Traditional structures for the organizations come in four types Functional, Divisional, Matrix, and Flat organizational structure. Choosing an organizational structure that may work best for your company is a tedious task for entrepreneurs when they start a startup. It requires intensive information regarding different types of organizational structures and the way they are implemented. It is also likely that an organizational structure that suits the other company may not work out to be the best for you. Therefore, a thorough analysis of the working of the company as well as the relationship between people working in the company must be kept in mind when pursuing to locate the best type of organizational structure for the company. Lack of organizational structure in the company creates confusion among employees, results in a lack of creativity, and failure to recognize which roles belong to whom. Thus, organizational structures build the framework for the company to function on. Some of the types of organizational structures are mentioned below:
Functional Organizational Structure
A functional organizational structure falls under the category of a mechanistic organizational structure. It is one of the most common types of organizational structure that is followed by a majority of companies. A functional organizational framework relies on the idea that employees that share a common job practice in the company are categorized in the same department. For example, all the people who work in sales will work in the sales department. Whereas, people in marketing would be grouped. This is a pure skill-based system that may restrict employees working in a certain group from growing. However, on the up-side, this system allows for the increase in the efficiency of different functional groups. All in all, a functional organizational structure can be successful in institutions that are highly stable and have a predictable working environment.
Divisional Organizational Structure
A divisional organizational structure is more common with large companies operating at a large- scale or even globally. This type of structure divides the company into different divisions and then each of these divisions is further segregated into different departments functioning on their own as a separate entity. For example, in the case of a company that deals in various products and services may have separate divisions for each type of product. And then, each of those divisions will have a separate department for sales, marketing, finance, etc. A major advantage of this type of organizational structure is that each division is responsible for its finances and therefore, all the decisions can be made at a divisional level. Other than this, as there are different divisions responsible for different types of products, so the products are manufactures at a much faster rate. Therefore, it is much easier to gain customer feedback and adjust accordingly. On the other hand, there are several disadvantages to divisional organizational structure as well. One of them is that in this type of organizational structure, there is a communication barrier between different divisions. This may lead to every division working on its own with little to no connection among them.
Besides this, because of the presence of different departments, that are similar, within every division, the overhead cost may be high. This makes the divisional organizational structure more expensive than others. Another major drawback of this organizational structure is that it creates damaging competition between different divisions which may result in politics within the company.
Divisional Organizational Structure works best for large companies operating worldwide. This is because the customer needs may differ from place to place, this, working of different divisions under different pretense with a common goal may make sense.
Matrix Organizational Structure
This type of organizational structure is more complex than the previous two. It has communication that goes vertically as well as horizontally. In can be termed as a mix of both functional structure as well as divisional organizational structure.
Matrix organizational structure provides flexibility to the employees in the sense that there is cross-communication that exists within the company. For example, an assistant manager of a company may be assigned to tackle some other tasks in addition to his daily tasks. Therefore, he will have to report the findings and details of his other task with his new supervisor as well as dictate the daily activities to his former manager. This may also create some confusion between different people involved, thus, everyone must be well aware of their roles and responsibilities. An advantage of a matrix organizational structure is that there is an increased level of collaboration between different departments. This is the very good side of matrix structure that, allows the sharing of highly skilled resources between functional units and projects. This rise in communication is the driving force behind different people from different departments working alongside to attain the same goal. This results in people expanding their knowledge and skills that may ultimately lead to their professional growth. But there may be some conflicts born between two department managers and companies should address this problem with a proactive approach.
A matrix organizational structure may be termed as the best of both worlds. It is a fusion of functional and divisional structures which makes it more flexible for different companies to adopt. But, this type of organizational structure is not suitable for use in large organizations. The prospect of having to report to multiple bosses may give rise to confusion and complexity within the organization. This structure is good for large and complex projects.
Flat Organizational Structure
A flat organizational structure is a type of organic organizational structure. This type of organizational structure does not follow the usual hierarchy type of structure. Instead, it is planned out in a way that is more inclusive and makes the employees feel like they are closer to the management position. It is a system that is said to be more productive and encourages all the members of the organizations to take part in the decision-making process. In this type of organizational structure, there is great room for innovation and growth. This is the reason many high-end companies make use of this system and gain several benefits from it.
As with other organizational structures, this type of organizational structure also comes with some disadvantages. A major disadvantage of this system is that there is no clear way to reach an agreement in case of employees disagree over something because of lack of management figures. Therefore, for all the companies planning to go ahead with the flat organizational structure, they must prepare managers who specifically tackle such situations.
Waqar Hussain is the founder of The Business Goals. He writes about entrepreneurial strategies and is an SEO consultant by profession. He is a B.Com, GDM, and an MBA from the Australian Institute of Business.