It is the skeleton of an organization that defines how activities such as coordination, task allocation, and supervision are directed toward the achievement of organizational aims. An organization can be structured in many different ways, depending on its objectives.
It is an expression of who is performing the various functions and tasks of a company and how these people relate to one another. The organizational structure of a company encompasses a list of the various job positions, titles, and duties of a business, and the reporting structure or chain of command among them.
The organizational structure of a company can help determine a lot of things such as:
- Roles and responsibilities
- Hierarchy of ownership and opinions
- How people will be organized
- Lines of communication and accountability
Different types of organizational structure of a company that can coordinate employees for better productivity
The more common structures include a flat organization, which is horizontal, a hierarchy, which is vertical and a matrix. Each of these structures defines a number of different ways to organize and differentiate employees and teams:
- By function, where employees are grouped by abilities or skill sets
- By division, which might refer to a particular process, industry, product, or service
- By location, which is simply a division based on where employees are physically located
1. Hierarchical (Departmental structure)
A Hierarchical structure also knows as the vertical structure is a type of organizational structure of a company where each and every entity in an organization is a subordinate to a single other entity, except one. There are layers upon layers of people, with each layer shrinking in number, but growing in authority, until you reach the peak.
A hierarchy is typically visualized as a pyramid, where the person at the highest rank depicts their power status and the width of that level represents how many people or business divisions are at that level relative to the whole structure. The highest – ranking people are at the apex which is very few in number. The base may include thousands of people who have no subordinates.
This organizational structure of a Payroll software company is better for large organizations. It works best when leadership is strong and empowers people below them to act like owners and contribute ideas. It doesn’t work when people are more focused on climbing to the top instead of doing great work.
Airtel uses a Hierarchical structure where employees are grouped by their knowledge and skills, which helps achieve the highest degree of performance.
- Defines responsibilities in a better manner
- Shows reporting of each person
- Gives each employee a specialty
- Can cause employees to act in interest of the department instead of the company as a whole
- It doesn’t encourage people to collaborate and share information across the reporting
2. Horizontal (Process-based structure)
The Horizontal organizational structure is also known as the flat organizational structure of a company has few or no levels of management between staff and executives. In Horizontal organizations, the number of people who are directly supervised by each manager is large, and the number of people in the chain of command above one is small.
Many start-up businesses use a horizontal organizational structure before they grow large enough to build out different departments. But some organizations maintain this structure since it encourages less supervision and more involvement from all employees. Individual units in the large organization also use this structure.
The horizontal organization has a less defined chain of commands. Employees may perform many different functions and may report to several supervisors, rather than a single boss.
TATA Steel company uses Flat organizational structure, beginning with top-level management to low-level management.
- Employees get responsibility
- Improves coordination
- Increases speed of communication
- Can create a confusion as there poor handling
- Less efficient for the larger organization
A matrix organizational structure is an organizational structure in which the reporting relationships are set up as a grid or matrix. Employees have dual reporting relationships – generally to both a functional manager and a product manager.
It is mainly used in the management of the large organization or large projects. Resources in a matrix organization are shared between both business and project. This structure splits power and authority between the functional or division team manager and the project manager.
The matrix structure is ideal for both talent and performance management software across the various department. The ability to draw all the skills at one place occurs in a matrix organization.
Walmart uses Matrix organizational structure where each division is open to focus on a specific goal such as product, service, or customers.
- Resources can be used efficiently as they can be used in various project
- It can give efficient information exchange
- Give a dynamic view of the organization
- Complexity increases in project management
- Keeping the report of employees gets confusing
Importance of Organizational Structure of a Company – It’s easy
if you do it smart
- Impacts effectiveness and efficiency
- Reduces redundant actions
- Promotes teamwork
- Improves communication
- Contributes to success or failure
Purposes of the Organizational Structure of a Company
- Divides work to be done in specific jobs and department
- Assigns tasks and responsibilities associated with individual jobs
- Coordinates diverse organizational tasks
- Establishes a relationship between individual, groups, and departments
- Allocates organizational resources
- Clusters jobs into units
Some of the well-known companies that follow the above mentioned organizational structure are mentioned below:
- TATA Steel
- Ernst and young
So what type of organizational structure are you following in your company?
Your employees don’t have to get confused in terms of management. So now when you have an understanding of the organizational structure of some companies, your decision of choosing one can make your management easier and clearer.