Choosing an organisational structure for your business without accessing your team’s needs can do more harm than good.
The wrong organisational structure leaves you in an endless maze of communication mishaps, bottlenecked workflows, and a general sense of disarray within your team.
In this article, you’ll find ways to structure your organisation and make your team more efficient.
We’ll discuss a step-by-step guide to help you pick an organisational structure based on your business needs. Then, we’ll create a tailored approach to implementing it.
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What is organisational structure?
An organisational structure specifies tasks and how to complete tasks. It also defines the roles and responsibilities of each team member.
But why does your business need an organisational structure?
With an organisational structure, you can control the exchange of information between employees from different departments.
For example, your manager will make decisions for your team if you have a centralised structure. However, in a decentralised structure, any team member can make decisions.
What is the importance of a clear organisational structure?
In a clear organisational structure, you can implement a proper decision-making process.
With a proper decision-making process, you can assign roles and responsibilities according to specialisation.
When you define the hierarchy, your team can make decisions faster. That is with a clear organisational structure, your team will be more efficient and productive.
What are the four elements of organisational structure?
After learning the importance of a clear organisational structure, let’s discover the four elements of organisational structure.
1. Specialisation
When allocating tasks to a particular department, assign a manager, too. You can have a business manager or a functional manager supervise your team.
A functional manager oversees your team’s productivity and time management.
2. Standardisation
Standardisation is the precise definition of the different levels of management. In standardisation, you change the manager’s title and department.
But the level of management remains the same in every department.
3. Coordination
In coordination, you have both formal and informal processes. You can integrate every employee or team’s activity and performance in both processes.
You can coordinate with other team members and tasks as per project requirements. With coordination, you’ll have better performance and achieve your organisation’s goal more efficiently.
And if there’s no coordination in your organisation, you’re more likely to end up with delays and frustration.
4. Authority
The fourth element of an organisational structure is authority, which gives you the right to act, decide, and make decisions.
But when you give authority to your employees, you’re giving them accountability and responsibility.
Now that you understand the four critical elements of organizational structures let’s examine the 10 different types.
What are the 10 types of organisational structure?
Below, we’ve listed 10 types of organisational structures with pros and cons.
1. Hierarchical organisational structure
A hierarchical organisational structure allows you to assign supervisors to each team.
You organise teams according to their roles, responsibilities, and projects in a hierarchical organisational structure.
There are multiple levels in the hierarchy. At the top level, you’ll start with leadership and add direct employees below the leaders.
For example, Amazon has a hierarchical organizational structure. Millions of people around the world work for Amazon, and all of them report to its founder and CEO.
But what makes a hierarchical structure unique? Well, the fact is that in the hierarchical structure, you have different levels of authority.
Due to the levels of authority and multiple management, the decision-making process goes from top to bottom.
What are the advantages of the hierarchical organisational structure?
- Establishes the level of authority
- Promotes teamwork
- Enhances promotion opportunities
What are the disadvantages of the hierarchical organisational structure?
- Limited team communication
- Less innovation
Check out our ultimate guide to team communication.
2. Functional organisational structure
Functional organisational structure allows you to divide your organisation into groups.
You can divide your organisation group according to specialities, roles, and responsibilities.
Airtel is a multinational communication service provider that uses this structure.
Each department at Airtel has a director who oversees all the functions in their designated department.
Functional structure helps you organise and manage your departments.
But what’s so unique about a functional organisational structure?
Check out how Google uses the functional organisational structure.
What are the advantages of the functional organisational structure?
The advantages of a functional organisational structure are:
- Enhances overall performance
- Better accountability
What are the disadvantages of the functional organisational structure?
The downside to this organisational structure are:
- Leads to conflicts
- Limited collaboration
Check out how Tesla uses the functional organisational structure.
3. Matrix organisational structure
A matrix organisational structure is a combination of two or more organisational structures. In a matrix, you can arrange reporting relationships between team members as a matrix.
You can add a functional manager in your matrix structure to oversee project progress. Also, add a product manager who can focus on your company’s product growth.
For example, Starbucks uses a matrix organisational structure which contains multiple reporting and overlapping structures.
See how Facebook uses the matrix structure.
What are the advantages of the matrix organisational structure?
The benefits of the matrix organisational structure are:
- Flexible work schedule
- Balanced decision-making
- Open communication
- Shared resources
What are the disadvantages of the matrix organisational structure?
The downside to this organisational structure is that it is challenging to track budget and resources
4. Flat organisational structure
In a flat organisational structure, you’ll find few levels of management. Sometimes, you’ll only see leaders and employees with no middle management.
The flat structure is also known as a horizontal structure. A flat structure gives your employees more decision-making power and responsibility.
For example, Google, Facebook, and Telebu use a flat organisational structure.
And you know what’s unique about a flat structure?
Your employees have the power of decision-making and own their work like bosses. As a result, you’ll see a more positive attitude among your employees.
What are the advantages of the flat organisational structure?
The advantages of the flat organisational structure include:
- Reduced cost of operation
- Better relationships between team members
- Increase sense of responsibility
What are the disadvantages of the flat organisational structure?
The disadvantages of the flat organisational structure are:
- Requires wide-range plan
- Can lead to more conflicts
5. Divisional organisational structure
The divisional organisational structure allows you to split your team members into divisions. All the divisions are set according to services, products, and geographical locations.
So, how do things work in a divisional structure?
Every division has an executive leader, staff members, and departments.
For example, McDonald’s utilises a divisional organisational structure. Each McDonald’s branch makes an organisational structure strategy according to the location and audience.
Once you separate divisions according to your products, you’ll have to allocate different staff members and leaders.
But why a divisional organisational structure?
See how Google uses the divisional org structure.
What are the advantages of the divisional organisational structure?
In addition to allowing your team to focus on one product at a time the divisional organisational structure also provides
- Independence of the different divisions and products
- Individual needs are met quicker
- More focus on product
What are the disadvantages of the divisional organisational structure?
The disadvantages include:
- Scale limitations
- Duplication of resources
6. Network organisational structure
Network organisational structure works around one manager. Or, in some cases, one supervisor.
One manager works as a middleman who coordinates with internal and external entities throughout the project development.
This means one person with authority is at the centre of all the activities. For example, H&M goods.
Pros
The network organisational structure has these benefits:
- More flexibility and agility
- Control on budget
Cons
The network organisational structure becomes too complex in the long run.
7. Line organisational structure
The line organisational structure is simple. In line structure, your authority level starts from the top and ends on the bottom level staff.
There’s no specialist or supportive employee in the line structure.
Typically, organisations are divided into departments, and each department has a manager and general managers. But not in the line structure.
In line structure, you’ll find one supervisor who supervises other employees.
For example, your supervisor coordinates with you and other subordinates in the military. And the authority level flows from top to bottom level.
The unique part of line organisational structure is the direct vertical relation. Direct relations of managers with employees make workflow efficient.
Pros
Line organisational structure promotes:
- Stable work environment
- Effective team collaboration
- Quick work adaptation
Cons
Line organisational structure has these downsides:
- The structure becomes inflexible
- The manager possesses too much power
8. Team-based organisational structure
Every company employee works towards a common goal in a team-based organisational structure. But each employee works on different tasks.
The flexible team-based structure focuses on improving decision-making, problem-solving, and teamwork processes.
For example, Uber is a well-known transportation company. Uber has only three levels of managers: community, city general, and driver operations.
All these three managers work in different departments, but their goal is one. And that’s to make Uber the world’s top-rated transportation service app.
You must be thinking, why team-based?
A team-based structure is simple. It helps increase responsiveness among your team members.
Pros
Advantages of the team-based organisational structure:
- Streamlines organisational processes
- Enables decision-making power
- Increases flexibility
Cons
Disadvantages of the team-based organisational structure:
- Decreases consistency
- Increase chances of conflicts
9. Circular organisational structure
A circular organisational structure that works in a circle means the hierarchy begins and ends simultaneously.
The circular structure works in a ring form. In the outer ring, you’ll see lower-level and high-level employees on the inner level.
So, each ring ends where it began, and every employee on that ring will have the same responsibility and authority.
For example, in a restaurant chain, you’ll see waiters have the same level of authority. And managers of each branch have the same level of authority.
The unique part about circular structure is that all departments are part of the same project.
Pros
The circular structure:
- Encourages the sharing of information
- Enhances team collaboration.
Cons
The circular structure:
- Causes confusion
- Slows decision-making process
10. Process-based organisational structure
Process-based organisational structure workflows from left to right. The process-based structure highlights employee activities and how employees will interact with each other.
The manager in the top position in a process-based structure oversees lower-level work processes. But every department will have its manager.
And they must ensure that the second activity starts only when the first activity is finished.
For example, you cannot start the customer acquisition process until you complete the product development.
What’s different about process-based structure?
A process-based organisational structure is best for companies looking for rapid changes. It allows you to improve the efficiency and speed of your company.
Pros
The process-based organisational structure:
- Improves the organisation’s speed and efficiency
- Encourages teamwork
- Quickens adaptation
Cons
The process-based organisational structure also:
- Builds barriers between departments
- Decreases team collaboration
How to choose the best organisational structure for your company
Follow these steps to choose the best organisational structure:
- Check and review all the organisational structures.
- Work on organisational structure implementation strategy
- Review the information you’ve from the company (size, environment, and people)
- Create a demo and make your decision
Check out:
- Best organisational structures for startups
- Best organisational structures for enterprises
- Best organisational structures for SMEs
Strengthen your organisational structure with effective communication
Without effective communication, any organisational structure you choose will fail.
That is why you need the best team communication app that provides simplicity and effectiveness in one app.
Talk Magnet is so simple to use that your team will start getting work done from day #1. Get started with a free trial, or schedule a free demo to learn more about Talk Magnet.
