Just like all your fingers are not the same, two or more companies can’t be the same either. However, you may find alike organizations in the same industry, there will always be tinge and differences between every brand.
And you might feel like you have a great grasp on your leadership approach and company structure, but it’s crucial that you picture this structure as a formal corporate structure.
Various organizations have different structures/charts. Which one do you have?
Let’s discover together?
|Types of organizational structure
Types of Organizational Structure
Organizational structures can be tall in terms of entry-level employee tiers and leaders of the company. A management structure could be flat, in terms of there are a few levels untying the bottom from the top.
Below are the general types of organizational structure:
1. Line Structure
An organization with a direct vertical relationship between different levels is called a Line Structure. Only the line department-department interacts with each other without any intermediate to attain the primary goal of the organization.
Generally, in a typical line structure firm include two departments – production and marketing. In this set-up, the authority follows the chain command.
Feature: Has a vertical relationship between various departments, directly.
- Simplify and clarify authority, responsibility, and accountability relationships
- Easy to understand
- Specialists are neglected in the planning
- Key person overloading
2. Functional Structure
The functional structure divides the company based on the area of expertise. That’s why it’s called a bureaucratic organizational structure. This is a traditional business with a separate marketing department, sales department, customer service department, etc.
Each individual is dedicated to a single function and that’s the biggest advantage of functional structure. These defined expectations and roles prevent confusions among employees.
On the downside, it’s quite complicated to provide communication between different departments in the functional organizational structure.
An employee from the I.T. department may be called upon by the Human Resource (HR) manager to handle related issues to the area. The finance department will do the same and so forth.
It’s a way to evade excessive and centralization specialization in tasks in a specific area.
Nowadays, this structure is used the most by companies, but this doesn’t imply that it’s the best.
Everything will rely on the relationship among managers and, especially on the usage of IT to assist in internet communication.
Divide the departments based on an area of expertise
- Enhanced speed and flexibility
- Too many experts lead to quick problem solving
- Independent working as people can perform numerous tasks
- Helps to grow a firm fuller in an effective manner
- Can cause conflicts among the leaders
- Has risks to keep authorities centralized at the higher levels
3. Matrix Structure
The Matrix Structure heaves the advantage from different formats and as a result, is a bit complex. Employees have multiple reporting lines and bosses under this structure. Not only do they typically have managers for specific projects, but also have to report to a divisional manager.
Despite the balanced decision-making and flexibility, a matrix structure is prone to complications and confusions if employees are asked to accomplish conflicting responsibilities.
This structure is globally used by two types of companies. First are the companies that are launching marketing campaigns and new products, constantly. Second are the companies that already are having project-based structures, but still, believe that functional supervision is important.
The best example of the type of company that can make the most out of the matrix model is the ERP software installation consultancy companies.
Promote reporting and divisional relationship overlaying onto a single hierarchical functional structure.
- Strong project/product co-ordination
- Quick response to change
- Use resources flexibly
- Use support system efficiently
- Decentralized decision making
- Better environmental monitoring
- Increased administration cost
- Higher conflict prospects
- Confusion over responsibility and authority
- Emphasis too much on group decision making
- Extreme focus on internal relations
4. Divisional Structure
The companies those want to structure leadership according to different projects or products have the divisional structure and Gap Inc. is the true example of this. There are other retailers underneath this heading – Old Navy, Banana Republic, & Gap. They all operate as an individual but in reality, they are underneath the Gap Inc. brand ultimately.
Another perfect example is GE that owns dozens of different brands, assets, and companies across various industries. GE is a large brand, but each division functions independently.
Every organization has n-number of departments and each department is handled by the head and the heads further handled by the high-authorities. For better understanding, let’s say there are quality engineers, manufacturing processes, testing department, etc. in a company. All these areas will report to let’s say bench work, sales, business management, assembly sections, etc. Now, all these sections will report to Moding, sales, quality control, admin, and R&D departments. These departments further will sign to Management Representative and chairman of the company.
That’s how a divisional chart is created based on the position and expertise of each individual.
Uses a team of specialists from diverse niches to achieve common organizational goal.
- Define work by specific target or date for completion
- Unique and unfamiliar work
- Job completion is crucial in terms of profit and loss
- No repetitive tasks; therefore, give employees a chance to enhance their skills
- Different tasks demand specialists of a specific area
- The organization has to spend a lot of time and economy on the training of employees whenever a new task is introduced
- Can be a bit time consuming
5. Flatarchy Structure
This type of structure is common to see in small businesses and startups.
Forbes Jacob Morgan once wrote, “Flatter structure seeks to open each communication & collaboration line while eliminating layers within the organization, unlike the traditional hierarchy that focuses on one-way communication.”
The flatarchy structure removes redundant levels and spreads power across several positions. This enhances decision-making but can be confusing & cumbersome if everyone doesn’t agree. In simple words, it Flatarchy structure comes with pros and cons like other structures.
An organization has its internal innovation programs. The company can easily operate in existing makeup, but each employee is encouraged to suggest unique ideas and run with them, which potentially creates a new flat team.
The benefit of this structure is that this allows innovation to flow in each mind and eliminate red tape that to lead to innovation stalling like in functional structure.
Allow employees to make the decision independently and quickly.
- Perfect for start-ups and small companies
- Lead to new and innovative ideas
- Offers transparency between various departments
- Not meant for big organizations
- Giving decision making power to employees can lead to failures sometimes
- To implement this structure, one must have the complete knowledge of the organization, how it works, what it provides, and who it works for
These were 5 examples of company organizational charts along with their complete description.
In a Nutshell
So, did you figure out which organizational structure is yours? Hopefully, you did!
Understanding your firm type is vital for future prediction and decision-making. Also, it clarifies the demand for time for a change in an organization.