7 Types Of Organizational Structures For Companies - Creately

In one of our previous articles, we discussed organizational chart best practices. Now let’s take a look at types of organizational chart structures which can be used in different scenarios. And you don’t have to worry about creating them too. Our organizational chart software supports all the types mentioned below.

Organizational Structure Types

1) Hierarchical Structure 2) Matrix Structure 3) Horizontal/Flat Structure 4) Network Structure 5) Divisional Structure 6) Line Organizational Structure 7) Team-based Organizational Structure Other Types of Organizational Charts

1) Hierarchical Structure

The hierarchical model is the most popular organizational chart type. There are a few models that are derived from this model.

In a hierarchical organization structure, employees are grouped with every employee having one clear supervisor. The grouping is done based on a few factors, hence many models are derived from this. Below are a few of those factors

• Function – employees are grouped according to the function they provide. The below image shows a functional org chart with finance, technical, HR, and admin groups.
• Geography – employees are grouped based on their region. For example, in the USA employees might be grouped according to the state. If it’s a global company the grouping could be done according to countries.
• Product – If a company is producing multiple products or offering different services it can be grouped according to the product or service.

These are some of the most common factors, but there are many more factors. You can find org chart examples for most of these types in our diagramming community.

This is the dominant mode of organization among large organizations. For example Corporations, Governments, and organized religions are hierarchical organizations with different levels of management, power or authority. 

Pros:

• Helps establish a clear line of authority and reporting within the organization
• Clarifies employee roles and responsibilities
• Establishes a clear career path for employees which can in turn keep them motivated
• Allows employees to be in-depth specialists as they are more likely to have niche positions

Cons:

• Slow decision-making due to the complicated chains of command
• A disconnect of lower-level employees from those of the top-level management
• Inconsistencies in communication due to the vertical and horizontal levels between teams
• Restricted information due to the very little downward flow of information to the lower-level employees

2) Matrix Structure

In a Matrix organizational structure, the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager to report to (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts).

For example, all engineers may be in one engineering department and report to an engineering manager. But these same engineers may be assigned to different projects and might be reporting to those project managers as well. Therefore some engineers might have to work with multiple managers in their job roles.

Pros:

• Helps eliminate traditional siloed communications barriers
• Improved decision-making due to the availability of two chains of command
• Allows employees to use their skills in different roles
• Better use of resources which leads to increased efficiency

Cons:

• May result in confusion regarding roles, responsibilities, and priorities
• Conflict of power between the project manager and the functional manager
• Blurred lines of accountability
• Large overhead costs due to employing several managers

3) Horizontal/Flat Structure

This is an organizational chart type mostly adopted by small companies and start-ups in their early stage. It’s almost impossible to use this model for larger companies with many projects and employees.

The most important thing about this structure is that many levels of middle management are eliminated. This enables employees to make decisions quickly and independently. Thus a well-trained workforce can be more productive by directly getting involved in the decision-making process.

This works well for small companies because work and effort in a small company are relatively transparent. This does not mean that employees don’t have superiors and people to report to. Just that decision-making power is shared and employees are held accountable for their decisions.

So in summary, when deciding on a suitable organizational chart, it is important to have an understanding of the current organizational structure of your company.

Pros:

• Fosters better communication and collaboration between team members
• More autonomy and responsibility to employees
• More transparency due to limited bureaucracy
• Because the chain of command is shorter, it allows for faster decision-making

Cons:

• Lack of opportunities for employee progression
• Risk of power struggles arising due to the lack of a formal system
• Employees may have a lower sense of accountability because they have one lead
• Risk of confusion because employees don’t have a clear supervisor

4) Network Structure

Network organizational structure helps visualize both internal and external relationships between managers and top-level management. They are not only less hierarchical but are also more decentralized and more flexible than other structures.

The idea behind the network structure is based on social networks. Its structure relies on open communication and reliable partners; both internal and external. The network structure is viewed as agiler than other structures because it has few tires, more control, and a bottom flow of decision making.

Using a Network organizational structure is sometimes a disadvantage because of its complexity. The below example of a network org chart shows the rapid communication between entities.

Pros:

• Promotes healthy competition, innovation, and collaboration
• Allows organizations to adapt quickly to changes in their environment
• Paves way for an environment that fosters healthy competition, innovation, and collaboration
• Smaller, streamlined teams help save costs and contribute to improved efficiency

Cons:

• Due to teams being independent and small, large-scale tasks may prove difficult to accomplish
• Without immediate supervision, network organizations may struggle with control over employees
• Can create an environment where employees compete in an unhealthy manner with each other to perform tasks
• When work is outsourced, secret information about the organization may get breached

5) Divisional Structure

Divisional types of organizational charts have their own division which corresponds to either products or geographies. Each division contains the necessary resources and functions needed to support the product line and geography.

Another form of divisional org chart structure is the multi-divisional structure. It’s also known as M-form. It’s a legit structure in which one parent company owns several subsidiary companies, each of which uses the parent company’s brand and name.

The main advantage of the divisional structure is the independent operational flow, that failure of one company does not threaten the existence of the others.

It’s not perfect either. There can be operational inefficiencies from separating specialized functions. An increase in accounting taxes can be seen as another disadvantage.

Creating org chart with pictures using Creately

Pros:

• Makes it much easier to assign responsibility for actions and results
• Works well in markets where there is high competition as local managers can quickly respond to changes in local conditions
• Tends to yield faster responses to local market conditions
• Helps build a culture that contributes both to higher morale and a better knowledge of the division’s portfolio

Cons:

• Multiple divisions add more overhead costs to the organization
• When a number of functional areas are spread among many divisions, it might lead to inefficiencies
• With skills being compartmentalized by division, it can be difficult to transfer skills or best practices across the organization
• Since each division may have its own strategic goal, it might not always align with the overall company strategy.

6) Line Organizational Structure

Line organizational structure is one of the simplest types of organizational structures. Its authority flows from top to bottom. Unlike other structures, specialized and supportive services do not take place in these organizations.

The chain of command and each department head has control over their departments. The self-contained department structure can be seen as its main characteristic. Independent decisions can be taken by line officers because of its unified structure.

The main advantage of a line organizational structure can be identified as effective communication that brings stability to the organization.

Pros:

• It is the simplest method of administration and is easy to understand and manage
• Since it’s easy to add or remove levels of management, this approach can be beneficial to companies that are constantly growing and changing
• Since the decision-making authority is concentrated at the top, it allows for faster decisions
• Ensures that everyone is well-aligned with formalized rules and procedures within a line organization

Cons:

• Being overly reliant on line officials may become an issue in instances where they aren’t available
• Line organizational structures are rigid and inflexible, as such they maintain discipline so rigorously that they can rarely change
• Might create a culture of favoritism based on relationships or friendship
• Since the department manager is concerned only with the activities of his own department, employees are only skilled in tasks of their own departments

7) Team-based Organizational Structure

Team-based organizational structures are made of teams working towards a common goal while working on their individual tasks. They are less hierarchical and they have flexible structures that reinforce problem-solving, decision-making, and teamwork.

Team organization structures have changed the way many industries work. Globalization has allowed people in all industries around the world to produce goods and services cooperatively. Especially, manufacturing companies must work together with suppliers around the globe while keeping the cost to a minimum while producing high-quality products.

Pros:

• Communication between employees is much more free-flowing and effective
• Since communication is more efficient, information flows faster leading to quicker problem-solving
• Allows employees from different backgrounds and different skillsets to come together and learn from each other
• With higher flexibility, team-based organizations find it easier to adapt to a fast-changing industry environment

Cons:

• Personality conflicts within the team can negatively impact efficiency and group harmony
• Have less clear promotional paths for employees
• Since team accomplishments are rewarded rather than individual achievements, it might prove difficult to keep individual employees motivated
• Underperforming employees may hide behind those who are working hard and reap the benefits

Other Types of Organizational Charts

The ones shown above are the most commonly used types of Organizational Charts or organogram structure types as some call them. But there are plenty more models which have various advantages and disadvantages based on the situation and organization. You can easily experiment with different models using our org chart software.

Have questions? Feel free to ask them in the comments or you can reach to us via our social media channels.

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