Selecting the appropriate organizational structure for your company, division, or team is similar to selecting a new car.
At its most basic level, you’re searching for something roadworthy – something that will safely transport you (and your passengers) from point A to point B.
You can pick from a variety of organizational structures, such as chain of command (long or short?), span of control (broad or narrow? ), and centralization (centralised or decentralised decision-making? ), to mention a few.
Structure of Organization
An organizational structure is a schematic of a corporation that shows what people perform, who they report to, and how business decisions are made. Organizational structures can be guided by functions, markets, products, regions, or processes, and can be tailored to certain sizes and sectors.
As your firm grows, an organizational structure can be useful for new employees as they learn who is in charge of which operations.
What each of those factors signifies to an organization is as follows:
Tasks are distributed and work is approved according to your chain of command. You can use an org structure to specify how many “rungs of the ladder” a department or business line should have. In other words, who instructs whom on what to do? How are issues, demands, and proposals transmitted up and down the chain of command?
Your span of control can refer to two things: who falls under the management of a manager… and which tasks fall under the responsibility of a department.
Centralization refers to the location where final decisions are made. You’ll need to evaluate which persons and departments have a say in each decision once you’ve created your chain of command. A company can be centralised, with final choices made by only one or two organizations, or decentralised, with final decisions made by the team or department, that is responsible for carrying out the decision.
In this RisePath blog, we’ll look at how you may mix those elements to create various organizational systems. We’ll also go over the advantages and disadvantages of several structure types so you can decide which is ideal for your firm, division, or team. Let’s get started.
Organizational Structures: Mechanistic vs. Organic
The terms “mechanistic” and “organic” describe different types of organizational structures.
The mechanistic structure represents a typical, top-down approach to organizational structure, whereas the organic structure indicates a more collaborative, flexible approach.
Here’s a look at both sides of the structural spectrum, their benefits and drawbacks, and which types of firms they’re most suited for.
Mechanistic structures, often known as bureaucratic structures, are characterised by short control spans, strong centralization, specialisation, and formalisation. They’re also very strict about what individual departments are allowed to do for the corporation.
As intimidating and rigid as a mechanistic organization may appear, the chain of command, no matter how lengthy or short, is always visible under this approach. As a company expands, it must ensure that everyone (and every team) understands what is expected of them. Keep mechanical structure in your back pocket, because you never know when you’ll need it.
Organic structures (also referred to as “flat” structures) are characterised by broad control spans, decentralisation, low specialisation, and loose departmentalization. What does it all mean? Multiple teams might report to one person and take on projects based on their relevance and capabilities, rather than what the team is supposed to do, in this arrangement.
As you can obviously guess, this organizational structure is far less formal than mechanistic, and it approaches business demands on an ad hoc basis. This can make deciphering the chain of command, whether it’s long or short, challenging. As a result, executives may approve certain projects more rapidly, but the project’s division of labour may get muddled.
However, the flexibility that an organic structure provides can be immensely beneficial to a company navigating a fast-paced market or just trying to recover from a bad quarter. It also encourages employees to attempt new things and grow as professionals, resulting in a more strong workforce in the long term. In conclusion? Because they’re just trying to establish their brand and get their wheels rolling, startups are typically ideal candidates for organic structure.
Let’s look at some more specific forms of organizational structures, the majority of which are more traditional and mechanistic.
Organizational Structure Types
The organizational structure of a team will differ depending on the size of the company and its objectives. Each form has advantages and downsides, but developing a clear organizational structure has a universal benefit. It assists employees to manage expectations and goals by helping them understand their role within the firm.
To be successful, a company must have an organizational structure in place. Companies employ a variety of organizational structures, nine of which are discussed here.
1. Organizational Structure: Functional
The functional structure is one of the most prevalent forms of organizational structures. It divides an organization into departments based on common job functions.
A functional org structure, for example, would put all of the marketers in one department, all of the salesmen in another, and all of the customer care representatives in a third.
The functional structure allows employees to specialise to a high degree and is easily scalable as the company grows. Also, while this structure is mechanical in nature, which can stifle an employee’s progress, staffing skill-based departments allows them to go deeper into their industry and discover what they excel at.
2. Divisional Structure Based on Products
Multiple, smaller functional structures make up a divisional organizational structure (i.e. each division within a divisional structure can have its own marketing team, its own sales team, and so on). Each division within the business is committed to a certain product line in this scenario — a product-based divisional structure.
This structure is ideal for businesses that have a variety of products and can help shorten product development cycles. This enables small enterprises to quickly launch new products.
3. Divisional Structure Based on Markets
The market-based organizational structure is another sort of divisional organizational structure, in which an organization’s divisions are organised around markets, industries, or client groups.
The market-based structure is good for a company with products or services that are unique to specific market segments, and it’s even better if the company has extensive knowledge of those sectors. This organizational structure also keeps the company informed about variations in demand among its various audience segments.
Structure of Geographical Divisions
The geographical organizational structure divides the workforce according to — you guessed it — geography. Territories, regions, and districts, for example, are divisions of a geographical organization.
This structure is best suited to businesses that require proximity to suppliers and/or customers (e.g. for deliveries or for on-site support). It also brings together a wide range of business skills, allowing each geographical division to make decisions based on a wider range of perspectives.
5. Process-Based Organization
Process-based organizational structures are built on the end-to-end flow of various activities including “Research and Development,” “Customer Acquisition,” and “Order Fulfillment.” A process-based structure, unlike a simply functional structure, analyses not only the activities that employees execute, but also how those activities interact with one another.
Process-based organizational structures are ideal for increasing a company’s speed and efficiency, and they’re especially well-suited to fast-changing industries because they’re so adaptable.
6. Matrix Structure
A matrix organizational structure, unlike the other structures we’ve looked at so far, does not follow the typical hierarchical approach. Instead, all employees report to two different people. A functional reporting line is usually present, as well as a product-based reporting line.
The matrix form has a lot of appeal since it can enable both flexibility and more balanced decision-making (as there are two chains of command instead of just one). Having a single project overseen by many business lines also allows these business lines to exchange resources and interact more openly with one another, which they might not be able to do on a regular basis otherwise.
7. Circular Design
While the circular structure differs significantly from the other organizational models discussed in this section, it nevertheless relies on hierarchy, with higher-level employees occupying the inner rings and lower-level employees occupying the outer rings.
In a circular organization, however, the leaders or executives are not considered as sitting atop the corporation, issuing commands down the chain of command. Instead, they’ve moved to the centre of the organization, where they can propagate their vision.
A circular structure is intended to encourage communication and the free flow of information between different elements of the organization from an ideological standpoint. The circular form presents all divisions as being part of the same whole, whereas the traditional arrangement depicts separate departments or divisions as occupying individual, semi-autonomous branches.
8. Structural Layout
While a traditional organizational structure might resemble a pyramid, with numerous tiers of supervisors, managers, and directors between staff and leadership, the flat structure keeps management levels to a minimum, allowing all employees to be only a few steps away from the top. It may not always take the shape of a pyramid or any other shape for that matter. It’s also a type of the “Organic Structure” we mentioned earlier.
Employees are expected to be more productive in an atmosphere with less hierarchy-related demands, according to this framework. This arrangement may also give employees the impression that the managers they do have are more like peers or teammates than threatening superiors.
9. Network Architecture
When two companies collaborate to share resources — or if your organization has various sites with diverse activities and leadership — a network structure is commonly formed. If much of your staffing or services are outsourced to freelancers or numerous other organizations, you can use this framework to explain your company workflows.
The structure appears to be very similar to the Divisional Structure seen above. Instead of offices, it could feature outsourced services or satellite locations.
If your organization doesn’t perform everything in-house, this is an excellent method to demonstrate to employees or stakeholders how off-site operations are handled.
What are the benefits of having an organizational structure?
Consider a company with no organizational structure. Questions concerning the systems and procedures occur almost immediately. Who is the decision-maker? Employees are held accountable in what ways? What are the objectives of the company? Without a proper organizational framework, these issues are very impossible to answer.
Because it enhances workflow and efficiency, fosters communication, recognises corporate needs, and connects people with company goals, an organizational structure is essential for running a successful firm. It has a direct impact on the day-to-day operations of a company. When a corporation builds a functional structure, the combined efforts of its personnel, together with its systems and processes, enable the organization to make better future decisions.
Organizational Structures to Navigate
A successful team relies heavily on organizational frameworks. When employees are given a clear definition of their job within an organization, they may move easily, confidently, and efficiently.
Structure types will differ from one company to the next, thus keep in mind that certain structures are not universal. While not every type will work for your company, odds are that one will. Use this post to figure out which organizational structure is best for you, and then get down to business.