Types Of Organizational Structure In Business

Organizational Structure: Know the 4 basic elements

If you own a business, then you are responsible for everything, be it earning profits or making losses. If you are eager to hire qualified employees to run your business smoothly and efficiently, then you do require proper business Organizational structure and organizational hierarchy. This will help define a chain of command, promote communication, and allow your employees to know how they can advance their careers in your company.

Traditional business structure

There are the following 4 old business structure models:. However, with the digital marketplace flourishing at a fast pace, team-based, decentralized structures are found to disrupt the old models. Hence, you need to know in-depth about the old models prior to making the decision.

Old models practiced

• Flat organizational structure: In most companies, this model tends to disrupt top-down, traditional managed systems. No everyday ‘boss’ exists as there is decentralized management. Every employee needs to own up to the task, thus eliminating red tape and bureaucracy and enhancing direct communication. Adopting this business structure will help your company set up a top-down management system, especially for temporary events or projects.
• Functional organizational structure: Employees performing similar tasks are classified under the same group based on their specialty. For example, marketing, operations, human resources, senior management, operations, and accountants are classified accordingly. This structure allows for quick decisions since there is effective and timely communication among group members. They also get to learn from one another as they possess similar interests and skills.

• Matrix organizational structure with divisional & functional models: Matrix organizational structure is considered to be quite complex as it combines divisional and functional models together. Employees are grouped into functional specialization departments, which are again separated into products and divisional projects. Team members in this structure are provided with more autonomy to take proper and timely decisions and to be more responsible. It helps to improve team productivity and fosters creativity and innovation. Managers can solve problems with input from all team members through group interaction. However, such a structure requires plenty of effort and planning. Large companies with adequate resources can find this structure viable.
• A divisional structure that is product-based: Employees are grouped into teams in this business structure, based upon projects or products to meet the customized requirements of clients. It promotes division of labor, thus ensuring that employees creating similar products are able to achieve higher output and greater efficiency.

Getting to know the above details can help you choose the best business structure for your organization.