what is an organizational structure 
an organizational structure is a system that outlines how certain activities are directed to achieve the goals of an organization these activities can include rules roles and responsibilities the organizational structure also determines how information flows between levels within the company decisions flow from the top down in a centralized structure decision making power is distributed among various levels of the organization in a decentralized structure having an organizational structure in place allows companies to remain efficient and focused understanding an organizational structurebusinesses of all shapes and sizes heavily use organizational structures they define a specific hierarchy within an organization a successful organizational structure defines each employee s job and how it fits within the overall system the organizational structure lays out who does what so the company can meet its objectives this structuring provides a company with a visual representation of how it s shaped and how it can best move forward in achieving its goals organizational structures are normally illustrated in some sort of chart or diagram like a pyramid where the most powerful members of the organization sit at the top and those with the least amount of power are at the bottom not having a formal structure in place can prove difficult for certain organizations employees may have difficulty knowing to whom they should report that can lead to uncertainty as to who is responsible for what in the organization having a structure in place can help with efficiency and provide clarity for everyone at every level an effective organizational structure should result in each department within the organization becoming more focused and productive centralized vs decentralized organizational structuresan organizational structure is either centralized or decentralized organizations have traditionally been structured with centralized leadership and a defined chain of command the military is an organization famous for its highly centralized structure with a long and specific hierarchy of superiors and subordinates there are very clear responsibilities for each role in a centralized organizational system with subordinate roles defaulting to the guidance of their superiors more people play a role in decision making with a decentralized organizational structure mid and lower level managers as well as regular employees have more of a say in what goes on and can help call the shots there s been a rise in decentralized organizations this approach is popular among many technology startups and is viewed as enabling them to remain fast agile and adaptable with everyone able to throw ideas around johnson johnson is renowned for its decentralized structure as a large company with many business units and brands that function in sometimes very different industries each operates autonomously another well known company that gives employees a high level of personal agency is spotify 12decentralized structures are becoming more common and are popular among tech startups built in hierarchies usually still exist in decentralized companies such as the chief operating officer operating at a higher level than an entry level associate teams are empowered to make their own decisions and come to the best conclusion without necessarily getting approval from up top however types of organizational structuresfour types of common organizational structures are typically implemented the first and most common is a functional structure it s also referred to as a bureaucratic organizational structure it breaks up a company based on the specialization of its workforce most small to medium sized businesses implement a functional structure dividing the firm into departments consisting of marketing sales and operations uses a bureaucratic organizational structure this type is common among large companies with many business units it s called the divisional or multidivisional m form structure a company that uses this method structures its leadership team based on the products projects or subsidiaries it operates johnson johnson is a good example of this structure the company has thousands of products and lines of business it structures itself so each business unit operates as its own company with its own president 3divisions may also be designated geographically in addition to specialization a global corporation might have a north american division and a european division team based organizations segregate into close knit teams of employees that serve particular goals and functions similar to divisional or functional structures each team is a unit that contains both leaders and workers however flatarchy also known as a horizontal structure is used among many startups it flattens the hierarchy and chain of command as the name implies it gives its employees a great deal of autonomy companies that use this type of structure have a high speed of implementation firms can also have a matrix structure this is the most confusing and the least used it matrixes employees across different superiors divisions or departments an employee working for a matrixed company may have duties in both sales and customer service circular structures are hierarchical but they re said to be circular because they place higher level employees and managers at the center of the organization with concentric rings expanding outward they contain lower level employees and staff organizing this way is intended to encourage open communication and collaboration among the ranks the network structure organizes contractors and third party vendors to carry out certain key functions it features a relatively small headquarters with geographically dispersed satellite offices along with key functions outsourced to other firms and consultants benefits of organizational structuresputting an organizational structure in place can be very beneficial to a company the structure not only defines a company s hierarchy but it allows the firm to lay out the pay structure for its employees the firm can decide salary grades and ranges for each position by putting the organizational structure in place the structure also makes operations more efficient and much more effective the company can seamlessly perform different operations at once by separating employees and functions into separate departments a very clear organizational structure also informs employees on how best to get their jobs done employees will have to work harder at buying favors or courting those with decision making power in a hierarchical organization employees must take on more initiative and bring creative problem solving to the table in a decentralized organization this can also help set expectations for how employees can track their growth within a company and emphasize a certain set of skills it can help potential employees gauge whether such a company would be a good fit with their interests and work styles 