Org Structure: Definition, Types and Tips

By Indeed Editorial Team

Published May 17, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Companies use formats called org structure to dictate how employees and their managers communicate in a professional setting. There are multiple types of org structures that categorize employees according to their specialties and location. Understanding the differences in org structure can help you in your job search, as you understand what management style and independence you need to remain productive in the workplace. In this article, we define an org structure and its types and provide tips for outlining the structure of your organization.

What is an org structure?

An org structure is a model that illustrates how a company operates. Companies form their org structure according to their size, industry and organizational needs. The structure includes the level of autonomy and supervision employees have and the communication styles leaders use to distribute information to their staff. Org structures are centralized or decentralized. Here's the difference:

  • Centralized org structure: The organization has a clear chain of command, with one or several supervisors responsible for managing employees and making important decisions.

  • Decentralized org structure: Professionals work with more autonomy. They work as a team to make decisions, and there are fewer hierarchical roles among employees.

Why are org structures important?

Org structures are important because they dictate how supervisors and staff members interact with one another. Here are three reasons that illustrate the significance of structuring your company:

  • Employees know their roles. Professionals understand where they fit in an organization and how their work contributes to the company's success. With a clear business model, they know which team members to collaborate with and contact about their work performance.

  • The work employees produce is more focused. Org structures can define the tasks employees need to complete for the business to grow, which can increase the quality of work.

  • The business can run more efficiently. Organizational leaders can communicate with their employees, leading to less confusion and more productivity. Structures can also establish a decision-making process for the company, where employees can resolve issues faster and work as a unit.

Related: Business Models and Business Plans: How They Differ

Types of organizational structures

There are ten types of organizational structures, including:

Functional

Businesses commonly form hierarchies using a functional model, also known as a bureaucratic organizational structure. Employees work in departments or teams within their specialty. For example, professionals who are competent at employment law may work in the human resources department, while computer programmers may work in the IT department. There is also a supervisor of each team, and all of the managers report to the CEO or president of the company.

Related: What Is a Chain of Command? (Definition and Explanation)

Market-based

A market-based model is a divisional format that groups employees based on the demographics of consumers they target or their industry. It can be ideal for companies who sell a variety of products and employ professionals with different specialties. For instance, a department store that offers home appliances, clothes and electronic devices may have separate departments for each of the product categories, where the employees develop sales strategies and monitor market trends for goods within their designated area.

Process-based

Within the process-based structure, another divisional model, employees work in divisions according to their role in the consumer's buying journey. For example, there may be one department that specializes in producing a product and assessing customer expectations. Another department focuses on promoting the product to target audiences, while a third department processes payments and tracks sales numbers. The goal of the process-based model is to delegate tasks among groups of employees, while still working together to boost sales.

Geographic-based

Global businesses may use the geographical divisional model to divide employees based on their country of residence. The managers supervise a team of employees within the same country as them. Suppose a technology company employs professionals from multiple countries across the globe. There is one department in America, for example, and a separate department of the same company in Nigeria. The geographical model can also include divisions based on region or county, where each team can provide service to communities near them.

Flat

Members of organizations with flat org structures work independently. Unlike traditional hierarchies, flat models enable employees to make their own decisions and manage their own work performances. There is still an organizational leader at the top of the hierarchy, but there is no management between them and other employees. Most professionals in the company share the same rank and only report to one person instead of several supervisors. The flat structure is most common in small businesses.

Related: How To Make a Small Business Organizational Chart

Matrix

A matrix structure materializes when employees hold job responsibilities in separate departments and therefore report to multiple supervisors. Separate departments work together to complete work projects, requiring employees to work on tasks in both categories. For example, a company wants to launch a social media campaign and recruits the marketing and content creation division to develop a timeline and deploy content. The duties of a social media manager fall under both departments, so they report to the marketing director and the senior content creator for the duration of the campaign.

Network

The network structure is common for organizations that outsource their services to third parties. It includes a similar chain of command as the functional org format, but it also factors in agencies an organization collaborates with to complete projects. For example, a corporation outsources a public relations firm to safeguard the corporation's reputation and oversee all public announcements. Corporation employees have to contact professionals in the public relations agency for updates on their work.

Circular

In a circular org structure, every department in a company works together instead of functioning as separate groups. The model depicts managers in the center of the circle with lower-level employees on the outskirts. The purpose of the circular design is to promote inclusivity and open communication. Instead of managers sending their messages downward, they send them outward, and staff members can access their supervisors and share ideas more easily.

Related: Holistic Approach in Business: Definition, Characteristics and Benefits

Tips for implementing org structures

Follow these guidelines to learn how to establish an organizational structure that fits your company:

Assess your organizational needs

The first step to implementing an org structure is to determine how it can benefit your business.

  • Clients or customers your company services: Contemplate the number of external stakeholders your business has. If they span across several demographics or live in different locations, then you can select an org structure that enables you to service them more effectively.

  • Specialties of your employees: From your current roster, determine how you can designate your employees to departments. Perhaps you want to use a centralized model, so you consider promoting staff to managerial positions. A need for separate divisions may also encourage you to recruit and hire new personnel to fulfill specialized roles.

  • Location of your company: Suppose you want to expand your business to a different region or country. Consider using an org structure that can allow you to manage your company from multiple stations.

Request feedback from your employees

It's important that your org structure complements the work styles of your employees, which can help you retain them and maintain a positive work environment. Consider distributing a survey or forum throughout your organization to gain insight into how your employees perceive the most productive setting. For instance, if your staff reports a need for more guidance, then you might choose to implement a centralized approach. If they like to work independently, then decentralized models may be ideal. Feedback can help you select a model where your staff can easily adapt.

Hire a consultant

A consultant is a professional who can review your current operations and offer an impartial viewpoint on how to improve them. It may be helpful to hire a consultant with expertise in your industry. For example, if your business sells women's clothing, then you can search for consultants with experience working with retailers.

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