How to Get the Most Out of Your Organizational Structure

A group of employees meet virtually (via video conference) with a colleague.

Every business, department, and team has an organizational structure—the difference lies in how well it utilizes the team’s strengths to accomplish its goals. A functional organizational structure is built with intention, awareness of the different models, and the knowledge to decide what org type will best suit.

We will explore the following types of organizational structures so you can decide which is best for your business:

  1. Hierarchical
  2. Functional
  3. Horizontal or Flat
  4. Divisional (market-based, product-based, geographic)
  5. Matrix
  6. Team-based

1. Hierarchical Org Structure

The typical org chart looks like a pyramid, with C-level executives at the top drawing lines down to middle management and finally to staff-level employees. Hierarchies better define authority and responsibility (as well as direct reporting relationships) and provide clear career paths and chances for promotion.

Hierarchies can slow down innovation due to increased bureaucracy and can lessen the engagement for lower-level employees, who may feel less ownership. Well-defined management roles are a must, as the business of a hierarchy is accomplished through worker and workforce management. It’s important to keep account of who reports to whom, and the deliverables for which each party is responsible.

2. Functional Organizational Structure

Like a hierarchical structure, a functional org structure puts positions with the highest levels of responsibility at the top and goes down from there. Employees are organized according to their specific skills and corresponding functions in the company. A functional organizational structure lets workers focus on their roles and encourages specialization.

This approach can create informational and departmental silos and may obscure processes or strategies between teams. Value interdepartmental transparency above all things, and make sure communication is highly valued on an ongoing basis. Stay on the lookout for any skills and talents that lie outside this structure, so that you can use them effectively.

3. Flat Org Structure

A horizontal or flat organizational structure fits companies that don’t have a lot of levels between upper management and workers. Startups often use a flatter structure before they grow large enough to build out different departments; some organizations even maintain it. A flat structure encourages less supervision and more involvement from all employees, giving them more responsibility and fostering communication, which improves coordination and speed.

Flat structures can create confusion, and it’s difficult to maintain as the company scales beyond startup size. Keep it simple, small, and self-actualized. This means hiring people with the experience and skills to take on major responsibilities without oversight. Keep an eye out for possible job title changes, raises, and other documentation of workers’ career goals and achievements.

4. 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. This keeps large companies flexible, allows for quicker response time, and promotes independence.

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

  • Market-based. Divisions separated by market, industry, or customer type. Walmart might separate durable goods (electronics, furniture) from its food or logistics divisions.
  • Product-based. Divisions separated by product line. A tech company might have a division for its cloud services, while other divisions focus on different software offerings.
  • Geography-based. Divisions separated by region or districts, offering more effective localization and logistics. You might establish satellite offices across the U.S., or the globe.

Clear delineations between divisions’ areas of responsibility will help limit the amount of effort, resources, or strategies that may be duplicated. Equity in resource management and expenditures keeps things moving smoothly.

5. Matrix Organizational Structure

This is a chart shaped like a grid, showing cross-functional teams made for special projects. An engineer could belong to the engineering department (led by an engineering director), but work on a temporary project (led by a project manager), and the matrix org chart accounts for both roles and relationships. It allows supervisors to select their teams by the needs of the project and encourages using skills in more and varied capacities.

Clear and open accounting for time is key, especially if employees are splitting their time between projects or departments, as this arrangement could create conflicts between department and project managers. Cross-functional projects require efficiency, dedication, and critical thinking, and should be formed with this in mind.

6. Team-Based Structure

A team org structure intends to disrupt the traditional hierarchy, focusing on problem-solving, cooperation, and giving employees more control. It increases productivity, performance, and transparency by breaking down the silo mentality and promoting a growth mindset. Valuing experience over seniority, team structures require minimal management.

  • Agile (Scrum) team structure. Rather than spending months developing a product based on original requirements, Scrum teams shorten the development cycle and iterate releases, getting feedback earlier in development and more often. The three distinct roles within the Scrum structure carry an equal voice: the product owner who shepherds the project, the Scrum master who drives team meetings, and the software developers themselves.
  • Tiger team structure. Tiger teams are formed to focus on high-profile, high-impact, mission-critical projects after the most likely solutions have been attempted. Tiger teams may be formed to address projects that are blocked, or for new projects in response to opportunities. Once the project is finished, the members of the tiger team return to their original roles.

The teams approach can come up against companies’ natural inclination toward forming a more classic hierarchy. Creating a Scrum team requires heavy buy-in from all stakeholders, as working in an agile environment takes some getting used to. Tiger teams are formed for one purpose, usually with severe time limitation, which means every teammate must be supported by management in their best and most critical work.

Build Your Ideal Team With the Right Organizational Structure

Choosing the right fit among the various organizational structures is key to operating at your full potential. For other ways to bring your company to the next level, let Monster show you how.