3 Basic Types of Organisational Structure

With the growth of any company the reporting structure must change. Three common systems of hierarchy have emerged among the companies we work with. We’ve listed them below with a brief explanation:

1. Functional

A functional structure is simply one that divides a company by specialty. Typical departments are HR, sales, marketing, customer service, accounting, etc. Employees are grouped together based on the similarity of the activities they perform.

Some obvious advantages of this type of organization are that the various groups can concentrate on their particular area of focus and learn, grow and improve from their proximity to each other. It also avoids situations where work is being duplicated because it’s easier to assign or distribute work within the group.

One criticism of this type of structure is that groups can become siloed and a lack of interaction between departments can sometimes lead to a lack of cooperation if interdepartmental relations are not properly cultivated.

2. Divisional

A divisional structure can divide a company into different products or services of that company. For example, a company like Ford might be broken down into market segments like trucks, SUVs, hybrids etc. They operate independently as separate profit centers for the business.

Divisional structures may also make sense for companies that are geographically dispersed so the company can serve the specificities of that market with its own self-contained product, accounting and legal expertise. An advantage of this structure is that management is responsible for their units and divisions and those that are not performing are easily identified and removed without greatly affecting the overall performance of the organization. Having divisions devoted to certain specific products, services or geographies hold the advantage of being able to serve the customer with a focused, specialized fit to their needs.

3. Matrix

Matrix structures can be more complex. Employees can have multiple bosses. Perhaps one boss for a specific project and another for the division they originally report to. The matrix structure is flexible, pulling upon the strengths of each employee and placing them where they are most needed in the organization. Of course, having multiple bosses can sometimes result in confusion particularly when conflicting priorities and responsibilities are at play. Visualizing the dotted line relationships in an org chart can be helpful in identifying and resolving those confusions.

All three types of these structures can be managed and visualised using our organisation charting software, OrgChart Platinum and OrgChart Now. Schedule a free demo to learn how to optimise the company structure you have in place or predict the future with new organisational structures using “what-if” scenario planning. Would a new structure work for your company?