Types of Organizational Structures

Types of organizational
structures
1. Hierarchical org structure
Hierarchical org chart example (click on image to modify online)

The pyramid-shaped organizational chart we referred to earlier is
known as a hierarchical org chart. It’s the most common type of
organizational structure—the chain of command goes from the top
(e.g., the CEO or manager) down (e.g., entry-level and low-level
employees), and each employee has a supervisor.
Pros
 Better defines levels of authority and responsibility
 Shows who each person reports to or who to talk to about

specific projects
 Motivates employees with clear career paths and chances for

promotion
 Gives each employee a specialty
 Creates camaraderie between employees within the same

department
Cons
 Can slow down innovation or important changes due to

increased bureaucracy
 Can cause employees to act in interest of the department

instead of the company as a whole
 Can make lower-level employees feel like they have less

ownership and can’t express their ideas for the company
2. Functional org structure
Functional org chart example (click on image to modify online)
Similar to a hierarchical organizational structure, a functional org

structure starts with positions with the highest levels of
responsibility at the top and goes down from there. Primarily,
though, employees are organized according to their specific skills
and their corresponding function in the company. Each separate
department is managed independently.
Pros
 Allows employees to focus on their role
 Encourages specialization
 Help teams and departments feel self-determined
 Is easily scalable in any sized company
Cons
 Can create silos within an organization
 Hampers interdepartmental communication

 Obscures processes and strategies for different markets or
products in a company
3. Horizontal or flat org structure
Horizontal or flat org chart example (click on image to modify online)
A horizontal or flat organizational structure fits companies with few

levels between upper management and staff-level employees. Many
start-up businesses use a horizontal org structure before they grow
large enough to build out different departments, but some
organizations maintain this structure since it encourages less
supervision and more involvement from all employees.
Pros
 Gives employees more responsibility
 Fosters more open communication
 Improves coordination and speed of implementing new ideas
Cons
 Can create confusion since employees do not have a clear

supervisor to report to
 Can produce employees with more generalized skills and

knowledge
 Can be difficult to maintain once the company grows beyond
start-up status
Market-based divisional org chart example (click on image to modify online)
4. Divisional org structure
In divisional organizational structures, a company’s divisions have

control over their own resources, essentially operating like their own
company within the larger organization. Each division can have its
own marketing team, sales team, IT team, etc. This structure works
well for large companies as it empowers the various divisions to
make decisions without everyone having to report to just a few
executives.
Depending on your organization’s focus, there are a few variations

to consider.
Market-based divisional org structure
Divisions are separated by market, industry, or customer type. A

large consumer goods company, like Target or Walmart, might
separate its durable goods (clothing, electronics, furniture, etc.)
from its food or logistics divisions.
Product-based divisional org chart example (click on image to modify online)
Product-based divisional org structure
Divisions are separated by product line. For example, a tech

company might have a division dedicated to its cloud offerings,
while the rest of the divisions focus on the different software
offerings—e.g., Adobe and its creative suite of Illustrator,
Photoshop, InDesign, etc.
Geographical divisional org chart example (Click on image to modify online)
Geographic divisional org structure
Divisions are separated by region, territories, or districts, offering

more effective localization and logistics. Companies might establish
satellite offices across the country or the globe in order to stay close
to their customers.
Matrix org chart example (click on image to modify online)
Pros
 Helps large companies stay flexible
 Allows
for a quicker response to industry changes or customer
needs
 Promotesindependence, autonomy, and a customized

approach
Cons
 Can easily lead to duplicate resources
 Canmean muddled or insufficient communication between

the headquarters and its divisions
 Can result in a company competing with itself

5. Matrix org structure
A matrix organizational chart looks like a grid, and it shows cross-

functional teams that form for special projects. For example, an
engineer may regularly belong to the engineering department (led
by an engineering director) but work on a temporary project (led by
a project manager). The matrix org chart accounts for both of these
roles and reporting relationships.
Pros
 Allowssupervisors to easily choose individuals by the needs of

a project
 Gives a more dynamic view of the organization
 Encourages employees to use their skills in various capacities

aside from their original roles
Cons
 Presents
a conflict between department managers and project
managers
 Can change more frequently than other organizational chart

types
6. Team-based org structure
Team-based org chart example (click on image to modify online)
It’ll come as no surprise that a team-based organizational structure

groups employees according to (what else?) teams—think Scrum
teams or tiger teams. A team organizational structure is meant to
disrupt the traditional hierarchy, focusing more on problem-solving,
cooperation, and giving employees more control.
Pros
 Increases
productivity, performance, and transparency by
breaking down silo mentality
 Promotes a growth mindset
 Changes the traditional career models by getting people to
move laterally
 Values experience rather than seniority
 Requires minimal management
 Fits well with agile companies with Scrum or tiger teams
Cons
 Goes against many companies’ natural inclination of a purely
hierarchical structure
 Might make promotional paths less clear for employees
7. Network org structure
Network org structure example (click on image to modify online)
These days, few businesses have all their services under one roof,
and juggling the multitudes of vendors, subcontractors, freelancers,
offsite locations, and satellite offices can get confusing. A network
organizational structure makes sense of the spread of resources. It
can also describe an internal structure that focuses more on open
communication and relationships rather than hierarchy.
Pros
 Visualizes
the complex web of onsite and offsite relationships
in companies
 Allows companies to be more flexible and agile
 Give more power to all employees to collaborate, take
initiative, and make decisions
 Helpsemployees and stakeholders understand workflows and
processes
Cons
 Can quickly become overly complex when dealing with lots of

offsite processes
 Can make it more difficult for employees to know who has
final say
Consider the needs of your organization, including the company

culture that you want to develop, and choose one of these
organizational structures.

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Types of organizational

Hierarchical org chart example (click on image to modify online)

 Better defines levels of authority and responsibility

 Shows who each person reports to or who to talk to about

 Motivates employees with clear career paths and chances for

 Gives each employee a specialty

 Creates camaraderie between employees within the same

 Can slow down innovation or important changes due to

 Can cause employees to act in interest of the department

 Can make lower-level employees feel like they have less

Functional org chart example (click on image to modify online)

Similar to a hierarchical organizational structure, a functional org

 Allows employees to focus on their role

 Help teams and departments feel self-determined

 Is easily scalable in any sized company

 Can create silos within an organization

 Hampers interdepartmental communication

3. Horizontal or flat org structure

Horizontal or flat org chart example (click on image to modify online)

A horizontal or flat organizational structure fits companies with few

 Gives employees more responsibility

 Fosters more open communication

 Improves coordination and speed of implementing new ideas

 Can create confusion since employees do not have a clear

 Can produce employees with more generalized skills and

Market-based divisional org chart example (click on image to modify online)

4. Divisional org structure

In divisional organizational structures, a company’s divisions have

Depending on your organization’s focus, there are a few variations

Divisions are separated by market, industry, or customer type. A

Product-based divisional org chart example (click on image to modify online)

Product-based divisional org structure

Divisions are separated by product line. For example, a tech

Geographic divisional org structure

Divisions are separated by region, territories, or districts, offering

 Helps large companies stay flexible

 Promotesindependence, autonomy, and a customized

 Can easily lead to duplicate resources

 Canmean muddled or insufficient communication between

 Can result in a company competing with itself

A matrix organizational chart looks like a grid, and it shows cross-

 Allowssupervisors to easily choose individuals by the needs of

 Gives a more dynamic view of the organization

 Encourages employees to use their skills in various capacities

 Can change more frequently than other organizational chart

Team-based org chart example (click on image to modify online)

It’ll come as no surprise that a team-based organizational structure

7. Network org structure

Network org structure example (click on image to modify online)

 Can quickly become overly complex when dealing with lots of

Consider the needs of your organization, including the company

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