What is an organizational structure?
An organizational structure is the allocation of authority and responsibility within a company. It outlines the flow of information and the hierarchy of decision-making across roles and teams. This structure is often mapped out in an organizational chart, which visually represents how each position within the company relates to each other.
Organizational structures offer clarity to businesses both small and large about who is in charge of what, allowing the overall company to function effectively and meet their goals. They are best established when starting a business, but can evolve over time.
Types of organizational structures
These are the four types of organizational structures that are most common in the business world:
Bureaucratic structure: Also known as a functional organizational structure, this model has historically been used by the military and governmental agencies. It maintains a strict chain of command, with most of the power centralized at the top and subsequently decreasing as one moves down the ranks.
Divisional structure: For major corporations that house multiple brands, like Procter & Gamble’s ownership of Tide, Pantene, Olay, and Crest (to name a few), this structure allows them to organize each label into a mini-company: They each have their own marketing teams, developers, customer support agencies, and more.
Matrix structure: This structure allows multiple companies to exist underneath one larger brand. Instead of all acting independently, the matrix creates overlap in reporting and team membership. For example, members of the customer support team will make up their own independent group, yet they might also each specialize in one of the company’s five major products. So every agent will report to the customer support team lead, and also to the manager of the product to which they are assigned.
Flatarchy: A newer and particularly popular type amongst startups, this organizational structure functions like the word mashup it is: ‘flat’ and ‘hierarchy.’ One of the most decentralized models out there, it’s the complete opposite of the bureaucratic structure. That choice is intentional as it places more power in the hands of each employee, allowing them to make decisions quickly without moving through the red tape of upper management.
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Benefits of an organizational structure for your business
When chosen correctly, an organizational structure has the power to create a more satisfied workforce and at a more efficient productivity rate. Without those two foundational elements, it becomes difficult to meet your strategic goals for growth. An organizational structure helps move you closer to your objectives by outlining exactly the type of business you are running, who is responsible for what within an organization, helping employees understand who to speak with to accomplish a project and who has the authority to make relevant decisions.
Without this information, it becomes easy for projects to get sidetracked or subject to a dispute of competing departmental interests. Therefore, it’s important for top executives and the human resources department to finalize an organizational structure from day one. This will be the model that allows a business to scale effectively and meet its stated goals.