How to Determine Organizational Structure Types

by Hunkar Ozyasar; Updated September 26, 2017

Two main types of organizational structures are hierarchical and flat. Hierarchical organizations are also known as "tall organizations" and are characterized by a large number of management layers. Flat organizations, on the other hand, tend to have fewer levels of supervisors between top management and the employees carrying out the daily tasks.

Step 1

Count the number of layers in the organization. Determine how many levels there are between the very top of the firm, usually the CEO or president, and the most junior employees, who only have bosses but no one under their direct supervision. Realize, though, that it is possible that certain areas in the organization have more layers than other areas. While sales has six layers, for instance, accounting could have only four. Study various departments and regions to obtain a better idea about the number of layers in various parts of the organization.

Step 2

Survey similar organizations. The number of layers in an organization is highly dependent on the industry as well as size. Consider an organization tall or hierarchical if it has significantly more layers than firms that are in the same type of business and are of comparable size. The larger the firm and the more specialized the tasks it carries out, the more layers it usually needs. Find businesses of comparable size and area of specialization for an accurate comparison.

Step 3

Compare the number of layers in your target organization to that of other similar firms in your sample. Compare, wherever possible, the same departments in your sample and target business. Determine how many layers the sales department has on average, for example, in other similar firms compared to your target company. If your firm generally has more layers than the average of similar firms in your sample, you are dealing with a tall organizational structure. If it has fewer, it is a flat organization.

Understand that flat organizations tend to be more nimble, they foster team spirit and employees tend to be more motivated. In tall organizations, however, management can better control workflow, finances and quality.

About the Author

Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.

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