Five Major Types of Organizational Structures for a Business


Some companies contract most work to outside parties, while others form teams, departments or divisions. By exploring the five major organizational structures, you'll be better equipped to choose the one that best fits your company's needs. The usefulness of each model will depend on your company's size, philosophy and function.

Functional Structure

Organizations that group positions by similar roles follow a functional structure. The structure follows a hierarchical model that includes clearly identified roles, authority and promotional pathways. Employees in each department fill duties not covered elsewhere in the company, minimizing an overlap of tasks. You may divide work units by expertise, resources, skills and activities. For instance, your organization may include production, finance, human resources and marketing groupings.

Divisional Structure

The divisional structure is defined by the grouping of departments and is used by larger companies. The divisional structure follows a functional model within each division. Specialized departments help managers keep track of the products and activities the company develops. Your departments might distinguish between customer service, production and geographic location. Managers can focus resources and outcomes on their specific departments. The structure helps managers monitor performance more easily than some other models.

Matrix Structure

The matrix structure combines the specialization provided by a functional structure and the focus provided by a divisional structure.Employees are part of teams that connect functional roles with divisional roles. Each employee belongs to at least two formal groups; one is a functional group, and the other is a project, product or program team. Employees also report to two bosses – a functional group boss and a team boss. The structure increases employee motivation and allows training across functional areas.

Team Structure

Team structures organize each function into an objective-based group. Members from each department work together to solve problems and find opportunities. Employees might be involved with product development teams or a diversity task force. The team structure can help remove barriers between departments and foster effective problem-solving relationships. It can also motivate employees and increase decision-making times.

Network Structure

In a network structure, your organization would rely on other organizations to perform important roles. For instance, you may employ an accountant, website administrator or security personnel on a contractual basis. You reduce your company's overhead costs because you don't need to hire as many staff members. But you also lack control in the outcome because you rely on contractual workers to complete critical work.