Organizational structure refers to how a company arranges its employees and job roles in order to achieve its objectives and goals. It determines how roles, power, and responsibilities are assigned, controlled, and coordinated, and how information flows between different levels of management. A well-defined organizational structure provides a roadmap for the chain of command and the hierarchical structure of a company.
Common types of organizational structures include:
- Functional: The company is organized by specific functions such as marketing, finance, human resources, and production. Each function has a department and is headed by a department manager.
- Divisional: The company is organized by product line, geographical area, or customer. Each division operates as a semi-autonomous unit with its own functional departments like marketing, finance, etc.
- Matrix: This is a blend of the functional and divisional structures. Employees report to both a functional manager and a project or divisional manager.
- Flatarchy: Also known as a flat or horizontal organization, it has fewer management layers and a more flexible approach, usually adopted by small businesses or start-ups.
- Network: In this structure, major functions are outsourced to other companies and coordinated by a small headquarters organization.
- Team-Based: This structure completely removes department boundaries and focuses on the complete task that needs to be done. It forms teams that work toward a common goal.
The type of structure a company chooses depends on its size, strategy, objectives, and industry. A well-chosen organizational structure can foster effective communication and coordination, increase efficiency, and help the business to meet its strategic goals.
Example of Organizational Structure
Let’s take the example of a large multinational corporation to illustrate different types of organizational structures:
- Functional: Suppose a company named TechnoProducts Inc., which produces a variety of electronic products. The company might be divided into departments by functions: Engineering, Manufacturing, Marketing, Sales, Human Resources, and Finance. Each department is headed by a manager who reports to the CEO.
- Divisional: If TechnoProducts Inc. operates in different geographical regions, it might have a divisional structure with a North America Division, Europe Division, Asia Division, etc. Each division might have its own set of functional units like marketing, manufacturing, etc., and is managed by a divisional head.
- Matrix: In this case, an employee at TechnoProducts Inc. could report to both a functional manager and a divisional or project manager. For example, an engineer might report to the Engineering Manager (functional manager) and also to the Project Manager for a specific product they’re working on.
- Flatarchy: If TechnoProducts Inc. was a startup or a smaller company, it might adopt a flatter structure where employees often have more responsibility and more direct contact with top management. There could be just one level of management like “Team Leaders” between the CEO and all other employees.
- Network: TechnoProducts Inc. could outsource some of its operations, like manufacturing or customer service, to other companies. The main corporation would be small and would coordinate the activities of the networked companies.
- Team-Based: In this structure, TechnoProducts Inc. might have cross-functional teams working on different projects. For example, a new product launch team could include employees from engineering, marketing, sales, and finance, all working together towards the launch of the product.
It’s important to note that these are simplified examples, and real-world corporations often have more complex structures with elements from multiple structure types. The chosen structure depends on many factors like the company’s strategy, size, business environment, and culture.