Choosing the most optimal structure for your business is a crucial decision. Therefore, this article will assess different organizational structure types and how to best unlock the most value from them.
A good organizational structure helps a business run smoothly while a bad one will bring it to a grinding halt.
What Is an Organizational Structure?
It is a system of rules, policies guidelines designed to determine the workflow, delegation and cooperation behavior among employees. It helps assign the different duties of the various cadres of employees to improve action points.
Organizational structure is a depiction of a company’s strategy chosen to most effectively attain its objectives. A good organizational structure type that pairs with the right kind of company will, therefore, yield a high degree of efficiency, providing a competitive advantage.
What are Various Organizational Structure Types?
1. Hierarchical Structure
Many consider it the oldest form of an organizational structure known to modern man. It acts by utilizing layers to develop a top to bottom focused chain of command. Communication flows from the top downwards.
- The main strength of this approach is its ability to maintain a status quo desired by the leadership consistently. However, this becomes disadvantageous when facing more nimble and agile competitors who are utilizing more flexible organizational structure types.
- This structure most effectively supports linear work environments doing rote work with minimal necessary skill. Every employee is effectively considered disposable. Employees under this structure tend to feel a lack of opportunities to improve their abilities. This lack of talent growth opens the company up to potential talent drain as employees seek more enabling work environments.
- This is a resilient organizational structure. However, companies that use it will in the future face difficult times retaining a skilled workforce.
- The most typical example of a company adopting this structure is Walmart.
2. Flatter Structure
This structure is an attempt at moving away from being purely hierarchical and infusing a degree of agility in the company. Instead of exclusively one-way communication, more bi-directional communication thrives. Collaboration among employees and departments is encouraged to a greater degree through the elimination of as organizational layers.
- Agility takes root without having to undertake a costly total overhaul of the organizational structure type from purely hierarchical to merely flat. The result becomes a reasonable and desirable compromise by many companies today.
- One major risk this structure runs is the handling of multiple tasks by one employee, who reports to various managers. This risk overloading the workers or assigning them tasks for which they are not competent to handle.
- On the flip side, employees get more attention and room to improve their skills. The resulting growth ultimately helps the company in talent retention.
- Working methods considered outdated are either done away with in part or in full. The management views the employee as one who desires to work there and not one forced to work there. As a result adoption of more flexible work policies, partial or full elimination of traditional reviews and giving employees unexpected perks.
- A keen focus on the employee experience now becomes a core theme for the management team.
- Technology is leveraged much more under this model to enable staff and departments collaborate more effectively. Large and mid-sized companies favor this organizational structure type, especially in the technology sector.
- Examples include Apple, Cisco, and Facebook.
3. Flat Structure
The flatter structure may be a halfway compromise. Yet, the flat structure is another purist organizational structure type. Flat organizations are termed as self-managed organizations too.
- Flat structures eliminate managers and view all employees as equal. There are no job titles or positions. Due to no management in place, employees pick the assignments they desire to work on.
- As everyone is considered equal, everyone gets to see all the assignments due and choose their pick. This freedom can potentially create a sense of ownership and responsibility in an employee, leading to better results.
- On the flip side, employees who create their assignments are responsible for seeking finances for them and for building the necessary team to handle it.
- Informal command chains tend to develop in the absence of formal ones. These tend to rely on factors that may not be as strategic e.g. who has been at the company for the longest time. This pattern can affect the quality of work done. Cliques also tend to emerge among the staff, potentially obstructing collaboration and communication.
- This organizational structure tripe also tends to run the risk of allowing weak accountability. This loophole can usually end up breeding poor reliability among employees.
- Scaling this type of organizational structure is difficult. Small and mid-sized companies are the best-placed ones to adopt it. Newly formed businesses that are designed to be flat from the ground up also stand a good chance at scaling with this organizational structure.
- The most recognized and successful case after adopting this structure is by the gaming company Valve.
4. Holocratic Structure
This organizational structure type was created and founded Brian J. Robertson and is the most recent to emerge. At its core, holocracy enables distributed decision-making roles while still allowing the collective to do what they’re best at.
- Structure and hierarchy still exist to a degree. But it they center around departments as compared to people. Information is still accessible, and issues are handled company-wide during special meetings.
- The most notable cases of this organizational structure are Zappos and Medium.
- As a new organizational structure type, time is necessary to determine its efficacy.
- However, this is one of the organizational structure types that are likely work best for small to mid-sized companies and for larger enterprises that were oriented to be holocratic from the ground up.
To the Choice
Many organizational structure types have spawned over the years. Beginning with the traditional hierarchical sturdier all the way down to the emerging holocratic structure, we see different ways to orient a company for success.
The primary task of the senior leadership is to accurately identify their business DNA. Then, they must seek to marry it with the organizational structure that best suits them. As the future of work changes, it is imperative that senior management teams keep tweaking their organizational structure types to adapt well.