An organizational structure is a set of rules, roles, relationships, and responsibilities that outline how your company's activities are directed to achieve its goals.
There are eight types of organizational structures, each of which is centralized or decentralized in terms of who has the power.
Each structure has advantages and disadvantages that you should consider when choosing one for your company.
This article is for business owners who have employees and want to decide on the right organizational structure for their company.
Running a business means successfully delegating tasks to your employees. It also means having the final say on all projects or, if your company is on the larger side, hiring people you trust enough to give them full approval authority. The organizational structure of your business can help you understand where and with whom your company's responsibilities lie, and you have many types to choose from. An organizational structure is a set of rules, roles, relationships, and responsibilities that determine how a company's activities should be directed to achieve its goals. It also manages the flow of information across company levels and outlines the relationships between mid-level employees, senior management, executives and owners. In effect, it is a hierarchy for society, although some organizational structures emphasize an almost complete lack of hierarchy. In your research, you may first read that there are two types of organizational structures: centralized and decentralized. However, using only these two classifications for every possible team structure may be painting with too broad a brush. This is why experts have come up with eight types of organizational structures, each of which is either centralized or decentralized:
Hierarchical structure (also known as line structure)
Functional structure
Divisional structure (also known as multidivisional structure)
Anarchy structure (also known as horizontal or flat structure)
Matrix structure
Team structure
Network structure
Projected structure
All are centralized expert for housing, team and network structures. In a centralized structure, power flows up the chain of command to executives and owners, while decentralized organizational structures give much more authority to non-executives and owners. We'll get to know how it works in a moment. A centralized structure, known as a divisional organization, is more common in corporate companies with many large departments, markets, or territories. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. In a divisional structure, each line or product has its own commander-in-chief. Large companies of any kind, but especially in the manufacturing industry, are best suited to this structure.
These are the main advantages of a divisional organization:
Different departments have some flexibility to operate separately from the company as a whole.
It is more adaptable to customer needs.
Individual departments have greater autonomy and room for innovation.
These are some of the disadvantages of a divisional structure:
Risks accidental duplication of resources.
It promotes poor communication and low interaction between different departments.
It encourages internal competition across departments rather than aligning the company with external competitors. No one organizational structure is best for all businesses. When determining the right one for your company, think about how much power you'd like to give your employees, how much room you'd like to leave for innovation, how big your company is, and how much you care about employee interaction. After considering these factors, you'll likely know which organizational structure is best for you—and if you get it wrong, you can always switch to a different organizational structure.
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