In the movie Modern Times (1936), we see Charlie Chaplin play his iconic Little Tramp character. The story is about the industrial revolution and how Chaplin, a factory worker is fired for his behavior. The factory is a testimony to the fact that organizations depend on structure and discipline.

Although the world continues to change since Modern Times, organizational structures continue to persist in different forms. Read on to learn more about different types of organizational structures and how they are instrumental to healthy business performance.


Why Do Organizations Need Structures?



What Are The Different Types Of Organizational Structure?



Navigating Various Types Of Organizational Structures



Finding The Best Structure


Why Do Organizations Need Structures?

An organization’s structure is directly related to its objectives. The more structured an organization is, the more efficiently it’s able to achieve its targets and drive business goals. You’ll find an organizational structure typically presented as a chart or a pyramid. It represents authority, responsibilities and relationships between various positions in the organization who interact and collaborate.

A formal organizational structure in management helps employees know who to report to in different situations. People are more accountable when responsibilities are clearly laid out. In short, a structure improves efficiency at all levels of an organization. When departments follow a certain structure, they know how to focus their time, energy and other resources towards improving productivity. A structure provides an organization with a roadmap—allowing opportunities for growth and career advancement.

If you still aren’t convinced of the need for an organizational structure in management, here are a few advantages highlighting its importance:

  • Clarity Of Authority

A structure specifies who reports to whom, allocating authority and establishing accountability. It helps everyone understand what their role entails and who is responsible for what.

  • Effective Communication

By grouping people, departments and functions, an organizational structure facilitates communication between various groups. People who have common problems can solve them easily as a clearly-defined structure enables faster communication.

  • Power Of Decision-Making

Not every organizational structure relies on a traditional method of power distribution. A few organizational structures use a decentralized system of power distribution—where decision-makers are present at various levels. Managers have the autonomy to step up and decide what’s best for their functional unit.

  • Innovative Thinking

An organizational structure allocates people to different functional units or departments, often where they can specialize and grow in their fields. By establishing well-defined patterns of authority and responsibility, the structure stimulates creativity and innovative thinking. People have the opportunity to expand their knowledge base and skill set.

  • Growth And Development

A structure is essentially a framework within which an organization functions. When there’s flexibility, it helps to overcome challenges and creates opportunities for development and growth. It encourages an organization to increase activities, facilitating growth—both at an organizational and individual level.

What Are The Different Types Of Organizational Structure?

Various types of organizational structures can be broadly categorized into mechanistic and organic. A mechanistic structure represents a top-down hierarchical approach while an organic structure uses a more flexible approach. Here is a break-down of both the structures and the types of businesses that are suitable for each.

  1. Mechanistic

Also known as a bureaucratic structure, such organizations are rigid when it comes to power distribution. High centralization, formalization and specialization are the basic tenets of these organizations. They also use specific standards and practices for decision-making. In other words, departments have well-defined roles and functions, not allowing much flexibility.

However, despite its inflexibility, the chain of command is clear and every individual is accountable for their own actions. Everyone knows what’s expected of them and they know who to reach out to because the positions are so well-defined.

  1. Organic

Also known as a flat structure, organic structures make room for flexibility. There is a decentralization of power, loose departmentalization and low specialization. Teams aren’t designed to do particular tasks but they take on responsibilities that are urgent and need prioritization. It’s much less formal, compared to a mechanistic structure. This type of organizational structure uses an ad-hoc approach for business needs and expectations.

While the chain of command isn’t always clear in such organizations (difficult to understand who you should report to), the flexibility allows for faster communication and efficient collaboration. It encourages individuals to try new things as it gives them more autonomy and opportunities to engage in decision-making.

You can also view both mechanistic and organic structures as two ends of a spectrum. While a few organizations fall on either side, others have a combination of features.

Navigating Various Types Of Organizational Structures

As a business owner or decision-maker at your organization, you probably think about ways to make the best of the existing structure. Here are the common types of organizational structures; consider their advantages and disadvantages before you implement structural changes.

  1. Hierarchical Structure

This type of organizational structure is the most common one. There is a top-down approach and the chain of command goes from the top i.e., executive level to down i.e., entry-level and junior employees. The hierarchical organizational chart looks like a pyramid, with senior managers supervising junior employees.

Its Advantages:

  • The different levels of authority and responsibility are clearly laid out

  • Everyone has clarity about who to talk to about projects and who to report to

  • Creates clear career paths for employees as they specialize in particular fields

  • Encourages communication within the same department as there is an easy flow of information

  • Provides everyone with a specialty

Its Disadvantages:

  • Increased bureaucracy can discourage people from thinking outside the box, therefore creating echo chambers

  • Departments may focus too much on driving team goals instead of the overall objectives

  • Junior employees have very little authority and autonomy, preventing them from expressing their thoughts and ideas freely

  1. Circular Structure

It’s nothing like the other organizational structures because it uses a circular approach for power distribution. Nonetheless, it continues to rely on a hierarchy, with higher-level employees occupying the inner rings of the circle and junior or entry-level employees occupying the outer rings of the circle. Leaders and executives in the center spread their ideas outward, instead of a top-down approach. The chain of command flows inside out.

Its Advantages:

  • It’s meant to encourage a free flow of information across various levels of an organization

  • As it distributes authority in a circular manner, every division looks like a part of a whole, therefore overcoming the challenges of a traditional hierarchy

Its Disadvantages:

  • It’s highly likely that a new employee will get confused about the division of authority; they may find it difficult to figure out who they have to report to

  • Ambiguity can often lead to chaos and there is a high chance of miscommunication; this will further affect an organization’s productivity and efficiency

  1. Network Structure

Several modern-day organizations have their functions under one roof. When your organizational workflow is influenced by multiple vendors, freelancers, subcontractors and offsite locations, you have a network structure. It helps organizations evenly distribute and track external resources more carefully. For example, a marketing team depends on an agency for its copywriting and graphic designing work. However, a network structure also defines internal structures that form a complex web of functions—multiple teams working collaboratively.

Its Advantages:

  • Allows organizations to be agile and flexible

  • Encourages employees to take initiatives, make decisions and collaborate with each other

  • Helps everyone (all the stakeholders) understand workflows and function in an organized manner

Its Disadvantages:

  • Has the potential to quickly become confusing and chaotic because of the multitudes of functions (both onsite and offsite)

  • Unless monitored well, depending on multiple vendors and freelancers can be costly

  • The presence of so many people and factors can make it difficult for decision-makers who have a final say

  1. Team Structure

In this type of organizational structure, you will find a decentralized but formal system that encourages collaboration. Department heads collaborate with employees from other departments. In other words, people with different specializations come together to form a temporary team and complete certain projects. A team structure focuses on cooperation and problem-solving.

Its Advantages:

  • No compartmentalization means increased transparency, productivity and growth across multiple departments

  • It stresses the importance of employee experience, rather than hierarchy and seniority

  • It encourages creativity and innovative thinking beyond areas of specialization, breaking down silos

Its Disadvantages:

  • Can be confusing for employees because of a lack of authority and direction

  • Employees can get discouraged to work harder because it minimizes the importance of a corporate ladder

  1. Projectized Structure

A few organizations rely heavily on projects such as technology solutions, infrastructure development and contract-based research. Such organizations deliver their services to clients and collaborate only contractually.

A new contract is a new project for them and they will form new project teams accordingly. The teams exist only until the end of the project. Project managers act as supervisors in addition to being decision-makers and resource-allocators.

Its Advantages:

  • There is an efficient flow of information and decision-making as there is a clear hierarchy

  • The sense of urgency of project completion acts as a motivator for individuals

  • It improves employee versatility and flexibility as they work on multiple areas

Its Disadvantages:

  • Project deadlines are usually inflexible, making it a stressful situation for employees

  • A project manager has too much power and other individuals have very little autonomy to suggest ideas or solutions

  • There isn’t any specialization, minimizing long-term skill development opportunities

Finding The Best Structure

Just like one size doesn’t fit all, one type of organizational structure isn’t suitable for every business. Every type has its own advantages and disadvantages. You need to carefully consider its features before determining the most suitable structure for your organization. Even if there is an existing structure, you can switch to another one that benefits your organization and helps it grow.

To determine which structure is Cinderella’s shoe (i.e., the perfect fit), take time to understand how your organization operates. Harappa Education’s Navigating Workplaces course will help you dig deeper and reflect on workplace culture and power hierarchies. The Stakeholder Map and Power Structure framework in particular will help you identify the various decision-makers at work. Evaluate what works for your organization and identify the structure that’ll help it grow. So, find your Cinderella’s shoe to establish a structure that works for your goals!

Explore Harappa Diaries to learn more about topics related to the COLLABORATE Habit such as What is Organizational StructureOrganizational CultureDelegation of Authority & Organizational Behavior to understand organizational culture and needs.

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