In choosing a company's organizational structure, management is searching for the one that will bring the company's moving parts together into a well-coordinated, efficient and effective unit. The choice is important because the right groupings of people and work facilitate business activities, allowing employees to accomplish the company's strategic vision and mission. Some groupings lead to a highly defined and mechanistic structure. Other ways of departmentalizing create a loose and more free-flowing organization. Possible structures include functional, divisional, matrix, team and network.

Functional Organization Structures

The functional organizational structure groups people by typical broad business activities -- marketing, finance, human resources and production -- then further subdivides as necessary. This results in a vertical, hierarchical structure. Advantages include efficiency and clear lines of authority, communication and accountability. Workers easily coordinate and communicate within their departments. Unfortunately, a departmental focus causes interdepartmental communication and coordination to suffer. Hierarchical layers mean ideas for change must brave a bureaucratic chain of command. Functional structures are the most controlled and mechanized but also the least nimble and adaptive to changes in their environment.

Divisional Organization Structures

The divisional structure groups workers according to geography, product line or customer. Each division operates as a separate company, complete with all the necessary functions, though sometimes upper management controls some functional areas such as finance. Duplication of roles across divisional units is one of this structure's drawbacks, as it means less efficiency and economy. Additionally, interdivisional rivalries and poor communication and coordination among units may result. However, the divisional structure lets each product line excel, better serves customer niches and can cater to geographic and cultural differences.

Matrix Organization Structures

The matrix structure blends the functional and divisional structures, gaining the advantages of both. Each person belongs to a functional department such as production, reporting to a boss above. Each person also answers to a project team or business unit. Teams benefit from the functional expertise of members, while the functional hierarchy exerts a measure of control and accountability for business activities. The downside is, of course, that everyone has two bosses with possible conflicting interests and loyalties. Divisional and functional power struggles can erupt.

Team Organization Structures

The team structure groups people according to a common objective. Each team is empowered to meet its goal, taking responsibility for results. Team participants hold the power. The company sheds its management layers, resulting in a horizontal rather than vertical structure. Without chains of command, decisions are made more quickly and the company becomes adaptable and able to move nimbly within the marketplace. Meanwhile, empowered individuals make for motivated, invested employees. The risk of the team structure lies in employee control. Workers must be trained to take on challenges.

Network Organization Structures

Rather than hiring workers for all of its business functions, a company using the network structure relies on outside companies. The networking company can employ few workers, while enjoying the reach, capacity and functionality of a larger business. It may, for instance, hire an outside manufacturer to produce its products. The network structure lowers costs and gains flexibility because it uses outside help according to need. Creating a network-based company, however, means losing control over whatever processes the company delegates to others.