A company’s organisational structure defines what its employees do, who they report to and how responsibility is distributed.
Having a clear organisational structure can help company leaders establish how the business is going to run, and can be useful for visualising how workflows may shift if leadership or other roles change.
An organisational structure can be represented as a visual diagram – essentially, this is a map that explains how the company works and how different roles are organised.
The organisational structure you choose will depend on various factors, including what the company does, how big it is and where it operates.
Here are eight types of organisational structure that could help your company succeed.
The functional structure is a traditional hierarchical structure. Employees are divided into groups, and every employee has one clear supervisor.
Employees are grouped based on the function they provide – for example, all the finance employees are grouped into one department, all marketers are together in another department and all salespeople are in a different one.
This type of structure is easily scalable, and allows employees to specialise easily. However, separating the departments can make it more difficult for employees to gain a wide range of skills, and can limit communication between departments.
Geographical divisional structure
In a divisional structure, the organisation is made up of multiple, smaller functional structures. Each division can have within it its own marketing team, HR team and so on.
In a geographical divisional structure, the company is divided based on its geographical location.
Each division of the company will represent a different country, region or district. This is a useful structure for large companies that operate globally, and is also suited to companies that need to be close to customers and/or suppliers.
Product-based divisional structure
If a company offers a variety of different products or services, it may choose a structure in which each division is dedicated to a particular product line or service.
This type of structure can make product development cycles shorter, helping companies bring new products to market faster. However, it can make it difficult for the company to scale.
Market-based divisional structure
This is another variation of the divisional structure, in which employees are divided based on markets, industries or types of customer.
For example, a large clothing retailer may have divisions dedicated to men’s, women’s and children’s clothes.
This type of structure works well for companies that offer products that are unique to specific markets or audience segments, but companies need to be vigilant to ensure the different divisions remain compatible.
The team-based structure is less hierarchical than the more traditional structures. It involves a number of different teams working towards a common goal, whilst also working on individual tasks.
This type of structure allows for more flexibility, and is good for facilitating teamwork, collaboration and problem-solving.
A network structure may be created when a company has multiple locations, when it shares resources or staff with another company or when it outsources some of its work.
This type of structure looks similar to the hierarchical structures listed above. However, the separate divisions may be different companies, subcontractors or freelancers.
Again, this is a more flexible structure. It relies on reliable partners and open communication, as without these its complexity may become something of a hindrance.
In a matrix structure, employees are arranged in a grid-like system, rather than in the traditionally hierarchical way.
Each employee may report to more than one manager, with some reporting relationships being more direct or significant than others.
For example, a company may have a group of web developers who all report to a departmental manager, but each developer may also work on individual projects and report to a seperate project manager for each.
This type of structure offers more balanced decision-making and diversity of perspectives, as there are multiple chains of command.
The flat structure does away with traditional hierarchy almost completely, eliminating many levels of management so that all employees are close to leadership.
This type of structure is most often adopted by small companies and startups in their early stages, as it’s almost impossible for large companies to use this system.
Having less hierarchy-related pressure may make employees feel more valued and autonomous, which may in turn increase productivity. However, the complexity of the structure may make it difficult to ascertain who should have decision-making power in some situations.
Which organisational structure is right for your company?
Our rundown should have given you an overview of some of the most common organisational structures – but there are many more.
In reality, these are archetypal structures. Many companies use a hybrid model suited to their particular circumstances, so you should carefully consider what will work best for your company.