Major Organizational Structures Explained

The idea of organization structures comes from scientific management. It is a way to systematize work. However, the essential elements which make them so popular lies in the assumptions that the productivity of employees can only be guided by the management. Another assumption is that there can be a best organizational structure which eliminates any supposed problem. Later many other theories followed, giving rise to changes in the views. Organizational structures can be identified in the following ways:

Simple Structure

This is also known as flat organizational structure. Small businesses tend to adopt it. Within the flat structure, employees are not divided, but grouped in one level. This makes the structure somewhat informal, allowing them to have freedom to control some aspects of their work. What they do in their job can vary, but it does not involve specialization.

Meanwhile, all important decisions are taken in centralized manner and the one responsible for it is the business owner himself. They come in quite quickly because he relies on no other boss except himself. Another reason is the direct communication between him and his employees.

A good example of simple structure is an independent retail store. The store owner is the manager. He takes decisions and may sometimes directly work with the employees. They are all together under the same roof. A lot of multitasking is involved here. While some are on the floor the rest are behind cash register. If given more freedom they can switch the roles.

Flat organizational structure tends to provide very little specialized skills to the employees. For this reason, in their future jobs requiring some form of specialization, their performance in it may not prove to be valuable. At the same time, their boss is the busiest person, for he has to handle both the top and bottom levels. Sometimes he has to be out and that time if an emergency case occurs demanding his attention, employees may find themselves in murky water.

Functional Structure

This is the structure that came out of the views of scientific management. Functional structure is very much driven by status and promotions. Its main focus is the set of materials that make up a profession. In other words, functional structure has to do with putting together all the employees who have similar professions or jobs into functional categories. However, decisions here go from top to bottom and information from bottom to top.

Example of functional structure would be a president commanding from the top and below him are the departments of vice president of finance, operations, personnel, marketing and so on.

Each functional division has its own power. Within their departments specialized people of similar professions work. But the overall objective of the structure is to show as well as weigh important role of each division in the business and its strategies. Not all businesses, however, are suitable for it. Functional structure is beneficial in those that have only one product which will not have competition for a long time. To put it differently, the product will stay in the marker for years. Additionally, the culture of the organization is such that it is comfortable with the command and control system. Employees, on the other hand, are highly specialized. Functional structure is very common in public sectors.

Divisional structure

Typically, found in big companies, divisional structure is created through the departmentalization such as:

Product or product line: This is based on unifying employees in each division based on the specific products they are working on. Think about separate research and development department for each different product. Divisional product structure is chosen when the company knows that its products do not have a very long life in the market. Another would be demand of distribution channels or operations. The company must also take into account if it is okay to let certain job function independently.
Geography: When a company does business in many states or countries it employs people of such locations. So the division here is based on geographic locations of the business and the employees working in each. This structure can also be chosen when the business wishes to be known as local to each state or country.
Market: A company can have more than one market. Under such circumstances, each needs its own set of employees to keep the targeting of its customers easy.
Process: Process division occurs when there is a difference between how each process must be run. The examples can be the difference between internal and external process. External one comes from responding to customer queries. But then there is also business to business purchasing. That is internal. In order to take advantage of this structure, there is a need to identify each process carefully.
Customer: Sometimes a company needs to be known as customer focused. That is when this structure comes in handy. In order to benefit from customer structure, it is important to identify the different customer segments. A good example of customer structure is a bank where segments are established by categorizing customers by the kind of account they have such as personal, student loan and business accounts. Under such circumstances, departments are divided in a way that they can respond to each segment with the right knowledge about each account.

The company has the freedom to choose any of the above, but the main decision is based on demand of the situation. Each division has its own manager. He has the partial right to take certain decisions. Beneath him is the department head who must report to him.

However, the main power to control and synchronize the activities of all the divisions here resides in the hands of the central headquarters. Although the divisions may have some independent power their performance is measured by the headquarters. This calls for high amount of discretion from the managers of the divisions.

Matrix Structure

It is the combination of both functional and product structures. Its objective is to give consumers a wide variety of alternatives by utilizing specialized employees. At the same time, it can be used by businesses which have intense projects requiring a wide variety of skills from different professional fields.

However, instead of one, there are three matrix structures.
Functional matrix: It is extremely similar to functional structure, but the difference lies in the role of a project manager who facilitates the different activities taking place in a wide variety of departments for the project. He also has the partial right to control.
Balanced matrix: The word balance here is connected to the authority given to both the project manager and other managers responsible for different functions. At face value, it may seem fair, but underneath there might be clashes of ego and decisions looking murky due to difference in their thinking process about the projects. It is also important to emphasize that this structure partially inhibits the project manager’s power over finance needed to run them.
Project matrix: Here the roles of the different managers are separated. While the project manager has authority over the project, the functional managers fulfill their duty by overseeing the technical side of the project. Each has their own employees also. Consequently, it is far easier for activities to run smoothly.

Network Structure

This structure is brought to life typically through the formation of teams which have employees coming from a wide variety of professions. They have the right skill and knowledge to work on the product or service at a good speed without sacrificing the efficiency. The decision making within the networked structure tends to be extremely decentralized because the teams are actually from many different organizations which have their own purposes and strategies.

The main company chooses to involve them in the business to expedite the delivery of its products or services. This should signal that network structure is used by businesses focused on products or services requiring high speed in operations or intensive innovation, but allow different methods of working on them. How to identify a network structure? Imagine for a moment that you wish to build a house. You hire a contractor for it. Now to fulfill his job requirement, he would include other organizations such as material suppliers, construction workers, architect and so on. So the chart for this would look like the one below.

The main aim of organizational structure is to validate activities to be done by different employees and departments. In addition to this, it establishes who has the power to make decisions, accept reporting and synchronize the activities to achieve results for the overall vision, mission and objectives of the company. Below is a comparison of how each does under several categories of business elements.