What are the 8 organizational structures?

In one of our previous articles, we discussed organizational chart best practices. Now let’s take a look at types of organizational charts structures which can be used in different scenarios. And you don’t have to worry about creating them too. Our organizational chart software supports all the types mentioned below.

Organizational Structure Types

1) Hierarchical Structure

The hierarchical model is the most popular organizational chart type. There are a few models that are derived from this model.

In a hierarchical organization structure, employees are grouped with every employee having one clear supervisor. The grouping is done based on a few factors, hence many models derived from this. Below are few of those factors

• Function – employees are grouped according to the function they provide. The below image shows a functional org chart with finance, technical, HR and admin groups.
• Geography – employees are grouped based on their region. For example in USA employees might be grouped according to the state. If it’s a global company the grouping could be done according to countries.
• Product – If a company is producing multiple products or offering different services it can be grouped according to the product or service.

These are some of the most common factors, but there are many more factors. You can find org chart examples for most of these types in our diagramming community.

A functional organizational structure chart, a variation of the hierarchical model

This is the dominant mode of organization among large organizations. For example Corporations, Governments, and organized religions are hierarchical organizations with different levels of management, power or authority. 

2) Matrix Structure

In a Matrix organizational structure, the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. It is a type of organizational management in which people with similar skills are pooled for work assignments, resulting in more than one manager to report to (sometimes referred to as solid line and dotted line reports, in reference to traditional business organization charts).

For example, all engineers may be in one engineering department and report to an engineering manager. But these same engineers may be assigned to different projects and might be reporting to those project managers as well. Therefore some engineers might have to work with multiple managers in their job role.

3) Horizontal/Flat Structure

This is an organizational chart type mostly adopted by small companies and start-ups in their early stage. It’s almost impossible to use this model for larger companies with many projects and employees.

The most important thing about this structure is that many levels of middle management are eliminated. This enables employees to make decisions quickly and independently. Thus a well-trained workforce can be more productive by directly getting involved in the decision-making process.

This works well for small companies because work and effort in a small company are relatively transparent. This does not mean that employees don’t have superiors and people to report. Just that decision making power is shared and employees are held accountable for their decisions.

So in summary, when deciding on a suitable organizational chart, it is important to have an understanding of the current organizational structure of your company.

4) Network Structure

Network organizational structure helps visualize both internal and external relationships between managers and top-level management. They are not only less hierarchical but are also more decentralized and more flexible than other structures.

The idea behind the network structure is based on social networks. Its structure relies on open communication and reliable partners; both internal and external. The network structure is viewed as agiler than other structures because it has few tires, more control and bottom flow of decision making.

Using a Network organizational structure is sometimes a disadvantage because of its complexity. The below example of network org chart shows the rapid communication between entities.

5) Divisional Structure

Within a divisional types of organizational charts has its own division which corresponds to either products or geographies. Each division contains the necessary resources and functions needed to support the product line and geography.

Another form of divisional org chart structure is the multi-divisional structure. It’s also known as M-form. It’s a legit structure in which one parent company owns several subsidiary companies, each of which uses the parent company’s brand and name.

The main advantage of the divisional structure is the independent operational flow, that failure of one company does not threaten the existence of the others.

It’s not perfect either. There can be operational inefficiencies from separating specialized functions. Increase in accounting taxes can be seen as another disadvantage.

Divisional organizational structure chart drawn with Creately

Creating org chart with pictures using Creately

6) Line Organizational Structure

Line organizational structure is one of the simplest types of organizational structures. Its authority flows from top to bottom.  Unlike other structures, specialized and supportive services do not take place in these organizations.

The chain of command and each department head has control over their departments. The self-contained department structure can be seen as its main characteristic. Independent decisions can be taken by line officers because of its unified structure.

The main advantage of a line organizational structure can be identified as the effective communication that brings stability to the organization.

7) Team-based Organizational Structure

Team-based organizational structures are made of teams working towards a common goal while working on their individual tasks. They are less hierarchical and they have flexible structures that reinforce problem-solving, decision-making and teamwork.

Team organization structures have changed the way many industries work. Globalization has allowed people in all industries around the world to produce goods and services cooperatively. Especially, manufacturing companies must work together with the suppliers around the globe while keeping the cost to a minimum while producing high-quality products.

Other Types of Organizational Charts

The ones shown above are the most commonly used types of Organizational Charts or organogram structure types as some call them. But there are plenty more models which have various advantages and disadvantages based on the situation and organization. You can easily experiment with different models using our org chart software.

Have questions? Feel free to ask them in the comments or you can reach to us via our social media channels.

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But not every company functions best with a hierarchical organizational structure. Many types of organizational charts exist because many types of organizational structures exist. 

Let’s go through the seven common types of org structures and reasons why you might consider each of them.

1. Hierarchical org structure

The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. It’s the most common type of organizational structure—the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor. 

Pros    

• Better defines levels of authority and responsibility

• Shows who each person reports to or who to talk to about specific projects

• Motivates employees with clear career paths and chances for promotion     

• Gives each employee a specialty     

• Creates camaraderie between employees within the same department

Cons

• Can slow down innovation or important changes due to increased bureaucracy

• Can cause employees to act in interest of the department instead of the company as a whole

• Can make lower-level employees feel like they have less ownership and can’t express their ideas for the company

2. Functional org structure

Similar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. Each separate department is managed independently. 

Pros

• Allows employees to focus on their role

• Encourages specialization

• Help teams and departments feel self-determined

• Is easily scalable in any sized company

Cons

• Can create silos within an organization

• Hampers interdepartmental communication

• Obscures processes and strategies for different markets or products in a company

3. Horizontal or flat org structure

A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees.

Pros    

• Gives employees more responsibility

• Fosters more open communication    

• Improves coordination and speed of implementing new ideas    

Cons

• Can create confusion since employees do not have a clear supervisor to report to

• Can produce employees with more generalized skills and knowledge

• Can be difficult to maintain once the company grows beyond start-up status

In divisional organizational structures, a company’s divisions have control over their own resources, essentially operating like their own company within the larger organization. Each division can have its own marketing team, sales team, IT team, etc. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives. 

Depending on your organization’s focus, there are a few variations to consider.

Market-based divisional org structure

Divisions are separated by market, industry, or customer type. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) from its food or logistics divisions. 

Divisions are separated by product line. For example, a tech company might have a division dedicated to its cloud offerings, while the rest of the divisions focus on the different software offerings—e.g., Adobe and its creative suite of Illustrator, Photoshop, InDesign, etc.

Divisions are separated by region, territories, or districts, offering more effective localization and logistics. Companies might establish satellite offices across the country or the globe in order to stay close to their customers.

Pros

• Helps large companies stay flexible 

• Allows for a quicker response to industry changes or customer needs

• Promotes independence, autonomy, and a customized approach

Cons

• Can easily lead to duplicate resources

• Can mean muddled or insufficient communication between the headquarters and its divisions

• Can result in a company competing with itself

A matrix organizational chart looks like a grid, and it shows cross-functional teams that form for special projects. For example, an engineer may regularly belong to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager). The matrix org chart accounts for both of these roles and reporting relationships.

Pros

• Allows supervisors to easily choose individuals by the needs of a project

• Gives a more dynamic view of the organization

• Encourages employees to use their skills in various capacities aside from their original roles

Cons

• Presents a conflict between department managers and project managers

• Can change more frequently than other organizational chart types

6. Team-based org structure

It’ll come as no surprise that a team-based organizational structure groups employees according to (what else?) teams—think Scrum teams or tiger teams. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control.

Pros

• Increases productivity, performance, and transparency by breaking down silo mentality
• Promotes a growth mindset
• Changes the traditional career models by getting people to move laterally
• Values experience rather than seniority
• Requires minimal management
• Fits well with agile companies with Scrum or tiger teams

Cons

• Goes against many companies’ natural inclination of a purely hierarchical structure
• Might make promotional paths less clear for employees

See why forming tiger teams is a smart move for your organization.

These days, few businesses have all their services under one roof, and juggling the multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get confusing. A network organizational structure makes sense of the spread of resources. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy.

Pros

• Visualizes the complex web of onsite and offsite relationships in companies
• Allows companies to be more flexible and agile
• Give more power to all employees to collaborate, take initiative, and make decisions
• Helps employees and stakeholders understand workflows and processes

Cons

• Can quickly become overly complex when dealing with lots of offsite processes
• Can make it more difficult for employees to know who has final say

Consider the needs of your organization, including the company culture that you want to develop, and choose one of these organizational structures.

Once you've chosen the right org structure to pursue, learn the steps in the company reorganization process.

Shannon Williams graduated from BYU in English and then turned to the world of marketing. She works as a content marketing specialist at Lucid Software. Instead of writing her novel (like she should be), Shannon spends her free time running, reading, obsessing about Oscar season, and watching Gilmore Girls on loop.