Guide to Organizational Structure With Examples

An organizational structure, or org structure, is a business operating system that defines the responsibilities and requirements of each job and how it assists the company in achieving its goals. It also determines the flow of information among a company’s executives, management, and business units. It defines how teams carry out tasks, which department handles them, and which middle-management division oversees their completion. Small businesses and large companies often visualize organizational structure in a diagram called an organizational chart or org chart.

There are several different types of organizational structures, each with its own design. The right organizational structure can increase a company’s efficiency and profitability and help it adapt more quickly to changes in its market.

The purpose of organizational structures is to align a company’s operations with its business strategy. A business must have strong leadership with proven problem-solving skills, team members in positions that put their talents to the best use, and a solid business structure to guide workers of all levels to success.

Organizational structures clearly define the rules and requirements for every level in a company. Doing so prevents many of the problems that occur with misaligned business structures, including cash flow shortages, workforce decreases, and damage to customer loyalty and product development.

Many elements are common to all organizational structures, including:

1. 1. Job design: Job design, or work specialization, outlines the job description or duties of each position at a business, based on the employee’s experience. A clear understanding of a job’s requirements avoids duplication or assigning tasks to employees who have no previous experience with them.
2. 2. Departmentation: Departmentation, or departmentalization, refers to how a company structures its different divisions or teams (typically by organizing them into departments that handle specific tasks). Companies also form departments based on product lines, geographic locations, and customer relations.
3. 3. Delegation: Delegation refers to how companies make decisions. There are two types of delegation: centralization and decentralization. Centralization has a clear chain of command and reporting structure. It gives decision-making authority to one or two higher-level entities, such as a chief executive or board of directors. Conversely, decentralization divides authority between divisions within the company or different team members within a department. Tech startups and similar businesses often favor decentralized structuring because it prioritizes autonomy.
4. 4. Span of control: The span of control determines how many employees or departments a manager will oversee. The number of departments in a business will determine the scope of the manager’s responsibilities and leveling: middle management will typically have a greater span of control than team leaders.
5. 5. Chain of command: A chain of command establishes a company’s hierarchical structure so that each employee has a specific manager. In addition to assigning work duties to employees, the manager is also responsible for transmitting information to the next level in the chain of command.

Here are some examples of organizational structure:

1. 1. Bureaucratic organizational structure: The bureaucratic structure, also known as a functional structure, is one of the most common organizational structures, particularly in large organizations. The bureaucratic structure is a top-down structure, meaning that information flows from a president or top management down through heads of departments like the sales and marketing department or human resources. The next level involves the division heads in various departments, which oversee project managers and department employees.
2. 2. Divisional organizational structure: A divisional structure gives decision-making authority to a company’s divisions, which allows them to act like smaller, individual companies with their own resources and even departments. Companies often organize these divisions by market, industry, location, or product lines.
3. 3. Horizontal organizational structure: Also known as a flat organizational structure, a horizontal structure reduces the number of levels between executives, management, and staff. The horizontal structure encourages greater self-management and more open communication by the staff but can also lead to confusion because employees are unclear about their specific supervisor. A flatarchy structure combines a flat structure with a hierarchical structure, with few managers between executive and employee levels.
4. 4. Matrix organizational structure: A matrix structure assigns multiple reporting relationships to its employees. For example, an employee may work in one department and report to a different department’s project manager. A matrix organization’s structure is more flexible and allows more open communication between divisions but is also more complex.

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