A small-business owner finding success can’t go on juggling all the tasks a growing business requires. Hiring employees means creating formal jobs and organizing the people who do them. The way they’re organized is the company’s organizational structure. The shape of the structure affects how employees accomplish work, since it determines communication channels, working relationships, and the ways that employees share resources. Knowing this, a wise owner chooses a structure that furthers employees’ efforts toward the company’s goals. The matrix and pyramid are two organizational structure shapes.


On paper, the matrix organizational structure forms a grid. Combining two different structures creates the grid. Typically, the functional structure -- another name for the pyramid -- is melded with a structure based on location, product or customer divisions. Functional departments such as engineering or marketing span the top of the matrix organizational chart. Divisions are arranged on the side. Drawing horizontal lines out from each division and down from each functional department creates the matrix. The intersections of horizontal and vertical lines represent employees who simultaneously serve both a division and department.


The functional structure gets its pyramid shape from its command hierarchy. The boss tops the pyramid. Beneath the boss sits some number of managers, ranked in rows according to power. Because jobs get less complex as power decreases, lower-ranking managers can supervise more people, widening the structure and giving it the pyramid shape. The pyramid’s base contains non-manager employees. A typical structure could feature the owner supervising managers of functional departments such as marketing. Those department heads may supervise the leaders of department sections such as market research and advertising. The section supervisors manage employees.


With its ranks of managers, the pyramid structure allows companies to exert control. Grouping employees by function promotes efficiency and saves money, since specialized resources can be shared. The pyramid structure also encourages functional expertise. Since the matrix is half functional, it shares some of these advantages, but has the added advantage of flexibility. Employees permanently answer to a functional department head, but can be deployed to divisional projects as needed. As employees from different departments come together to tackle these projects, interdepartmental communication and coordination improve.


Strong management control makes the pyramid rigid compared to the matrix, which can adapt to industry changes by redeploying employees. The pyramid’s control gives workers less opportunity for initiative and creativity than the matrix structure. Gaining flexibility does cost the matrix some efficiency. Meanwhile, matrix employees don’t enjoy a clear-cut chain of command. Each worker answers to two supervisors: a divisional manager and a functional manager. Conflicts of interest can erupt.


The functional structure’s management hierarchy makes it suitable for situations requiring authority. The military uses the pyramid. It’s a simple structure, which makes it also useful for small businesses organizing for the first time, especially if those companies only offer one product or service. Complex situations recommend the matrix structure. Several products, customer types or geographical markets can simultaneously benefit from different functional areas.