Organizational structure can be defined as a system that consists of explicit and implicit institutional rules and policies designed to outline how various work roles and responsibilities are delegated, controlled and coordinated. Organizational structure also determines how information flows from level to level within the company.  There are mainly four types of organizational structure, in order to choose the best organizational structure for an organization you have to first understand the four types and their characteristics. In general, an organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military, for example, is an organization famous for its highly centralized structure, with a long and specific hierarchy of superiors and subordinates. However, there has been a rise in decentralized organizations, as is the case with many technology startups and millennial run companies. A decentralized structure allows the companies to remain fast, agile and adaptable and flexible to change, with almost every employee receiving a high level of personal agency.

As mentioned above, there are four types of organizational structures. The four types are explained below

Structural Organizations: This is the first, and most common type of organizational structure. This is also referred to as a bureaucratic organizational structure and 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 is the act of using a bureaucratic organizational structure. The hierarchy has permeated virtually every company around the world regardless of size, industry, or location. The greatest strength of the hierarchy used to be that it was so reliable at maintain the status quo, which was exactly what companies wanted decades ago. However what was once its strength is now it's greatest weakness. The hierarchy is a very resilient management structure that has been so embedded in how we work that most organizations around the world are having a tedious time getting rid of it.

 

Multi-divisional Structure:The second type is common among large companies with many business units. Called the divisional or multi-divisional structure, a company that uses this method structures its leadership team based on the products, projects or subsidiaries they operate. A good example of this structure is Johnson & Johnson. With thousands of products and lines of business, the company structures itself so each business unit operates as its own company with its own president.

 

Flatarchy: Flatarchy, a newer structure, is the third type and is used among many startups. As the name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of autonomy. Companies that use this type of structure have a high speed of implementation. Unlike the traditional hierarchy which typically sees one way communication and everyone at the top with all the information and power; a "flatter" structure seeks to open up the lines of communication and collaboration while removing layers within the organization. As you can see there are fewer layers and that arrows point both ways. Obviously a very simplified way to look at this type of a company but hopefully it gets the point across. For larger organizations this is the most practical, scalable, and logical approach to deploy across an entire company. This is the model that most large (and many mid-size) organizations around the world are moving towards.

 

Matrix Structure: The fourth and final organizational structure is a matrix structure. It is also the most confusing and the least used. This structure matrixes employees across different superiors, divisions or departments. An employee working for a matrixed company, for example, may have duties in both sales and customer service.