The pyramid organizational structure is a popular type of leadership used in business. It's natural because there are far fewer leaders than workers, so when all are listed on an organizational chart, it is shaped like a pyramid. There are other common types of organizational structures that you might want to consider before settling on the classic pyramid, however, and some people suggest that flipping the pyramid upside down instead may be an even better way to operate.

Understanding the Pyramid Business Structure

Most small businesses are formed by someone with the big idea who is at the top of the pyramid, most likely as CEO. All of the company's other employees are underneath him on the organizational chart. Directly under him are other executives, like the president, chief operating officer and chief financial officer. Next are the vice presidents, who are typically each in charge of a specific area or department, such as VP of sales, VP of communications and others.

There may be several other layers of managers and supervisors under the vice presidents, and each successive layer contains more people. You can visualize a pyramid shape starting from the point at the tip — the CEO — with the sides of the pyramid expanding wider with each lower level of workers. Staffers who produce the products, run machinery, design packaging, write promotional materials and many others make up the base of the pyramid, which is the widest and deepest section.

It's not a coincidence that the base — the heaviest part of the pyramid — contains the basic workers. While the CEO and other executives are important to the business, nothing is truly accomplished from start to finish without the workers. There are many more workers than managers and executives, otherwise the organization is said to be "top heavy", meaning that it has too many bosses telling people what to do compared to the number of workers doing the work.

Reasoning for Flipping the Pyramid

Now, picture the pyramid flipping upside down so that the entire base of workers is on the top and top leadership is on the bottom. It doesn't mean the executive team is unimportant, but it does mean that the workers are making many more of the decisions on a daily basis. Instead of top executives making the decisions, which filter down to the workers, flipping the pyramid gives the workers more power to make most of their own decisions without checking with management every time.

Putting the workers on top also shows that the company values its workers and trusts them to make good decisions. The theory is that the experiences your customers have with your company determine whether they continue to do business with you or not, and it's your workers who interact with customers. The CEO and the rest of the leadership team still set the direction for the company, but they rely on the workers to follow through by making decisions that keep customers happy.

Using this model, there is often less salary disparity between the executives and workers because when workers are better paid, they understand that the company values the jobs they do.

Examining Other Organizational Structures

Comparing other types of organizational structures to the pyramid structure reveals how different organizational structures can be. For example, two other popular structures are the matrix and the flat structures.

  • Matrix structure: This structure groups people by project rather than by departments or strict hierarchy. Workers are listed under their project manager but also with those with whom they interact who may be in other departments. The organizational chart appears more interactive than the top-down pyramid. Although you can see who reports to whom, it isn't as fixed and finite but instead encourages interaction and communication with others regardless of their titles.

  • Flat structure: A flat organizational structure shows every employee in a straight line, all reporting to a manager. This does away with any sort of hierarchy, with everyone just focused on getting the job done. By depicting everyone as peers, all are encouraged to contact and work with whomever they need in order to get the job done well.

Smaller businesses may find methods like these that encourage cooperation and teamwork to be more beneficial than traditional hierarchy or the pyramid. They may also find them easier to implement than they may be for larger businesses.