Organizational Structure

Organizational Structure is a system used to define a hierarchy within an organization. It identifies each job, its function and where it reports to within the organization. This structure is developed to establish how an organization operates and assists an organization in obtaining its goals to allow for future growth. The structure is illustrated using an organizational chart.

Centralized vs. Decentralized Organizational Structures
An organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure, with a long and specific hierarchy of superiors and subordinates. In a centralized organizational system, there are very clear responsibilities for each role, with subordinate roles defaulting to the guidance of their superiors.

There has been a rise in decentralized organizations, as is the case with many technology startups. This allows companies to remain fast, agile, and adaptable, with almost every employee receiving a high level of personal agency. For example, Johnson & Johnson is a company that's known for its decentralized structure. As a large company with over 200 business units and brands that function in sometimes very different industries, each operates autonomously. Even in decentralized companies, there are still usually built-in hierarchies (such as the chief operating officer operating at a higher level than an entry-level associate). However, teams are empowered to make their own decisions and come to the best conclusion without necessarily getting "approval" from up top.

Types of Organizational Structures

• Hierarchical Structure: A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Its chain of command is the one that likely comes to mind when you think of any company: Power flows from the board of directors down to the CEO through the rest of the company from top to bottom. This makes the hierarchical structure a centralized organizational structure. In a hierarchical structure, a staff director often supervises all departments and reports to the CEO. There are two types of Hierarchical Structures:
  • Functional Structure: The functional structure is a centralized structure that greatly overlaps with the hierarchical structure. 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.
  • Divisional Structure: The centralized structure, known as a divisional organization, is more common in enterprise companies with many large departments, markets or territories. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. In the divisional structure, each line or product has its own chief commanding executive.

source: The Org

• Flat Structure: A flat structure is a decentralized organizational structure in which almost all employees have equal power. At most, executives may have just a bit more authority than employees, as seen in the figure below. This organizational structure is common in startups that take a modern approach to work or don't yet have enough employees to divide into departments.

source: The Org

Matrix Structure: The matrix structure is a fluid form of the classic hierarchical structure. This centralized organization structure allows employees to move from one department to another as needed, as the horizontal lines in this matrix organization figure below indicates.

source: The Org

• Team Structure: A team structure is a decentralized but formal structure that allows department heads to collaborate with employees from other departments as needed. It is similar to a matrix structure; although, the focus is less on employee fluidity than on supervisor fluidity, leading to a decentralized functional structure.

source: Lumen Learning

• Network Structure: A network structure is especially suitable for a large, multi-city or even international company operating in the modern era. It organizes not just the relationships among departments in one office location, but the relationships among different locations and each location's team of freelancers, third-party companies to whom certain tasks are outsourced, and more. While this may sound like a lot for one type of network structure to detail

source: Rafael Aita

• Projectized Structure: In a projectized structure, the focus is on one project at a time. In this centralized organizational structure, project managers act as supervisors, not just resource allocators and decision-makers. Unlike other structure types, a projectized structure involves the demobilization of teams and resources upon a project's completion. But it's like other types of organizational structures in that an obvious hierarchy exists

source: Lumen Learning