Depending on the size of your business, number of employees and your potential long-term growth in staff levels, you have several options -- such as flat, hierarchical, divisional and departmental -- for creating an organizational structure that’s right for you. Determining if a departmental structure will work in your business requires an understanding of your different choices.

Organizational Structure

An organizational structure helps companies staff properly, manage employees, create a chain of command and see to it that all functions are handled. Small businesses often start with a handful of employees, with the owner designating who does what and staff members reporting directly to the boss. As the business grows, this lack of structure can lead to confusion and turf wars, such as whether marketing directs sales or vice versa. Creating a formal organizational structure helps businesses operate based on their current needs as well as take on and manage new employees as the company grows.

Types of Structures

A flat organization is one without different levels, and employees have significant input into how they do their jobs. This is often the structure of startups and very small companies. A hierarchical structure has layers and is useful when employees have assistants or subordinates. For example, in a hierarchical structure, the marketing department might have a director who oversees a manager who oversees a coordinator. Using a divisional structure, companies divide responsibilities among different products, services or locations. For example, a company that makes footwear might divide its structure into men’s, women’s and children’s shoes, assigning marketing, HR and IT functions to each. A departmental structure divides the responsibilities of a business into different functions. Different departments fall under the management of the CEO, the CFO or the COO.


Common parts of a departmental structure include marketing, finance, human resources, information technology, administration and production. Some departments are subfunctions of others. For example, the marketing department might oversee separate sales, advertising, public relations and promotions functions or departments. The production department might oversee manufacturing, warehousing and shipping.

Organization Chart

An organization chart of a company with a departmental structure might include titles and department names. For example, the first title on the pyramid would be the CEO. Under that, the chart would show CFO, COO and often a director of marketing. Under the CFO, the accounting department and all of its titles or positions are listed. The COO might oversee production, administration and information technology. Titles within departments often include director or vice president, then manager, then coordinator.