What Is Organizational Structure? Definition and Guide

What is organizational structure?

Organizational structure helps a company assign a hierarchy that defines roles, responsibility, and supervision. It’s the plan that outlines who reports to whom and who is responsible for what. It’s usually recorded and shared as an organizational chart that includes job titles and the reporting structure.

Structure types

Organizational structures typically use one of two approaches:

  • A centralized structure gives most of the authority and decision-making power to the team at the top.
  • A decentralized structure distributes authority and decision-making power at lower levels, which might include departments, groups, or business units.

A company can be organized in a number of ways. It might be built around divisions, functions, geography, or with a matrix approach:

  • A divisional structure is organized around divisions or business units that are self-contained entities with their own functional departments such as human resources, marketing, and so on. 
  • A functional structure is based on job functions often labeled as departments – finance, purchasing, etc. 
  • A geographical structure is often used when a company has multiple locations. Each location operates independently. 
  • With a matrix structure, the company is organized around teams assembled for specific tasks. Team members usually report to more than one person – the team leader, and the supervisor for the team member’s functional area.

The organizational structure of a small business is most likely functional – one based on job duties. While small businesses are often casual with their hierarchy, some type of organizational structure is required so that employees know who is supervising their work and can help with problem-solving and other issues. That structure also helps them understand growth potential in their jobs. In addition, an expanding business can minimize growing pains when it has an organizational structure or hierarchy in place to build on during growth periods.

See also: 10 Common Types of Business Structures

What Is Organizational Structure? FAQ

What is the Organisational structure?

Organisational structure is a system used by an organisation to outline how its activities and operations are divided, organised and coordinated. It includes the relationships between departments, employees, roles and responsibilities. Organisational structure also determines how information flows between different levels of an organisation. It can determine the lines of authority, communication channels, and how information is shared throughout the organisation.

What are the 4 types of organizational structures?

  • Functional Structure: A structure in which employees are organized by areas of specialization, such as marketing, accounting, and engineering.
  • Divisional Structure: A structure in which employees are organized by product, geographic area, or customer type.
  • Matrix Structure: A structure in which employees report to both a functional manager and a project manager. 4. Network Structure: A structure in which companies partner with other companies to share resources and expertise.

What is organizational structure and its importance?

Organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles, and responsibilities, as well as relationships between people, tasks, and strategies. Organizational structure is important because it helps to define the roles and responsibilities of individuals and teams, and it provides guidance on how to achieve organizational goals. It also allows organizations to operate efficiently and effectively, as well as create a sense of order and stability.