Organizational Structure Types

What is even more important than acquiring skillful employees to achieve high-performing organizations? It is to ensure that every employee fits in and feels appreciated in the organization. To make this magic happen, small and big companies nowadays increasingly emphasize the importance of clear and appropriate organizational structure types. 

Organizational Structure Types Organizational Structure Types

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Table of contents

    Organizational Structure Types in Management

    If high-quality employees and infrastructure are the flesh and skin of an organization, a suitable organizational structure type can provide the organization with a firm backbone.

    What is Organizational Structure?

    Check out our explanation of Organizational Structure to understand this concept in more detail.

    What are common organizational structure types in business? And how can companies determine the most appropriate structure type for their operations? Read further to find out the answers to these questions.

    Organizational Structure Types Importance

    Appropriate organizational structure types can grant companies with various advantages. Firstly, having clear organizational structure types can help companies engage with their employees closely. Second, organizational structure types can also enhance coordination within teams and across organizations while boosting overall productivity through mass orientation and reducing the chances of conflicts.

    An organizational structure carries inherent capabilities as to what can be achieved within its frame.

    - Pearl Zhu1

    By contrast, ambiguous or missing organizational structure types can result in various business problems, including miscommunication, slow work process, incivility, weak process flows, etc.

    Organizational Structure Types Company

    While there are diverse types of organizational structures at work, most organizational structure types in companies share the following seven elements (see Fig. 1 below):

    Have a look at our explanation of Organizational Structure to discover the elements of organizational structure in more detail.

    Organizational Structure Types Business

    In today's constantly evolving workplaces, there have been various types of organizational structures in practice. This explanation will guide you through the three most common organizational structure types at work, coupled with some innovative recent ones.

    Organizational Structure Types: Common Types

    There are three standard organizational structure types: the simple structure, the bureaucracy, and the matrix structure.

    Organizational Structure Types: The Simple Structure

    The simple structure implies a flat organization with only two or three levels of hierarchy. Usually, decision-making is central and lies in the hands of a single individual.

    The simple structure is a type of organizational structure with a low degree of departmentalization, a wide span of control, and high centralization of authority.

    Typically, young companies and companies with short life spans will implement this simple organizational structure. Yet, during crises, large organizations may downsize to simple structures to save their resources.

    Unsurprisingly, the simple structure is simple, flexible, and inexpensive to adopt within companies. However, the simple structure's low formalization and high centralization may prevent the company from scaling. Further, as the simple structure relies on a single decision-maker, what will the entire company do if they are absent for some reason?

    Organizational Structure Types: The Bureaucracy

    In a bureaucratic structure, organizations focus on standardizing their operations and processes.

    A bureaucratic structure consists of high specialization, high formalization, functional departments based on tasks, a narrow span of control, and a long decision-making chain.

    Typically, there are two types of bureaucratic organizational structures: divisional and functional.

    A functional structure divides employees based on their specialties or roles.

    On the other hand, a divisional structure may group employees based on the product, market, or customer they are serving.

    What are the advantages of a bureaucratic organizational structure?

    Firstly, a bureaucratic structure increases an organization's standardization. Second, unlike a simple structure, a bureaucratic structure lessens the dependence on managers, given its highly formalized rules and regulations. However, in the creative industry, a bureaucratic structure may limit employees' creativity and innovation.

    Organizational Structure Types: The Matrix Structure

    The Matrix structure replaces the typical unified structure of command with a dual chain of command at work. Typically, there are two simultaneous management teams in a matrix structure, one representing functional departments and the other representing the product specialization departments.

    A matrix structure generates two lines of authority, combining the functional and product departments of the organization.

    Given the complexity and interdependence of specific industries, such as hospitals or universities, the matrix structure empowers effective coordination and resource allocation. However, there is a high risk of bias in a matrix structure as employees may take sides in the dual chain of command.

    Figure 2 below shows the three general organizational structure types.

    Organizational Structure Types: Emerging Types

    Recently, there have been diverse types of organizational structures emerging.

    Organizational Structure Types: The Virtual Structure

    The virtual structure emphasizes the unnecessary presence of an actual work location.

    A virtual structure implies a small, centralized organization that outsources most business functions.

    There is high centralization and low departmentalization within virtual organizations. Virtual organizations are quite flexible and inexpensive to operate, so they can effectively save costs and maximize resource allocation. However, a weakness of the virtual structure is its lack of clear business vision and mission, thus failing to educate employees about the organization's culture and ethics.

    Organizational Structure Types: The Team Structure

    If you seek an organizational structure free of a chain of command, look no further than the team structure.

    A team structure replaces departments with teams and minimizes external barriers between customers and suppliers.

    Within organizations with a team structure, the hierarchy is flat, with the slightest possibility of status and rank. Sometimes, you can recognize team-oriented global corporations as team-structured organizations. Effective ways to engage with employees within team-structured organizations are the 360-degree evaluation method and the participative team discussion.

    Organizational Structure Types: The Circular Structure

    A circular structure is made up of concentric rings. Accordingly, at the center of the target are the directors and executives, followed by groups of managers, specialists, and workers in the outermost ring.

    A circular structure places executives at the center who spread their vision outwards in rings of grouped functions (managers, specialists, workers).

    Although presented as a ring concept, the circular structure is still high in hierarchical formation. Accordingly, management and their visions hugely influence the entire ring within a circular organizational structure.

    Organizational Structure Types Examples

    To further understand how the above-mentioned theoretical types of organizational structures translate into practicality, let's look at the following real-life examples of diverse organizational structure types.

    Organizational Structure Types

    Examples

    The Simple structure

    A start-up company typically includes a small team of founders and employees who perform multitasking. Further, most critical decisions lie in the hands of founders.

    The bureaucracy structure

    A bank in which employees are divided into departments such as debit, credit, private, and services while power is centralized within a well-defined hierarchy, thus resembling a functional structure.

    The matrix structure

    A university in which dual lines of authority resemble the minor departments (e.g., marketing, finance, operations, etc.) and the major departments (e.g., Business and Economics).

    The virtual structure

    A filmmaking organization such as Warner Bros in which there is no fixed location for film production. Instead, the organization will determine diverse casts and filming sites based on specific projects.

    The team structure

    Team-oriented global corporations such as Burger King divide their teams based on geographic barriers.

    The circular structure

    An insurance firm in which founders or investors are at the center. Then, team leaders form the second outer ring, followed by various insurance salespersons.

    Table 1 - Real-life examples of organizational structure types

    Organizational Structure Types Implementations

    Are you a young entrepreneur looking for steps to define and implement an appropriate organizational structure for your business? Have a look at the following advice:

    • List all existing job positions: you can look at your employees' jobs and responsibilities and make a list for each job. This list helps you identify undefined job roles and responsibilities within your company.

    • Define clear job roles and organizational levels: first, you must list all existing jobs and responsibilities at your company. Then, define all roles based on expected competencies and hierarchical levels.

    • Start from the top level: you should draw an overall picture of your company's mission and long-term strategies to identify the organization's future needs.

    • Down to the individual level: you should tie the organization's future needs with your employees' roles and levels for better generalization and specialization.

    • Grow your organization: you may train yourself to be prepared to change your organizational structures to adapt to your business needs. Alongside this, you can implement a good plan for training and development.

    While there are various organizational structure types, there is no one-size-fits-all recipe for organizations to select and implement. The critical thing to remember is that organizational structure is not permanent; it helps a business stay competitive and flourish for good.

    Organizational Structure Types - Key takeaways

    • Organizational structure types in business share seven common elements: work specialization, departmentalization, chain of command, a span of control, centralization and decentralization, formalization, and boundary spanning.
    • The three most common types of organizational structure are simple, bureaucratic, and matrix structure.
    • The recent emerging organizational structures are team structure, virtual structure, and circular structure.
    • There is no one-size-fits-all recipe for organizations to select and implement

    References

    1. Newman Emily. Preparing an Organizational Structure with the Help of Flowcharts. Yonyx. 2020.
    Frequently Asked Questions about Organizational Structure Types

    What are the 8 types of organizational structure?

    The three most common types of organizational structure are simple, bureaucratic, and matrix structure. Besides, there have been emerging types of organizational structures such as team structure, virtual structure, and circular structure.

    What are the 3 aspects of structure of organization?

    The three most common types of organizational structure are simple, bureaucratic, and matrix structure. 

     What is the best organizational structure?

    While there are various organizational structure types, there is no one-size-fits-all recipe for organizations to select and implement 

    What are the different types of organizational structures, and which is the most widely used?

    The three most common types of organizational structure are simple, bureaucratic, and matrix structure. While there are various organizational structure types, there is no one-size-fits-all recipe for organizations to select and implement.

    What is a simple organizational structure?

    The simple structure is a type of organizational structure with a low degree of departmentalization, a wide span of control, and high centralization of authority. 

    Why is organizational structure important?

    Appropriate organizational structure types can grant companies with various advantages. Firstly, a clear organizational structure can help companies engage with their employees closely. Second, organizational structure types can also enhance coordination within teams while boosting overall productivity through mass orientation and reducing the chances of conflict.

    Test your knowledge with multiple choice flashcards

    What is NOT among the six common elements of organizational structure types?

    What are the three most common types of organizational structure?

    Which is true about an organization with a simple structure?

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