Organizational designers must group job activities in a way that promotes a company’s strategic goals, a process called departmentalization. The traditional approach departmentalizes according to like activities. Production functions end up in one department, as do sales or accounting functions. This results in a design called the functional organizational structure. The team-based approach creates groups by pulling together representatives from different activity areas, giving the team experts in different functional specialties. These differing approaches to departmentalization have company-wide affects, not only affecting structure, but also culture and the way a company accomplishes its business.

Mechanistic Versus Organic

Besides making decisions on departmentalization, designers must decide questions of authority, boundaries and chain of command. The decisions result in varying degrees of structural rigidity or mechanization. Most mechanistic is the functional organizational structure. It is strictly constructed, with locked-in jobs and departments, much oversight, many rules and a formal chain of command. The team organizational structure is loose and organic, growing out of the intersection of company needs and the environmental challenges a business faces. Teams may be semi-permanent or even just a temporary measure. Where the functional structure is rigid, the team-based structure is flexible.

Tall Versus Flat

To have the strict control that a mechanistic structure requires, the traditional functional structure relies on a management hierarchy. Employees form the company’s foundation, with managers overseeing operations. Middle management oversees operational managers. Additional management might be necessary, depending on a company’s complexity. Atop the organization sits a central authority in the person of a CEO or owner. On a chart, this setup forms a tall triangle. The team structure doesn’t use such a hierarchy — the bureaucracy would impede flexibility. Without management layers, the structure flattens.


Management makes the decisions in traditional structures. Lacking a management hierarchy, team-based companies take a different approach. They decentralize power, spreading it through their teams. Boasting a variety of functional experts, when decisions arise, the team defers to the member possessing the most relevant expertise. One manager oversees several teams. In a small business, the owner may be the single manager in charge of all the company’s teams.


The team and functional structures differ greatly in their best use. Stable environments call for mechanistic structures. The machine-like ability to efficiently churn out a product or service thrives in stable times. Unstable times reveal the downside of the functional structure -- its lack of adaptability. With the bureaucracy hindering innovation and creativity, designers turn from mechanistic to organic. In unpredictable times and settings, organic designs such as the team-based structure shine. Not only can teams be rapidly deployed, employees feel empowered to rise to challenges, creating a fertile ground for inspired solutions, products and services.