEO. It also might not always take the form or a pyramid, or any shape for that matter. The functional structure allows for a high degree of specialization for employees, and is easily scalable should the organization grow. Another variety of the divisional organizational structure is the market-based structure, wherein the divisions of an organization are based around markets, industries, or customer types. Process-based organizational structure is ideal for improving the speed and efficiency of a business, and is best-suited for those in rapidly changing industries, as it is easily adaptable. 
It clearly defines reporting relationships, project organization and division of authority. If there's a time when teams in a flat organization disagree on something, such as a project, it can be hard to get aligned and back on track without executive decisions from a leader or manager. Each structure has advantages and disadvantages that you should consider when choosing one for your company. These are the main advantages of a divisional organization: These are some disadvantages of a divisional structure: A flat structure is a decentralized organizational structure in which almost all employees have equal power. From a practical perspective, the circular structure can be confusing, especially for new employees. One of the most common types of organizational structures, the functional structure departmentalizes an organization based on common job functions. There are several types of organizational structures commonly used by companies, nine of which we expand upon below. for deliveries or for on-site support). Free and premium plans, Customer service software. Bureaucratic hurdles could delay project completion and discourage employees from taking risks. There could be conflicts of interest between the needs for project organization and department organization. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy. And how are issues, requests, and proposals communicated up and down that ladder? This organizational model also promotes intradepartmental (within the department) and interdepartmental (across multiple departments) teamwork. Organizational structures fall on a spectrum, with "mechanistic" at one end and "organic" at the other. We'll also highlight the benefits and drawbacks of different structure types so you can evaluate which is the best option for your company, division, or team. But its like other types of organizational structures in that an obvious hierarchy exists, as you can see in this projectized structure template. Centralization describes where decisions are ultimately made. What are the companys goals? Itll come as no surprise that a team-based organizational structure groups employees according to (what else?) ), just to name a few. When a company establishes a structure that works, the combined efforts of its employees, in conjunction with its systems and processes, allow the company to make better decisions for its future. A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees.
An organizational structure is a visual diagram of a company that describes what employees do, whom they report to, and how decisions are made across the business. At the most basic level, you're always looking for something road-worthy something that can take you (and your passengers) from point A to point B without a hitch. Each type has its advantages and disadvantages; however, there is a universal benefit to establishing a clear organizational structure. Here's a breakdown of both ends of the structural spectrum, their advantages and disadvantages, and which types of businesses are suited for them. Divisions are separated by market, industry, or customer type. It can be difficult to scale under a product-based divisional structure, and the organization could end up with duplicate resources as different divisions strive to develop new offerings. She works as a content marketing specialist at Lucid Software. Divisions might also end up inadvertently duplicating activities that other divisions are already handling. An organizational structure for your business can help you make sense of where and with whom your companys responsibilities lie, and you have plenty of types from which to choose. No one organizational structure is best for all businesses.
This leads to problems communicating and handing off work to other teams and employees. The primary pitfall of the matrix organizational structure? This makes the hierarchical structure a centralized organizational structure. It encourages poor communication and low interaction among different departments. It provides employees with a chain of command. teamsthink Scrum teamsor tiger teams. Unlike a strictly functional structure, a process-based structure considers not only the activities employees perform, but also how those different activities interact with one another. It prioritizes employee experience over seniority. An organizational structure is a set of rules, roles, relationships and responsibilities that determine how a companys activities should be directed to achieve its goals.
It cultivates stronger relationships among employees within a team. As I said, org structures help you define at least three key elements of how your business is going to run. Many types of organizational charts exist because many types of organizational structures exist. Key takeaway: An organizational structure determines how information, responsibilities and approval will flow within your company. It helps employees understand their role within a company, which enables them to manage expectations and goals. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. Depending on the size of a business and its goals, the organizational structure of the team will vary. In the divisional structure, each line or product has its own chief commanding executive, as seen in this divisional structure template. And when you have more than one marketing department one for each region you run the risk of creating campaigns that compete with (and weaken) other divisions across your digital channels. An advantage of a matrix structure is that it promotes collaboration and communication. It is similar to a matrix structure, but as this team structure template shows, the focus is less on employee fluidity than on supervisor fluidity, leading to a decentralized functional structure. Let's dive in. Instead, all employees (represented by the green boxes) have dual reporting relationships. In our example below, it's clear that functional reporting takes precedence over product-based reporting. While this may sound like a lot for one type of network structure to detail, this network structure template shows just how useful this decentralized structure can be, especially for understanding the human resources your company has on hand. The most popular online Visio alternative, Lucidchart is utilized in over 180 countries by millions of users, from sales managers mapping out target organizations to IT directors visualizing their network infrastructure. It also governs the flow of information through levels of the company and outlines the reporting relationship among midlevel staff, senior management, executives and owners. It fosters more efficient decision-making and communication. Sharing knowledge keeps companies strong. To put it simply, this chart is like a map that simply explains how your company works and how its roles are organized. Also this structure is mechanistic in nature which has the potential to inhibit an employee's growth putting staff in skill-based departments can still allow them to delve deep into their field and find out what they're good at.
This structure is probably one of the most detailed, It's also thought that employees can be more productive in an environment where there's less hierarchy-related pressures. While it might appear drastically different from the other organizational structures highlighted in 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. Too much autonomy within each market-based team can lead to divisions developing systems that are incompatible with one another. Organizational structures are central to a successful team. Functional structure also has the potential to create barriers between different functions and it can be inefficient if the organization has a variety of different products or target markets. Divisions are separated by region, territories, or districts, offering more effective localization and logistics. A business can lean toward centralized, where final decisions are made by just one or two entities; or decentralized, where final decisions are made within the team or department in charge of carrying out that decision. Its benefits include keeping all employees aligned with the processes and goals of the company and encouraging employees to collaborate between departments. Unlike other structure types, a projectized structure involves the demobilization of teams and resources upon a projects completion. From an ideological perspective, a circular structure is meant to promote communication and the free flow of information between different parts of the organization. Startups are often perfect for organic structure, since they're simply trying to gain brand recognition and get their wheels off the ground. 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. The lack of compartmentalized labor drives productivity, growth and transparency. Now, let's uncover more specific types of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum. hbspt.cta._relativeUrls=true;hbspt.cta.load(53, 'bf8259d0-ec61-4677-9368-6abd4a2cbfe3', {"useNewLoader":"true","region":"na1"}); Originally published Feb 11, 2022 7:00:00 AM, updated February 11 2022, 9 Types of Organizational Structure Every Company Should Consider, The 6 Building Blocks of Organizational Structure, How to Find, Choose, & Hire the Best B2B Marketing Consultant or Agency. Here's what each of those elements means to an organization: Your chain of command is how tasks are delegated and work is approved.
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. Instantly, questions arise about the systems and processes. Built-in GPS? Free and premium plans, Operations software. The divisions work separately, which allows employees to work independently and enables them to focus on the needs of their particular industry. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) It helps to specialize each employees work. The outsourcing nature of the network structure provides companies with the advantages of lower costs, more focus, and increased flexibility. It boosts flexibility for one department or location to delegate tasks to another. Hierarchical structure (also known as line structure), Divisional structure (also known as multidivisional structure), Flatarchy structure (also known as horizontal or flat structure). It also gives companies the flexibility to change their processes and the ability to focus on their core functions. Not only does it allow organizations to tailor their approach based on geography, but it allows the division to react quickly and efficiently to any geographical market changes. If your company doesn't do everything under one roof, this is a great way to show employees or stakeholders how outsourcing of off-site processes work.
At most, executives may have just a bit more authority than employees, as seen in this flat structure template. Similar to a few other structures on this list, process-based structure can erect barriers between the different process groups. Whereas a traditional structure shows different departments or divisions as occupying individual, semi-autonomous branches, the circular structure depicts all divisions as being part of the same whole. But not every company functions best with a hierarchical organizational structure. Better defines levels of authority and responsibility, Shows who each person reports to or who to talk to about specific projects, Motivates employees with clear career paths and chances for promotion, Creates camaraderie between employees within the same department, Can slow down innovation or important changes due to increased bureaucracy, Can cause employees to act in interest of the department instead of the company as a whole, Can make lower-level employees feel like they have less ownership and cant express their ideas for the company. @bardofboston. A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Nonetheless, the flexibility that an organic structure allows for can be extremely helpful to a business that's navigating a fast-moving industry, or simply trying to stabilize itself after a rough quarter. As you'll probably be able to tell, the mechanistic structure represents the traditional, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach.
Employees have the opportunity to learn and foster skills outside their primary roles. A network structure is often created when one company works with another to share resources or if your company has multiple locations with different functions and leadership. Complexity. Unlike with a more traditional, top-down structure, a circular structure can make it difficult for employees to figure out who they report to and how they're meant to fit into the organization. The organizational chart is prone to regular changes. How many types of organizational structures are there? However, using just these two classifications for every possible team structure may paint with too broad a brush. You can use templates and examples of hierarchical structures to better understand the relationships between the CEO, staff director and individual teams. Companies might establish satellite offices across the country or the globe in order to stay close to their customers. These are some advantages of a hierarchical structure: There are also some drawbacks of choosing a hierarchical structure: The functional structure is a centralized structure that greatly overlaps with the hierarchical structure. Once you've chosen the right org structure to pursue, learn the steps in the company reorganization process. First, it reduces the expenses of the company. Because of their separation, divisions may flourish (or fail) concurrently. Editor's note: This post was originally published in December 2014 and has been updated for comprehensiveness. It clearly outlines workflows and chains of commands in large businesses. Its the most common type of organizational structurethe chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor. Free and premium plans, Sales CRM software. What's that all mean? This allows small businesses to go to market with new offerings fast. He's also published articles on payroll, small business funding, and content marketing. The structure looks nearly the same as the Divisional Structure, shown above. Divisions are separated by product line. If you do outsource or have multiple office locations, make sure your org chart clearly states where each specific role and job function lies so someone can easily understand your basic company processes. Based on the differences in language, culture, and customs one would find across the world, companies cannot necessarily expect the same operations to work in different locations. When determining the right one for your company, think about how much power you would like to give your employees, how much room you would like to leave for innovation, how large your company is and how much interaction among employees matters to you. Outsourcing the HR Function: How and When to Outsource Human Resources to a Third Party, How to Open a Private Medical Practice, Step by Step, Understanding What an Independent Contractor Is, What Is a Decision Matrix? An org structure allows you to define how many "rungs of the ladder" a particular department or business line should have. The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. Organizational structure is necessary for running a successful business because it improves workflow and efficiency, promotes communication, identifies company needs, and aligns employees with company goals. It improves understanding of how functional roles are distributed among onsite employees, offsite employees, freelancers and outsourced third parties. This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control. (Only if you're going back in time, of course.) These questions are practically impossible to answer without a functional organizational structure. Divisional org structures (market-based, product-based, geographic), Increases productivity, performance, and transparency by breaking down, Changes the traditional career models by getting people to move laterally, Fits well with agile companies with Scrum or tiger teams, Goes against many companies natural inclination of a purely hierarchical structure, Might make promotional paths less clear for employees, Visualizes the complex web of onsite and offsite relationships in companies, Allows companies to be more flexible and agile, Give more power to all employees to collaborate, take initiative, and make decisions, Helps employees and stakeholders understand workflows and processes, Can quickly become overly complex when dealing with lots of offsite processes, Can make it more difficult for employees to know who has final say. It can make employees feel like they have no say in how to approach their projects. It drives employee communication, collaboration and innovation. ), span of control (wide or narrow? Flux capacitor? Outsourcing allows organizations to save money, as they dont have to bear the expense of setting up a department for the same purpose. Key takeaway: There are eight types of organizational structures, each of which is centralized (executives and owners have the power) or decentralized (non-executives share the power). Improves coordination and speed of implementing new ideas, Can create confusion since employees do not have a clear supervisor to report to, Can produce employees with more generalized skills and knowledge, Can be difficult to maintain once the company grows beyond start-up status.
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 levels of management so all staff are only a few steps away from leadership. Four-wheel drive or two? 15 Great Small Business Ideas to Start in 2022, The Best Small Business Government Grants in 2022. Process-based organizational structures are designed around the end-to-end flow of different processes, such as "Research & Development," "Customer Acquisition," and "Order Fulfillment." This confusion can ultimately cause frustration over who has authority over which decisions and products and who's responsible for those decisions when things go wrong. Its complex, especially in regard to out-of-office processes. Typically, there is a functional reporting line (shown in blue) as well as a product- based reporting line (shown in yellow). After weighing these factors, youll likely know which organizational structure is best for you and if you get it wrong, its possible to switch to another organizational structure. Why You Need to Create a Fantastic Workplace Culture, 10 Employee Recruitment Strategies for Success, Best Accounting Software and Invoice Generators of 2022, Best Call Centers and Answering Services for Businesses for 2022, what each organizational structure entails, templates and examples of hierarchical structures. Business News Daily receives compensation from some of the companies listed on this page. Use this post to determine which organizational structure works for you, and then its time for the real work to begin. Allows supervisors to easily choose individuals by the needs of a project, Gives a more dynamic view of the organization, Encourages employees to use their skills in various capacities aside from their original roles, Presents a conflict between department managers and project managers, Can change more frequently than other organizational chart types. It could confuse employees, given the potential subversion of traditional executive and lower-level roles. The answer, as with many business matters, is that the right choice differs by company. This open line of communication ultimately allows businesses to share resources and allows employees to develop new skills from working with different departments. This centralized organization structure allows employees to move from one department to another as needed, as the horizontal lines in this matrix organization template indicate. With this intuitive, cloud-based solution, everyone can work visually and collaborate in real time while building flowcharts, mockups, UML diagrams, and more. Allows for a quicker response to industry changes or customer needs, Promotes independence, autonomy, and a customized approach, Can mean muddled or insufficient communication between the headquarters and its divisions, Can result in a company competing with itself. The main downside of a geographical org structure: It can be easy for decision- making to become decentralized, as geographic divisions (which can be hundreds, if not thousands of miles away from corporate headquarters) often have a great deal of autonomy.
It may encourage employees to prioritize their own department and direct supervisors instead of the whole company. These are the advantages of a team structure: These are some disadvantages of a team structure: A network structure is especially suitable for a large, multi-city or even international company operating in the modern era. See pricing, Marketing automation software. Organizational structures can use functions, markets, products, geographies, or processes as their guide, and cater to businesses of specific sizes and industries. Employees have more responsibility and independence. There are eight types of organizational structures, each of which is either centralized or decentralized in terms of who has the power. Read world-renowned marketing content to help grow your audience, Read best practices and examples of how to sell smarter, Read expert tips on how to build a customer-first organization, Read tips and tutorials on how to build better websites, Get the latest business and tech news in five minutes or less, Learn everything you need to know about HubSpot and our products, Stay on top of the latest marketing trends and tips, Join us as we brainstorm new business ideas based on current market trends, A daily dose of irreverent and informative takes on business & tech news, Turn marketing strategies into step-by-step processes designed for success, Explore what it takes to be a creative business owner or side-hustler, Listen to the world's most downloaded B2B sales podcast, Explore strategies that drive revenue, customer engagement, and retention, Free ebooks, tools, and templates to help you grow, Learn the latest business trends from leading experts with HubSpot Academy, All of HubSpot's marketing, sales CRM, customer service, CMS, and operations software on one platform. The different departments have some flexibility to operate separately from the company at large. Free and premium plans, Content management software. Compare this functional structure template with the hierarchical structure template to understand the specific differences between these two organizational structures. The matrix org chart accounts for both of these roles and reporting relationships.
In this case a product-based divisional structure each division within the organization is dedicated to a particular product line. Supervisors have the flexibility to choose the best employees for a project. In this centralized organizational structure, project managers act as supervisors, not just resource allocators and decision-makers. Employees lack or dont develop specialized skills. It boosts individual departments and employees self-sufficiency and innovation. You might also use this structure to explain your company workflows if much of your staffing or services is outsourced to freelancers or multiple other businesses. Each separate department is managed independently.
each division within a divisional structure can have its own marketing team, its own sales team, and so on). In a hierarchical structure, a staff director often supervises all departments and reports to the CEO. Choosing the best organizational structure for your company, division, or team is a lot like picking out a new car. Try another search, and we'll give it our best shot. What does HR actually do? What's the point of an organizational structure? Bottom line? It allows a dynamic org chart with varying responsibilities for employees. The Best Medical Billing Services of 2022. Now that you know the eight types of organizational structures, youre probably wondering which one is best for your business. An organization with a functional org structure, for instance, would group all of the marketers together in one department, group all of the salespeople together in a separate department, and group all of the customer service people together in a third department. Because the roles and responsibilities of this organizational structure example rarely change, department employees can consistently work on similar assignments and hone their skills. Instead, they're at the center of the organization, spreading their vision outward. This organizational structure is much more formal than organic structure, using specific standards and practices to govern every decision the business makes. It increases employee flexibility and versatility. Functional organization increases efficiency, provides stability, and boosts accountability. When looking at a matrix structure org chart, solid lines represent strong, direct-reporting relationships, whereas dotted lines indicate that the relationship is secondary, or not as strong. This model might have multiple teams answering to one person and taking on projects based on their importance and what the team is capable of rather than what the team is designed to do. Advertising Disclosure. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. More specifically, the divisions of a geographical structure can include territories, regions, or districts. Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. It hides key details of departmental processes and strategies from employees outside that department. Similar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Shannon Williams graduated from BYU in English and then turned to the world of marketing. At some point, you have likely seen an organizational chart for your company. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees. Its faster to implement new practices or ideas, with less risk of error. Companies and their employees can experience the benefits of the product-based divisional structure. The elimination of middle management employees defines the flat structure type. See why forming tiger teams is a smart move for your organization. Written by Erik Devaney However, the role of a staff director instead falls to each department head in other words, each department has its own staff director, who reports to the CEO. It also might not always take the form or a pyramid, or any shape for that matter. The functional structure allows for a high degree of specialization for employees, and is easily scalable should the organization grow. Another variety of the divisional organizational structure is the market-based structure, wherein the divisions of an organization are based around markets, industries, or customer types. Process-based organizational structure is ideal for improving the speed and efficiency of a business, and is best-suited for those in rapidly changing industries, as it is easily adaptable. It clearly defines reporting relationships, project organization and division of authority. If there's a time when teams in a flat organization disagree on something, such as a project, it can be hard to get aligned and back on track without executive decisions from a leader or manager. Each structure has advantages and disadvantages that you should consider when choosing one for your company. These are the main advantages of a divisional organization: These are some disadvantages of a divisional structure: A flat structure is a decentralized organizational structure in which almost all employees have equal power. From a practical perspective, the circular structure can be confusing, especially for new employees. One of the most common types of organizational structures, the functional structure departmentalizes an organization based on common job functions. There are several types of organizational structures commonly used by companies, nine of which we expand upon below. for deliveries or for on-site support). Free and premium plans, Customer service software. Bureaucratic hurdles could delay project completion and discourage employees from taking risks. There could be conflicts of interest between the needs for project organization and department organization. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy. And how are issues, requests, and proposals communicated up and down that ladder? This organizational model also promotes intradepartmental (within the department) and interdepartmental (across multiple departments) teamwork. Organizational structures fall on a spectrum, with "mechanistic" at one end and "organic" at the other. We'll also highlight the benefits and drawbacks of different structure types so you can evaluate which is the best option for your company, division, or team. But its like other types of organizational structures in that an obvious hierarchy exists, as you can see in this projectized structure template. Centralization describes where decisions are ultimately made. What are the companys goals? Itll come as no surprise that a team-based organizational structure groups employees according to (what else?) ), just to name a few. When a company establishes a structure that works, the combined efforts of its employees, in conjunction with its systems and processes, allow the company to make better decisions for its future. A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. An organizational structure is a visual diagram of a company that describes what employees do, whom they report to, and how decisions are made across the business. At the most basic level, you're always looking for something road-worthy something that can take you (and your passengers) from point A to point B without a hitch. Each type has its advantages and disadvantages; however, there is a universal benefit to establishing a clear organizational structure. Here's a breakdown of both ends of the structural spectrum, their advantages and disadvantages, and which types of businesses are suited for them. Divisions are separated by market, industry, or customer type. It can be difficult to scale under a product-based divisional structure, and the organization could end up with duplicate resources as different divisions strive to develop new offerings. She works as a content marketing specialist at Lucid Software. Divisions might also end up inadvertently duplicating activities that other divisions are already handling. An organizational structure for your business can help you make sense of where and with whom your companys responsibilities lie, and you have plenty of types from which to choose. No one organizational structure is best for all businesses.
This leads to problems communicating and handing off work to other teams and employees. The primary pitfall of the matrix organizational structure? This makes the hierarchical structure a centralized organizational structure. It encourages poor communication and low interaction among different departments. It provides employees with a chain of command. teamsthink Scrum teamsor tiger teams. Unlike a strictly functional structure, a process-based structure considers not only the activities employees perform, but also how those different activities interact with one another. It prioritizes employee experience over seniority. An organizational structure is a set of rules, roles, relationships and responsibilities that determine how a companys activities should be directed to achieve its goals.
It cultivates stronger relationships among employees within a team. As I said, org structures help you define at least three key elements of how your business is going to run. Many types of organizational charts exist because many types of organizational structures exist. Key takeaway: An organizational structure determines how information, responsibilities and approval will flow within your company. It helps employees understand their role within a company, which enables them to manage expectations and goals. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. Depending on the size of a business and its goals, the organizational structure of the team will vary. In the divisional structure, each line or product has its own chief commanding executive, as seen in this divisional structure template. And when you have more than one marketing department one for each region you run the risk of creating campaigns that compete with (and weaken) other divisions across your digital channels. An advantage of a matrix structure is that it promotes collaboration and communication. It is similar to a matrix structure, but as this team structure template shows, the focus is less on employee fluidity than on supervisor fluidity, leading to a decentralized functional structure. Let's dive in. Instead, all employees (represented by the green boxes) have dual reporting relationships. In our example below, it's clear that functional reporting takes precedence over product-based reporting. While this may sound like a lot for one type of network structure to detail, this network structure template shows just how useful this decentralized structure can be, especially for understanding the human resources your company has on hand. The most popular online Visio alternative, Lucidchart is utilized in over 180 countries by millions of users, from sales managers mapping out target organizations to IT directors visualizing their network infrastructure. It also governs the flow of information through levels of the company and outlines the reporting relationship among midlevel staff, senior management, executives and owners. It fosters more efficient decision-making and communication. Sharing knowledge keeps companies strong. To put it simply, this chart is like a map that simply explains how your company works and how its roles are organized. Also this structure is mechanistic in nature which has the potential to inhibit an employee's growth putting staff in skill-based departments can still allow them to delve deep into their field and find out what they're good at.
This structure is probably one of the most detailed, It's also thought that employees can be more productive in an environment where there's less hierarchy-related pressures. While it might appear drastically different from the other organizational structures highlighted in 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. Too much autonomy within each market-based team can lead to divisions developing systems that are incompatible with one another. Organizational structures are central to a successful team. Functional structure also has the potential to create barriers between different functions and it can be inefficient if the organization has a variety of different products or target markets. Divisions are separated by region, territories, or districts, offering more effective localization and logistics. A business can lean toward centralized, where final decisions are made by just one or two entities; or decentralized, where final decisions are made within the team or department in charge of carrying out that decision. Its benefits include keeping all employees aligned with the processes and goals of the company and encouraging employees to collaborate between departments. Unlike other structure types, a projectized structure involves the demobilization of teams and resources upon a projects completion. From an ideological perspective, a circular structure is meant to promote communication and the free flow of information between different parts of the organization. Startups are often perfect for organic structure, since they're simply trying to gain brand recognition and get their wheels off the ground. 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. The lack of compartmentalized labor drives productivity, growth and transparency. Now, let's uncover more specific types of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum. hbspt.cta._relativeUrls=true;hbspt.cta.load(53, 'bf8259d0-ec61-4677-9368-6abd4a2cbfe3', {"useNewLoader":"true","region":"na1"}); Originally published Feb 11, 2022 7:00:00 AM, updated February 11 2022, 9 Types of Organizational Structure Every Company Should Consider, The 6 Building Blocks of Organizational Structure, How to Find, Choose, & Hire the Best B2B Marketing Consultant or Agency. Here's what each of those elements means to an organization: Your chain of command is how tasks are delegated and work is approved.
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. Instantly, questions arise about the systems and processes. Built-in GPS? Free and premium plans, Operations software. The divisions work separately, which allows employees to work independently and enables them to focus on the needs of their particular industry. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) It helps to specialize each employees work. The outsourcing nature of the network structure provides companies with the advantages of lower costs, more focus, and increased flexibility. It boosts flexibility for one department or location to delegate tasks to another. Hierarchical structure (also known as line structure), Divisional structure (also known as multidivisional structure), Flatarchy structure (also known as horizontal or flat structure). It also gives companies the flexibility to change their processes and the ability to focus on their core functions. Not only does it allow organizations to tailor their approach based on geography, but it allows the division to react quickly and efficiently to any geographical market changes. If your company doesn't do everything under one roof, this is a great way to show employees or stakeholders how outsourcing of off-site processes work. At most, executives may have just a bit more authority than employees, as seen in this flat structure template. Similar to a few other structures on this list, process-based structure can erect barriers between the different process groups. Whereas a traditional structure shows different departments or divisions as occupying individual, semi-autonomous branches, the circular structure depicts all divisions as being part of the same whole. But not every company functions best with a hierarchical organizational structure. Better defines levels of authority and responsibility, Shows who each person reports to or who to talk to about specific projects, Motivates employees with clear career paths and chances for promotion, Creates camaraderie between employees within the same department, Can slow down innovation or important changes due to increased bureaucracy, Can cause employees to act in interest of the department instead of the company as a whole, Can make lower-level employees feel like they have less ownership and cant express their ideas for the company. @bardofboston. A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Nonetheless, the flexibility that an organic structure allows for can be extremely helpful to a business that's navigating a fast-moving industry, or simply trying to stabilize itself after a rough quarter. As you'll probably be able to tell, the mechanistic structure represents the traditional, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach.
Employees have the opportunity to learn and foster skills outside their primary roles. A network structure is often created when one company works with another to share resources or if your company has multiple locations with different functions and leadership. Complexity. Unlike with a more traditional, top-down structure, a circular structure can make it difficult for employees to figure out who they report to and how they're meant to fit into the organization. The organizational chart is prone to regular changes. How many types of organizational structures are there? However, using just these two classifications for every possible team structure may paint with too broad a brush. You can use templates and examples of hierarchical structures to better understand the relationships between the CEO, staff director and individual teams. Companies might establish satellite offices across the country or the globe in order to stay close to their customers. These are some advantages of a hierarchical structure: There are also some drawbacks of choosing a hierarchical structure: The functional structure is a centralized structure that greatly overlaps with the hierarchical structure. Once you've chosen the right org structure to pursue, learn the steps in the company reorganization process. First, it reduces the expenses of the company. Because of their separation, divisions may flourish (or fail) concurrently. Editor's note: This post was originally published in December 2014 and has been updated for comprehensiveness. It clearly outlines workflows and chains of commands in large businesses. Its the most common type of organizational structurethe chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor. Free and premium plans, Sales CRM software. What's that all mean? This allows small businesses to go to market with new offerings fast. He's also published articles on payroll, small business funding, and content marketing. The structure looks nearly the same as the Divisional Structure, shown above. Divisions are separated by product line. If you do outsource or have multiple office locations, make sure your org chart clearly states where each specific role and job function lies so someone can easily understand your basic company processes. Based on the differences in language, culture, and customs one would find across the world, companies cannot necessarily expect the same operations to work in different locations. When determining the right one for your company, think about how much power you would like to give your employees, how much room you would like to leave for innovation, how large your company is and how much interaction among employees matters to you. Outsourcing the HR Function: How and When to Outsource Human Resources to a Third Party, How to Open a Private Medical Practice, Step by Step, Understanding What an Independent Contractor Is, What Is a Decision Matrix? An org structure allows you to define how many "rungs of the ladder" a particular department or business line should have. The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. Organizational structure is necessary for running a successful business because it improves workflow and efficiency, promotes communication, identifies company needs, and aligns employees with company goals. It improves understanding of how functional roles are distributed among onsite employees, offsite employees, freelancers and outsourced third parties. This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control. (Only if you're going back in time, of course.) These questions are practically impossible to answer without a functional organizational structure. Divisional org structures (market-based, product-based, geographic), Increases productivity, performance, and transparency by breaking down, Changes the traditional career models by getting people to move laterally, Fits well with agile companies with Scrum or tiger teams, Goes against many companies natural inclination of a purely hierarchical structure, Might make promotional paths less clear for employees, Visualizes the complex web of onsite and offsite relationships in companies, Allows companies to be more flexible and agile, Give more power to all employees to collaborate, take initiative, and make decisions, Helps employees and stakeholders understand workflows and processes, Can quickly become overly complex when dealing with lots of offsite processes, Can make it more difficult for employees to know who has final say. It can make employees feel like they have no say in how to approach their projects. It drives employee communication, collaboration and innovation. ), span of control (wide or narrow? Flux capacitor? Outsourcing allows organizations to save money, as they dont have to bear the expense of setting up a department for the same purpose. Key takeaway: There are eight types of organizational structures, each of which is centralized (executives and owners have the power) or decentralized (non-executives share the power). Improves coordination and speed of implementing new ideas, Can create confusion since employees do not have a clear supervisor to report to, Can produce employees with more generalized skills and knowledge, Can be difficult to maintain once the company grows beyond start-up status.