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What are Common Types of Organizational Structure?
Organizational structure defines the roles, responsibilities, and levels of authority within the company. It identifies who supervisors and direct reports. There are many ways to design an organization’s structure. Each organizational structure has its distinct advantages and disadvantages. Some common approaches to organizational structure include:
- Line Organization: Line organization is the oldest and simplest pattern of organization, wherein the supervisor has outright supervision over the subordinate. The flow of authority is from the top-level executive to the person at the lowest level of the organization’s echelon.
- Functional Organization: As the name suggests, the functional organization structure is one in which the thorough task of managing and directing the employees, is grouped as per the functions or type of work involved.
- Line and Staff Organization: This type of organization structure is an improvement over the traditional line organization. With line and staff organization primary and supportive activities are related to the line of supervision by appointing a supervisor and a specialist, who are linked to line authority.
- Project Management Organization: Project Organization is not an independent organization, like the organization structure discussed above. Instead, it is a set up within an organization, so as to accomplish a project or firm’s objectives. It is led by a project manager, who is responsible for project objectives.
- Mechanistic Structures – Mechanistic structures are designed to be very formalized, hierarchical, centralized, and specialized. They closely resemble the ideal of a bureaucracy. Communication tends to flow down from the top. The chain of reporting and authority is very rigid. For this reason, this organizational structure is most appropriate in very stable markets. The formalized structure and excessive rules allow for efficiency and predictability. As you might imagine, it is less appropriate in turbulent markets that require a company to be creative and move quickly to adapt to change. They also tend to result in lower employee job satisfaction and a reduced sense of motivation.
- Organic Structures – Organic structures are quite different from mechanistic ones. They form naturally through human interaction. They tend to have less-complex structures with decentralized decision making. The lack of formalization means that they rely on personal or social interactions rather than procedures for decision-making situations. These types of organizations are far more effective in rapidly-changing environments that require creativity and adaptability.
- Matrix Organization: Matrix organization is a mix between a functional and organic organizational structure. Generally, it involves employees grouped into functional specialties but cross-assignment to other managers based upon specific projects. The functional organizational elements are vertical in nature. The assignment to cross-functional teams for specific projects is vertical in nature. Thus, it gives rise to a matrix structure. Because the organizational structure incorporate cross-disciplinary team, it tends to be more flexible and innovative than a traditional functional organization. The primary difficulty arises in the reporting structure. There is very little “Unity of Command” in a matrix structure.
- Flat Organization – In a flat organizational structure, there is little or no traditional chain of authority. The traditional vertical chain of authority is reduced while the horizontal elements of the structure are increased. An extremely flat structure will place all employees on the same level without seniority in their positions. There is a singular line of authority – if any is present at all. One version of the flat structure is the “Holocracy”. This structure maintains hierarchical levels but with circles or groups of equal authority working at each level. It removed the single supervisor from the equation. The objective of a flat structure generally is to increase communication that breaks down with a hierarchy. Generally, the organization functions as a group or groups – all with decision-making authority. These organizations generally have organic methods of decision making built into the relationship between employees. Flat structures lend themselves to rapid responses to changing environments and a creative, innovative atmosphere. They are most common in small or mid-sized organizations.
- Boundaryless Organization – This type of organization attempts to break down barriers within the organization and between the organization and the external environment. The concept was developed by the CEO of General Electric, Jack Welch. The basic form of boundaryless organization seeks to break down the barriers that exist between employees. It generally means removing social, organizational, and physical barriers. It generally results in self-directed work teams that establish their own integrated functions or roles within the team. There are multiple types of boundaryless organization, including:
- Modular Organization – In this type of organization, all of the non-essential, non-strategic functions of the organization are outsourced to third parties. The idea behind this format is to retain only the value-generating and strategic functions in-house, while the rest of the operations are outsourced to many suppliers.
- Strategic Alliances – This structure seeks to break down barriers between the organization and another market participant. It generally results in the two organizations creating a joint venture in which the organizations work together for the benefit of both.
- Virtual Organizations – An increasingly common organizational structure is one that is completely virtual. This means that employees work remotely from a central office or other employees. This method relies on electronic communication to facilitation the workflow. This type of organization may be beneficial when employees live in diverse locations or when some factor bars employees from congregating together in a single location.