Organizational structure pertains to the way a company arranges its employees and their positions. For example, presidents usually sit at the top of an organization, followed by vice presidents then directors. Managers, in turn, usually report to directors. The main purpose of organizational structure is to create an environment that is conducive to fostering communication and completing projects. Certain aspects of organizational structure better help companies accomplish their sales and profit goals.


One major aspect of organizational structure is height. The height of an organizational structure pertains to the number of levels between top management and lower-level employees. Many small companies use relatively flat organizational structures. Small companies may hire employees in various fields like accountants and engineers. Consequently, there may be few levels of management between executives and employees. Contrarily, larger companies will often employ tall organizational structures to better divide up the workload.

Span of Control

Span of control pertains to the number of employees of which an executive or manager is in charge. For example, a marketing vice president may be in charge of four directors: brand, advertising, public relations and marketing research directors. Each of the directors may have two managers reporting to her. Thus, the marketing vice president's span of control is four, while each director's span of control is two.


Most companies structure their organizations around various departments. These departments may be structured by product, function and even customers, according to For example, some department stores use product organizational structures. Managers in product organizational structures may be in charge of housewares, women's clothing or cosmetics. Companies that use a functional organizational structure will create departments around functions like marketing, finance and accounting. Customer-based organizational structures are used when a company services a wide variety of clients, such as consumers and corporations.

Hybrid Structures

Sometimes, a company will find it necessary to use a combination of organizational structures. Combined structures are called hybrid or matrix organizational structures. For example, a consumer products company may normally use a product organizational structure. However, the consumer products company may be introducing a new product. Therefore, they may need to form an ad hoc team of functional managers, such as marketing, brand and finance professionals. The ad hoc or temporary team may stay in place for a year or more, as success of the product is evaluated.