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10 types of organisational structures with examples

Team AckoJan 17, 2024

Having a clear organisational structure is vital for the success of any business. But did you know that there are several organisational structures to choose from? Knowing your options will make it easier for you to select the one that best fits the objectives and goals of your business. In this article, we have highlighted 10 different types of organisational structures with examples.

Contents

What is an organisation structure?
10 types of organisational structures
Benefits of having an organisational structure
Frequently asked questions

What is an organisation structure?

An organisational structure refers to how a company is organised and its various parts interact with one another. It serves as a general guide for how to manage a business and assign and complete tasks.

The following example will help to understand what is an organisational structure. For instance, a hierarchical structure is the most common type of structure. It has a clear chain of command and defined roles and responsibilities. In this type of structure, there is a clear top-down flow. The CEO is typically at the top of the authority chain, followed by upper management, middle management, and so on. This structure is often used by large corporations.

10 types of organisational structures

In this section, we will explore 10 different types of organisational structures with examples.

1. Functional structure

A functional structure is a way for companies to organise their different departments. Each department is in charge of particular duties and answers to a higher manager.

For instance, a large retailer might have distinct departments for sales, marketing, and finance. These departments each have a leader and team, and they all answer to the CEO or COO. This structure makes it easy to assign specific tasks to individuals.

2. Divisional structure

A divisional structure groups employees based on the product or service for which they are responsible. As a result, skills are not used to categorise individuals. Each division operates as a separate unit and is responsible for its own performance.

For example, a big retail company might have different divisions for clothing, electronics and home appliances. The CEO or COO would oversee each of these divisions. Nevertheless, each division would have a separate reporting leader. This structure allows for more flexibility and autonomy for each division. As a result, they might be able to respond to the unique demands of their product or service line more effectively.

3. Hierarchical structure

A hierarchical structure is yet another way that businesses set up their various levels of management. In this case, the management's authority and accountability rise with each level.

For example, in a big retail company, the CEO would be at the top of the hierarchy, followed by the COO. The department managers would come next, followed by the regular employees. Each level reports to the level above it. Although this structure is simple, it can also be rigid and less flexible.

4. Matrix structure

A matrix structure combines elements of functional and divisional structures. Here, employees are grouped by both function and project.

For example, a construction company might have a team of architects that work on all projects. However, they also have teams dedicated to building homes and another for building businesses. Each employee reports to two managers. One in charge of their job function and the other in charge of the specific project. This structure allows the company to work on multiple projects at the same time.

5. Line structure

A line structure is a business structure that is based on a clear chain of command. Here, the top management makes the major decisions and gives orders to the lower-level managers and employees.

For example, a small manufacturing company might have a CEO at the top. The plant manager, production supervisor, and production staff all come after the CEO. The decision-makers are in charge here, and the employees are at the bottom.

6. Network structure

A network structure is a way for a company to work with other companies to achieve its goals. It accomplishes this by establishing alliances and partnerships with other businesses.

An example of a network structure is a small software development company forming a partnership with a large consulting firm. Together, they provide services to clients. This allows the small business to gain access to resources and expertise that it might not otherwise have. It also allows them to be more adaptable to changes in the market.

7. Flat structure

A flat structure is a way for companies to organise themselves with fewer levels of management. This means that there are fewer layers of management between the employees and the CEO.

For example, a small startup might have a flat structure where all employees report directly to the CEO or founder. This structure allows for more direct communication and less bureaucracy.

8. Team-based structure

Businesses can divide their workforce into smaller groups that collaborate on specific tasks by using a team-based structure. Each team is given complete autonomy in resolving problems while completing a specific task.

For example, a software development company might have teams that work on different projects. Each team may include various roles, such as developers, designers, and quality assurance. Regardless, they are all accountable to a common project manager. This structure promotes collaboration, flexibility and innovation.

9. Process-based structure

People who perform similar tasks or functions are grouped together in a process-based structure. This can be in contrast to a functional structure, which groups people by their specific job roles.

An example of this is a manufacturing company, where all employees involved in the production process are grouped together. This is in contrast to being divided into separate departments such as marketing or finance.

10. Circular structure

A circular structure is a type of organisational structure in which there is no clear hierarchy. Here, decisions are made through consensus. In this type of structure, authority and decision-making power are distributed among all members of the organisation.

An example of this would be a cooperative, where all members have an equal say in the decision-making process. The benefits of this type of structure include more democratic decision-making, increased involvement of all members, and a flat organisational structure.

Benefits of having an organisational structure

Here are a few of the benefits of having a well-defined organisational structure.

Improved communication: A clear organisational structure helps ensure that everyone knows whom to communicate with and who is responsible for what tasks.
Increased efficiency: Tasks can be completed more quickly when there is a clear chain of command and defined roles and responsibilities.
Heightened accountability: A clear organisational structure makes it easier to hold employees accountable for their actions and decisions.
Better decision-making: Decision-making is more efficient and effective, as it's clear who has the authority to make decisions.
Better coordination: A well-defined organisational structure ensures that everyone is working towards the same goals and objectives. This leads to better coordination and less duplication of efforts.
Greater flexibility: It is simpler to adapt to new challenges and opportunities when a business’s organisational structure is clear.

Frequently asked questions

This section answers some of the most common questions about organisational structure types.

Is there a single "best" organisational structure for all companies?

It ultimately depends on the specific needs and goals of the company. Different types of organisational structures may be better suited for different industries, company sizes, and operational models. It's important to understand the different options available and choose the structure that aligns best with your company's goals and objectives.

Explain what an organisational structure chart is?

An organisational structure chart, also known as an org chart, is a visual representation of the company's structure. It shows the relationships between different positions within the organisation. The chart can include job titles, department names, and reporting lines.

What are some key elements that make up an organisational structure?

Some key elements of an organisational structure include the following.

The chain of command
Roles and responsibilities
Communication lines
Decision-making processes
Allocation of responsibilities and resources

How does organisational structure impact a company's performance?

The organisational structure of a company can have a significant impact on its performance by influencing communication, decision-making, and resource allocation. A well-designed structure can improve efficiency and accountability. A poorly planned structure, on the other hand, can cause confusion and inefficiency.

What is the difference between a centralised and decentralised organisational structure?

In a centralised organisational structure, decision-making power is held at the top of the organisation. In contrast, in a decentralised structure, decision-making power is distributed throughout the organisation. Centralised structures tend to be more rigid and hierarchical, while decentralised structures tend to be more flexible and adaptable.

What are the advantages and disadvantages of a flat organisational structure?

Advantages of a flat organisational structure include increased autonomy, faster decision-making, and greater flexibility. Disadvantages include a lack of a clear chain of command, which can lead to confusion and lack of accountability.

Can an organisational structure be changed?

Yes, organisational structures can be changed. However, it's important to consider the potential impact on the company's operations and employees. Any changes should be made with a clear understanding of the company's goals and objectives. Also, a plan should be implemented to lessen any potential negative effects.

How can I implement a new organisational structure?

A new organisational structure's implementation can be a challenging process that requires careful planning and communication. The steps of the process include the following.

Identifying the company's goals and objectives.
Conducting an analysis of the current structure.
Developing a plan for the new structure.
Communicating the changes to employees.
Monitoring the effects of the new structure.

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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

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