What is an organizational structure?

An organizational structure can be defined as the system which outlines how different activities are directed in the organization to achieve the desired goals. What is the reason to have an organizational structure? The organizational structure can help to determine the authority and responsibility of each individual. The higher up the individual is on the organizational structure, the more authority the individual will have in the organization. Thus, the powerful members of the organization i.e. Top-level management sits at the top of the organizational structure.

The organizational structure also outlines the role and responsibility of an employee in the organization by setting up a specific hierarchy in the organization. The organization structure can also be visually represented in the form of a diagram which can help you identify the authority of each individual. It can also help to determine the level of information flow in an organization.

Without an organizational structure, the employees in the organization may find it very difficult to determine whom they should report. Hence, the organizational structure provides clarity regarding the authority and accountability of each individual in the organization.

Types of organizational structures

Now, you must have got an idea about the organizational structure and its relevance in the organization. But you may be surprised by the fact that the organizational structure adopted by each organization is different. The right choice of the organization structure depends on the number of factors of the organization. Moreover, the organizational structure has evolved from hierarchical, centralized, and functional to decentralized, network, and hybrid organizational structures. There are 12 types of organizational structures and each organizational structure has its benefits and limitations.

Let’s go through the different types of organizational structures with exemplification of the organizational structure of different organizations.

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Functional organizational structure

The functional organizational structure is a business structure that groups the employees into specialized groups based on different functions and specialized skills and knowledge of the employees.

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Divisional organizational structure

The divisional organizational structure is a business structure that categorizes the organizational operations in different divisions around product, service, market, geographical location, etc. Further, each divisional structure can then have a marketing team, IT team, sales team, etc.

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Hybrid organizational structure

The hybrid organizational structure divides the activities of the organization into different departments which can be either functional or divisional. Thus, the hybrid organizational structure uses more than one reporting structure and includes a mix of functional and divisional organizational structures

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Flat organizational structure

The flat organizational structure is the business structure that has few levels of management between the front-line workers and the top-level managers. Thus, in this structure, the workers report directly to the top-level managers.

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Hierarchical organizational structure

The hierarchical organizational structure includes a chain of command that flows from the top-level managers to the workers. This structure looks like a pyramid as each employee has a supervisor under this organizational structure.

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Horizontal organizational structure

The horizontal organizational structure is just like the flat organizational structure as the horizontal organizational structure has fewer hierarchical levels and includes only two to three chains of command. This also provides some degree of freedom to the employees in the decision-making.

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Vertical organizational structure

The vertical organizational structure is similar to the hierarchical organizational structure that includes top to down management structure. Also, the organizations following a vertical organizational structure tend to have the highest level of leadership at the top, and the decisions in this structure take place from top to bottom.

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Matrix organizational structure

The matrix organizational structure includes the dual command situation where all the employees have dual reporting relations as the matrix organizational structure includes cross-functional teams. This type of structure is gaining huge momentum in the current times as it allows the supervisors to choose the best employees for different projects.

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Centralized organization structure

Each organization structure can be categorized as centralized or decentralized depending on the hierarchy of the decision-making. The centralized organizational structure relies on top-down decision-making as centralization relates to the degree to which the decisions can be restricted at the top-level managers.

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Decentralized organizational structure

The decentralized organizational structure is just the opposite of the centralized organizational structure as decentralization means the transfer of control. In the context of organizational structure, it refers to the transfer of control from the top-level management to the lower-level employees which provides authority to the low-level employees to take various decisions.

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Mechanistic organizational structure

The mechanistic organizational structure includes the bureaucratic organizational structure that has a higher degree of centralization and formalization. The use of this organizational structure is suitable for organizations that operate in a stable environment and are engaged in mass production. This organizational structure is characterized by a higher degree of specialization, a lower span of control, rigid departmentalization, narrow spans of control, centralization, and higher formalization.

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Network organizational structure

Network organizational structure is an organizational structure that is less hierarchical, more decentralized, more flexible, flatter and has a wider span of control. The network structure is more agile than other organizational structures as it helps in promoting effective decision-making and communication among different departments and subsidiaries. This organizational structure is mainly used by large international companies to effectively manage their operations at the global level.