We’re advocates for dismantling outdated corporate hierarchies. There are numerous organizational frameworks that embrace minimal hierarchy or none at all. So, what’s the deal with organizational structure in progressive companies?
What exactly is ‘organizational structure’?
Organizational structure is like the blueprint that shapes how a company's activities are directed to achieve its goals. Picture it as the game plan that sets the rules, roles, and responsibilities within an organization.
This structure also dictates the flow of information between different levels of the company. In a centralized setup, decisions trickle down from the top. It stops at a certain level, often middle management. On the other hand, a decentralized structure spreads decision-making authority across various levels.
Whether an organization embraces the classic pyramid-style org chart or a more unconventional setup, like a matrix or flat structure, the chosen organizational structure significantly impacts how a company functions. It matters to everyone who works there.
As organizations evolve, it’s important to explore and understand different organizational structures, for strategic alignment with objectives and overall success.
Usually, organizational structures are pictured in charts, the (in-)famous org charts. Want to learn more about our vision?
Read: Blow Up The Traditional Organization Chart
Choosing the structure for an organization
The structure a company takes on is not always part of a well-thought-out process. When a company grows after the startup phase, a top-down hierarchy is easily formed.
That doesn’t mean you can’t change it at any time.
Difference in organizational structures
When we look at different organizational structures, there is a clear difference between centralized and decentralized organizational structures.
Centralized organizational structure
In a centralized setup, decision-making authority is concentrated at the top level of the organization. This structure ensures a clear chain of command and uniformity in decision implementation. On the flip side, it can sometimes lead to slower responses to local issues, as decisions need approval from the ‘main office’.
Decentralized organizational structure
A decentralized structure distributes decision-making power across different levels of the organization. Imagine it as a network of interconnected hubs, each with its decision-making autonomy. This allows for quicker responses to local challenges and promotes flexibility and innovation. However, without a central authority overseeing everything, there's a risk of inconsistency.
Examples of structures
There are many organizational structures that companies can adopt. They’re usually based on a clear philosophy.
A functional structure is a common type of business structure that organizes a company into different departments based on areas of expertise, grouping employees by specialty, skill, or related roles. It’s based on levels of hierarchy, typically divided around different departments. Each has its own designated leader. While this structure clarifies roles and responsibilities, it may slow down employee growth as it works with silos, limiting cross-departmental communication and opportunities for employees to broaden their skills.
For companies with a broad reach, the geographical structure aligns with local nuances. Process-based structures, like the functional model, enhance efficiency but demand robust communication to prevent silos.
Alternative organizational structures, like the matrix, offer flexibility but can confuse lines of accountability. A matrix structure is an organizational design where employees report to more than one manager or supervisor. Circular structures distribute authority from the center, promoting communication.
In the realm of innovative structures, flat organizations champion minimal hierarchy, promoting collaboration and quick decision-making. Holacracy, a self-management system, represents a departure from traditional structures, emphasizing distributed authority and dynamic adaptability.
The organic structure, departing from vertical hierarchies, fosters open communication and a positive culture. Choosing the right structure involves understanding current roles, aligning with strategic plans, and gathering stakeholder feedback for a unique blend that suits the company's goals.
Many more organizational structures work. The companies that have chosen more autonomy, flexibility, and less hierarchy almost always have a more engaged workforce. This leads to less employee turnover and, in the end, to more innovation and success.
Elements of
organizational structure
A top-down hierarchy doesn’t lead to happy employees. Satisfied team members are more engaged, stay longer with the company, and make it stronger, better, and bigger.
Most elements of the organizational structure look a little different if you let go of the old-school org chart.