Types of Organisational Structures with Examples

An organisation runs on the completion of business goals that are achieved by a well-formed system, and this system is called organisational structure. A company's human resources is administered in a way that moves towards the realisation of that common business goal and success.

A structure primarily outlines the roles, responsibilities, and associated positions for harmonious and seamless execution of the tasks and duties of the enterprise. Different structures have different yet peculiar features and have unique influences on the company.

Let us understand the different types of organisational structure with examples.

Before understanding the structures, let us understand the concepts that these structures are based on.

Centralised

When we say a structure is centralised, we mean that the power of decision-making, responsibilities of completion, and the execution of goals are the duties that the leaders distribute. There is a chain of command, and it is followed to the t.

Decentralised

With decentralisation, teams experience more freedom to make decisions for themselves according to the rising situation. There is an autonomy of thought that leads to independent, adapting, and flexible business decisions.

Vertical

The authority of decisions and the level of importance of the responsibilities are vertically distributed in a vertical direction hierarchy. The higher the position, the more authority and responsibility one has.

Flat

Flat-structured businesses lack the chain of command mentioned in the vertical structure. It is a more inclusive and complex structure. The responsibilities and authority flow horizontally throughout all the departments, and hence, the distribution of power is likewise.

Hierarchical

The hierarchical structure is a mixture of vertical and centralised features of a structure. It forms a pyramid when it comes to power, authority, and responsibility. The higher the position, the more power, authority, and responsibility one has.

Circular

The circular structure does not consider any department or form of management as a part of the hierarchy but as a circle. Responsibilities are passed on accordingly since there is a free flow of information and data about the business goals with freedom and autonomy of decisions with all the departments!

There are 4 common types of structures. By common, we mean these structures are commonly found in the market. These are the primary or classic structures, easy to understand and implement, and highly impactful.

Functional Structure

In a functional structure, an organisation forms numerous specialised departments. These departments are allocated the responsibilities that they have expertise in according to the hierarchy of importance of their work. Every department is allocated this job by management, and these departments are answerable to their higher management.

On paper and in practicality, a functional organisational structure has centralised leadership, vertical distribution of power, and hierarchical features.

Example of functional structure: A company, “ABC”, has marketing, sales, accounting, and finance departments. All the employees have clear job roles; they are answerable to their department heads, and those department heads are accountable to the CEO or COO of the company. The organisational structure of an insurance company often replicates a functional structure.

Divisional Structure

Divisional structure, also known as product-based structure, is also hierarchical, vertical, and centralised in operations like functional structure. The organisation’s units are based on the company’s products instead of the skills and roles. Hence, skills do not differentiate two departments; products do.

Example of divisional structure: The ABC company manufactures different products: electronics, clothing, footwear, machinery, and furniture. There will be product managers for each product. The managers will be responsible for all the other employees working on that product. The CEO of the company will coordinate with the product heads/managers instead of the entire group of employees in each product.

Geographical Structure

The geographical structure is similar to the product-based structure. In this case, the work units are based on the location of the companies in the different geographical areas. Here, the management of the company will associate the products with the regional language and culture.

Example of geographical structure: Company ABC has headquarters in Delhi and other offices located in Mumbai, Bangalore, Nashik, and Shillong. The management of the product and company is completely based on regionwise segmentation. The CEO will be taking updates from the POC from every region.

Process-Based Structure

When it comes to a process-based structure, the organisation will follow the life cycle of a product as the base of its functioning. The conception, development, prototype, launch, manufacturing, distribution, use, service, and repeat is the basic life cycle of any product. The departments will be distributed according to these stages of the cycle and will be overlooked by the person in authority.

Example of process-based structure: Company ABC is working on the manufacturing of a product. The employees are segmented according to their expertise and are grouped with employees of similar specialities.

Organic Structure

As the name suggests, the structure is very organic. It has a free flow of communication and responsibilities along with the power of decision-making with discussion. The organic structure follows decentralised, flat, and circular features of structures. It yields a positive environment and a flexible, open, and free company culture.

Example of organic structure: Company ABC has different departments filled with people with expertise in their respective fields. Each department has an interconnection with another one. There are various instances where there is a collaboration between two departments, and the management does not necessarily interfere with that.

Matrix Structure

The matrix structure demands multiple duties from the department heads. They have to work on two or more tasks at the same time, hence the name “matrix”. The employees have to focus on the products as well as the functions of their departments.

Example of matrix structure: Company ABC has an accounting department. The account has to coordinate the finances with the accounting head and communicate with the manufacturing department head about their progress in the work.

Team-Based Structure

When an organisation collaboratively operates with cross-functional teams with collective decision-making authority, it is called a team-based structure. The organisation has flat, circular, and decentralised structures when it comes to authority, power, and responsibility.

Example of team-based structure: Company ABC has one team of digital marketers and serves multiple purposes. There is a digital and graphic designer, copywriter, social media manager, marketing head, product manager, advertising head, and software engineer. This team will operate on various products with those roles.

Along with a deeper knowledge of the organisational structure of the business, one needs to safeguard the future of the business and the people working in it.

Tata AIG’s group health insurance and SME insurance extend a helping hand to the business as functional safety systems for the employees and the company, respectively.

Every company needs corporate health insurance that will protect the financial future of the employees and the company. Due to the rapidly changing economic conditions, it is important to have business insurance in India, starting from small and medium enterprises to large corporations, every enterprise.

Organisational structure is an essential component of operating a business. Knowing the type and form of business, understanding its necessities, assessing the implications of implementing a certain structure, and then going ahead with the decision is essential.

Do not be blinded by certain biases regarding traditional or contemporary work structures. Also, there is always a way to amalgamate two or more structures to make an ideal one for the business in question. Exploring the landscape of different structures might help one find the best features and functions!

Assess, associate, and align; that’s how to find the best one!

Does the organisational structure impact a company’s performance?

The organisational structure definitely impacts a company’s performance due to its functionality and features. Every structure is unique to itself and has a varied impact on the company’s performance.

Can a company change its organisational structure?

Yes! A company can change its organisational structure. However, one must always consider proper research of the potential impact on the company and the difference it will make.

What is the most common organisational structure?

One of the most popular and widely used organisational structures is the functional structure. It is suitable for all types of organisations due to its flexibility.