Types of Business Organizational Structures

Every organization should have a defined organizational structure. A well thought out and strategic structure helps support good processes for communication and clarifies lines of authority and reporting relationships to assure that work processes flow in a defined process. An org structure shows lines of authority and reporting relationships. Having this mapped out helps to ensure efficient work flow and project management as well as elimination of duplicate systems and processes.

So what are the different types of org structures?

Org structures are defined by using different criteria. Things to think about are what is the functional grouping of work processes and are there natural groupings of  teams, work groups or units. This is a decision from senior management on how they would like work activities to be organized and carried out. This also identifies natural reporting relationships and chain of command. Reporting relationships can be both vertical as well as horizontal. The different structures are:

Matrix

A matrix structure provides for reporting levels both horizontally as well as vertically. Employees may be part of a functional group (i.e. production) but may serve on a team that supports new product development. This kind of structure may have members of different groups working together to develop a new product line.

Functional

Functional organizational structures are the most common. A structure of this type groups individuals by specific functions performed. Common departments such as human resources, accounting and purchasing are organized by separating each of these areas and managing them independently of the others.

Product

Another common structure is to be organized by specific product type. Each product group falls within the reporting structure of a senior leadership person and that person oversees everything related to that particular product line.

Customer

Certain industries will organize by customer type. This is done in an effort to ensure specific customer needs are met by specific customized service approaches. An example of this would be in healthcare. A different customer type might be outpatient and their needs are very different than inpatient customers.

Geographic

For organizations that cover a span of geographic regions, it sometimes makes sense to organize by the region. This is done to better support logistical demands and differences in geographic customer needs. Typically a structure that is organized by geographical regions reports up to a central oversight structure.

Deliberate time and thought should always go into the design of an organization’s structure. This is important so employees have a visual of how the organization functions and understands the chain-of-command. Operating within a defined structure with good communication processes and work-flows help to ensure more efficient management of resources – people, time and money.

photo by: Susan Renee

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