The way a business organizes its employees depends on a number of factors, but the goal of the organizational structure is to enable employees to do their jobs effectively so the business can meet its objectives. Whether your business has a handful of employees or several hundred, it’s important to consider how to structure your organization so that it aligns with the values, goals and mission of your company.
Employees' jobs within a company are usually defined by what function they complete, who they report to and who reports to them. Characteristics of organizational structure can also take into account other elements such as seniority, experience, geography, specialty and department.
Top-Down Hierarchical Organizational Structures
Traditional organizational structures take a top-down approach, and there are a few variations on this kind of structure. In smaller companies, an executive can manage the entire staff, with a clear line of authority from himself to each individual. In medium and large companies, executives can oversee managers, who then oversee teams. The number of management layers depends on the size of the organization and the way the individuals are organized.
If employees are organized by geographic location, then a manager can oversee everyone in a single location. If employees are organized by function, then a manager may oversee all employees who complete a similar role within the organization. For example, all customer service representatives can be overseen by the same manager, and all marketing personnel can be overseen by a marketing manager.
In larger organizations that have diversified portfolios with different lines of business, employees can be organized by product, service or channel. This is called a product or divisional structure. For example, if a company makes jarred baby food and dry baby snacks, each product line could have its own traditional hierarchy instead of grouping all marketing personnel together.
Flat Organizational Structures
Characteristics of hierarchy are dependent on the functions within a company but also on the values of a company. In many start-up businesses, especially in the technology space, flat organizations are commonplace because the businesses value teamwork, equality and collaboration. In a flat organization, there are no hierarchies or managers. Sometimes, these kinds of organizations can also be called self-managed. All employees are seen as equal in flat organizations. This kind of structure is easier to implement in small businesses than it is in larger corporations.
Matrix Organizational Structures
The matrix structure is a complex one and varies widely from company to company. It groups employees based on multiple factors, usually function and division or product. It also sometimes takes geography into account. The matrix structure can also shift from project to project. For example, if a marketing employee is working on a new product launch, she may report to that product’s manager in addition to her marketing manager for the duration of the project.
Emerging Forms of Organization
There are a number of new characteristics of organizational structure in today's business environment. Halocratic structures use distributed decision making. People are organized into groups based on skill set and function, but there are no individual managers.
A flatarchy is a kind of organizational structure that is a combination of a traditional and flat model. Employees are organized in a dynamic way and can change to reflect the project on which they are working or goal they are trying to achieve.
A self-organizing structure is one of the forms of organization where employees group together on their own to accomplish a goal based on their values. In learning organizations, managers don’t provide directives to their team members but instead offer new information and experiences that enable them to learn and build new skills.