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10 Types of Organizational Structures for Companies
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PM PM secrets Project Management

10 Types of Organizational Structures for Companies

Orga­ni­za­tion­al struc­ture of a com­pa­ny helps to see the ​“inside” of the busi­ness: how roles and respon­si­bil­i­ties are dis­trib­uted with­in it, and even how the main busi­ness process­es pro­ceed. The busi­ness orga­ni­za­tion­al chart helps to iden­ti­fy the ​“weak points” of the busi­ness, effec­tive­ly plan and reduce costs, and devel­op a pro­duc­tive man­age­ment strategy.

In this arti­cle, we will talk about the most pop­u­lar types of orga­ni­za­tion­al struc­ture of an enter­prise and fig­ure out how to build an opti­mal cor­po­rate struc­ture chart with org chart examples.

What Is an Orga­ni­za­tion­al Structure?

The orga­ni­za­tion­al struc­ture of an enter­prise is a mod­el that explains the rela­tion­ships between employ­ees or entire departments.

It builds a hier­ar­chy with­in the com­pa­ny and deter­mines the prin­ci­ple of action when mak­ing and exe­cut­ing decisions.

The rights and respon­si­bil­i­ties of man­agers and employ­ees are estab­lished based on the orga­ni­za­tion­al struc­ture. In addi­tion, the types of orga­ni­za­tion­al struc­ture influ­ence the key roles to achieve over­all busi­ness goals.

We will dis­cuss the 10 main orga­ni­za­tion­al struc­ture types com­mon in busi­ness man­age­ment. And let us imme­di­ate­ly note: this is not a dog­ma. There are no restric­tions in the selec­tion and appli­ca­tion of spe­cif­ic orga­ni­za­tion­al charts. You can adapt the orga­ni­za­tion­al struc­ture for your­self, change or com­bine dif­fer­ent types of orga­ni­za­tion­al sys­tems for dif­fer­ent areas of activ­i­ty. But you need to under­stand the fea­tures of each of the types of orga­ni­za­tion­al struc­tures to do this.

1️⃣Hier­ar­chi­cal Orga­ni­za­tion­al structure

The Hier­ar­chi­cal Orga­ni­za­tion­al struc­ture of a com­pa­ny refers to clas­sic types of orga­ni­za­tion­al sys­tems. It estab­lish­es clear­ly defined func­tions, rights and respon­si­bil­i­ties of employ­ees. The cen­tral node is respon­si­ble for control.


At its core, a hier­ar­chi­cal struc­ture refers to a pyra­mid: the high­est lev­el of pow­er sits at the top, and the lev­els of pow­er decrease from top to down.

In this method of orga­ni­za­tion, deci­sion-mak­ing is also top-down. Exec­u­tives or upper man­age­ment make cru­cial deci­sions and then pass them down to mid­dle man­agers, and fur­ther down to low­er-lev­el employ­ees for implementation.

There are hier­ar­chi­cal orga­ni­za­tions with dif­fer­ent lev­els of man­age­ment, pow­er or author­i­ty. This is the dom­i­nant mode for large tra­di­tion­al orga­ni­za­tions like Gov­ern­ments and orga­nized religions.

Pros

  • Sim­ple and clear orga­ni­za­tion­al structure;
  • Has a clear hier­ar­chy and report­ing lines;
  • Easy to manage;
  • Effec­tive for small companies.​​​​​​​​​

Cons

  • Inflex­i­ble and slow to make decisions;
  • Lim­it­ed com­mu­ni­ca­tion between departments;
  • Not suit­able for fast-grow­ing companies.​​​​​​​

2️⃣Func­tion­al Orga­ni­za­tion­al structure

This type of orga­ni­za­tion­al frame­work involves the divi­sion of respon­si­bil­i­ties accord­ing to pro­fes­sion­al skills. Employ­ees are grouped accord­ing to the func­tion they pro­vide. Besides the gen­er­al direc­tor, there are direc­tors respon­si­ble for their areas: sales, pro­duc­tion, mar­ket­ing direc­tor, etc.


A Func­tion­al struc­ture is one of the most com­mon among oth­er types of orga­ni­za­tion­al struc­tures. This struc­ture estab­lish­es clear expec­ta­tions and has a well-defined chain of com­mand. How­ev­er, this struc­ture runs the risk of being too con­fin­ing, it can impede employ­ee growth and cross-depart­ment com­mu­ni­ca­tion and collaboration.

At the same time, func­tion­al struc­ture facil­i­tates spe­cial­iza­tion, scal­a­bil­i­ty and account­abil­i­ty. This mod­el is tra­di­tion­al­ly used by hold­ings — enter­pris­es with many areas of activ­i­ty and a wide range of products.

Pros

  • High spe­cial­iza­tion of employees;
  • Effi­cient use of resources;
  • Easy to coor­di­nate the work of specialists.​​​

Cons

  • Bureau­crat­ic and slow;
  • Lim­it­ed cross-func­tion­al communication;
  • Not suit­able for fast chang­ing markets.

3️⃣Hor­i­zon­tal or flat Orga­ni­za­tion­al structure

Man­age­ment sys­tem with a min­i­mum num­ber of mid­dle man­agers. Deci­sions in such types of orga­ni­za­tion­al sys­tems are main­ly made by line employ­ees with rel­e­vant expe­ri­ence and competencies.


Under a Hor­i­zon­tal struc­ture, the com­pa­ny has a short chain of com­mand. It allows employ­ees to focus and invest time in big goals because they have more auton­o­my, free­dom and inde­pen­dence to car­ry out their roles and responsibilities.

This cor­po­rate struc­ture type is most­ly adopt­ed by small com­pa­nies and start-ups in their ear­ly stage because their work and effort in a small com­pa­ny are rel­a­tive­ly trans­par­ent. So, deci­sion-mak­ing pow­er is shared and employ­ees are held account­able for their decisions.

Hor­i­zon­tal or flat Orga­ni­za­tion­al struc­ture is almost impos­si­ble or just use­less for larg­er com­pa­nies with many projects and employ­ees. Most like­ly, as your busi­ness grows, you will have to choose from oth­er types of orga­ni­za­tion­al systems. 

Pros

  • Fast deci­sion-mak­ing;
  • Excel­lent com­mu­ni­ca­tion and cooperation;
  • High employ­ee motivation.​​​​​

Cons

  • Requires high­ly qual­i­fied and self-dis­ci­plined employees;
  • Not suit­able for large companies;
  • Com­plex tasks are dif­fi­cult to coordinate.​

4️⃣Divi­sion­al Orga­ni­za­tion­al structure

In this orga­ni­za­tion­al struc­ture, the gen­er­al man­ag­er is respon­si­ble for the strat­e­gy and devel­op­ment of the com­pa­ny, and the heads of divi­sions are respon­si­ble for their oper­a­tional man­age­ment. The duties, respon­si­bil­i­ties and tasks of each man­ag­er will depend on the busi­ness specific.


The divi­sion­al orga­ni­za­tion­al struc­ture is used more often than oth­er types of orga­ni­za­tion­al sys­tems by cor­po­ra­tions and large orga­ni­za­tions due to its wider range of prod­ucts and ser­vices. Each divi­sion has its own divi­sion which cor­re­sponds to either prod­ucts or geo­gra­phies and con­tains the nec­es­sary resources and func­tions need­ed to sup­port the prod­uct line and geography.

Such cor­po­ra­tions can focus on var­i­ous divi­sions more close­ly with Divi­sion­al orga­ni­za­tion­al struc­ture. The main advan­tage of this struc­ture is the inde­pen­dent oper­a­tional flow, that fail­ure of one com­pa­ny does not threat­en the exis­tence of the others.

Pros

  • Quick adap­ta­tion to mar­ket changes
  • Unit auton­o­my
  • Increas­ing the respon­si­bil­i­ty of managers.

Cons

  • Dupli­ca­tion of functions
  • High costs and increase in account­ing taxes
  • Dif­fi­cult cross-depart­ment coordination.

5️⃣Matrix Orga­ni­za­tion­al structure

Com­plex orga­ni­za­tion­al struc­ture, where the per­former simul­ta­ne­ous­ly reports to the func­tion­al man­ag­er and the project man­ag­er. Nar­row spe­cial­ists may be tem­porar­i­ly sub­or­di­nat­ed to the man­ag­er of a spe­cif­ic project. How­ev­er, he is not relieved of his main job.


For exam­ple, a PR spe­cial­ist may have report­ing oblig­a­tions with­in the mar­ket­ing and prod­uct teams. A more com­plex exam­ple for a large com­pa­ny: all engi­neers may be in one engi­neer­ing depart­ment and report to an engi­neer­ing man­ag­er. But these same engi­neers may be assigned to dif­fer­ent projects and might be report­ing to those project man­agers as well.

A Matrix Orga­ni­za­tion­al struc­ture can be more com­plex than oth­er types of orga­ni­za­tion­al sys­tems, so it can cause con­fu­sion about account­abil­i­ty and com­mu­ni­ca­tion, espe­cial­ly among new employ­ees. There are mul­ti­ple report­ing oblig­a­tions in such an orga­ni­za­tion­al structure.

Pros

  • Flex­i­ble and adap­tive orga­ni­za­tion­al structure;
  • Effi­cient use of resources;
  • Allows you to imple­ment com­plex projects.

Cons

  • Com­plex and con­fus­ing due to mix­ing dif­fer­ent types of orga­ni­za­tion­al systems
  • Requires pre­cise coordination
  • May lead to conflicts.

6️⃣Team-based Orga­ni­za­tion­al structure

Team-based Orga­ni­za­tion­al struc­ture is formed of teams work­ing towards a com­mon goal while work­ing on their indi­vid­ual tasks. Such teams include dif­fer­ent spe­cial­ists (man­agers, sup­pli­ers, pro­duc­tion work­ers, tech­nol­o­gists, finance spe­cial­ists) who work toward a com­mon goal while per­form­ing their own spe­cial­ized tasks.


Each team has auton­o­my and inde­pen­dence and is ful­ly respon­si­ble for the results of its work. Because they’re all on the same team and reg­u­lar­ly inter­act with each oth­er, they com­mu­ni­cate ideas faster com­pared with oth­er types of orga­ni­za­tion­al sys­tems. Fur­ther, pro­fes­sion­als may reach out to oth­er depart­ments with­in the orga­ni­za­tion for information.

Team Orga­ni­za­tion struc­tures have changed the way many indus­tries work around the world to pro­duce goods and ser­vices coop­er­a­tive­ly. They are less hier­ar­chi­cal and have flex­i­ble struc­tures that rein­force prob­lem-solv­ing, deci­sion-mak­ing, and teamwork.

Pros

  • High employ­ee moti­va­tion and involvement;
  • Fast deci­sion-mak­ing;
  • Flex­i­bil­i­ty and adaptability.​

Cons

  • Requires com­pat­i­ble teams;
  • Not suit­able for all tasks;
  • It is dif­fi­cult to coor­di­nate the work of dif­fer­ent teams.​​​​

7️⃣Net­work Orga­ni­za­tion­al structure

A hybrid solu­tion that com­bines divi­sion­al and matrix types of orga­ni­za­tion­al sys­tems, their adapt­abil­i­ty and uni­fied man­age­ment of basic func­tions. A net­work struc­ture pri­or­i­tizes col­lab­o­ra­tion and pos­i­tive rela­tion­ships more than hierarchy.


Com­pared with oth­er types of orga­ni­za­tion­al sys­tems, net­worked orga­ni­za­tions do not have a hier­ar­chi­cal orga­ni­za­tion­al chart. Instead, they make clus­ters made up of dif­fer­ent depart­ments, busi­ness units, or local offices, which work togeth­er when need­ed and use the full resources of an orga­ni­za­tion to meet cus­tomer goals.

A Net­work orga­ni­za­tion­al struc­ture is the most ben­e­fi­cial when a com­pa­ny has many divi­sion­al com­po­nents in dif­fer­ent geo­graph­ic loca­tions. It is a sys­tem that involves inter­act­ing with inter­nal and exter­nal par­ties to deliv­er a prod­uct or ser­vice. By focus­ing on core com­pe­ten­cies, each orga­ni­za­tion can offer its best prod­ucts or ser­vices to reach defined goals.

Pros

  • Flex­i­ble and adaptive;
  • Low costs;
  • Allows to quick­ly bring new prod­ucts to market.

Cons

  • Com­plex control;
  • Lim­it­ed coordination;
  • Not suit­able for all niches.

8️⃣Process-based Orga­ni­za­tion­al structure

The main fea­ture of the Process-based Orga­ni­za­tion­al struc­ture is the pri­or­i­ty of process­es rather than func­tions. For such a com­pa­ny, busi­ness is a set of process­es, strate­gic plans, and a sus­tain­able sys­tem of improve­ments. While a strict­ly func­tion­al struc­ture and some oth­er types of orga­ni­za­tion­al sys­tems often com­part­men­tal­ize work, a process-based approach pri­or­i­tizes the inter­con­nect­ed­ness of tasks with­in the big­ger picture.


So, the Process-based struc­ture is orga­nized to fol­low a product’s or service’s life cycle. For exam­ple, this orga­ni­za­tion­al struc­ture can be bro­ken down into R&D, prod­uct cre­ation, order ful­fill­ment, billing and cus­tomer services.

A Process-based orga­ni­za­tion relies on the idea that final prod­ucts or ser­vices are the result of a sequence of inter­nal process­es. All these inter­nal process­es should be orga­nized as well as pos­si­ble. The cus­tomer acqui­si­tion process can’t start until you have a ful­ly devel­oped prod­uct to sell. By the same token, the order ful­fill­ment process can’t start until cus­tomers have been acquired and there are prod­uct orders to fill.

Cus­tomer acqui­si­tion and order ful­fill­ment are two sides of the same coin, with one fuel­ing the oth­er in a con­tin­u­ous loop. These process­es dance in tan­dem, where cus­tomer acqui­si­tion sets the stage, and order ful­fill­ment deliv­ers the per­for­mance. Smooth exe­cu­tion requires both process­es to be planned and coordinated. 

Pros

  • Allows to reduce pro­duc­tion costs;
  • Increas­es effi­cien­cy and speed;
  • Each project par­tic­i­pant under­stands the impor­tance of their work.​​

Cons

  • Pos­si­ble con­flicts between the dif­fer­ent process groups;
  • Could cause com­mu­ni­ca­tion breakdowns.

9️⃣Cir­cu­lar Orga­ni­za­tion­al structure

Cir­cu­lar Orga­ni­za­tion­al struc­ture is based on a demo­c­ra­t­ic hier­ar­chy. Man­agers here are not com­man­ders, but lead­ers. They’re at the cen­ter of the orga­ni­za­tion, spread­ing their vision out­ward. Deci­sions are made col­lec­tive­ly by all mem­bers of the organization.


Unlike the siloed nature of tra­di­tion­al types of orga­ni­za­tion­al sys­tems, where depart­ments oper­ate some­what inde­pen­dent­ly, the cir­cu­lar mod­el visu­al­izes every­one as inter­con­nect­ed parts of a uni­fied whole.

A Cir­cu­lar orga­ni­za­tion is fos­ter­ing long-term col­lab­o­ra­tion and cre­ativ­i­ty, intend­ing to empow­er peo­ple. Soft skills, such as atti­tude, team­work, com­mu­ni­ca­tion, and deci­sion-mak­ing capa­bil­i­ties are crit­i­cal for a Cir­cu­lar Orga­ni­za­tion­al structure.

Pros

  • Infor­ma­tion flow­ing freely across the business;
  • Con­nect­ing indi­vid­u­als to the big­ger picture;
  • Encour­ag­ing employ­ees to col­lab­o­rate between departments.

Cons

  • Can be con­fus­ing, espe­cial­ly for new employees;
  • Unclear report­ing lines for new hires.

🔟Line Orga­ni­za­tion­al structure

This is one of the sim­plest and very com­mon types of orga­ni­za­tion­al sys­tems, con­sist­ing of chains, where each lev­el of man­age­ment has clear author­i­ty over the next lev­el down. Deci­sions go down the chain from the top to the deputies, then to depart­ment heads and spe­cial­ists. The chain of com­mand allows each depart­ment head to have con­trol over their departments.


In sim­ple words, line orga­ni­za­tions have clear lines of author­i­ty (chain of com­mand) run­ning from the top of an orga­ni­za­tion down to the low­est lev­els. Inde­pen­dent deci­sions can be tak­en by line offi­cers because of its uni­fied structure.

Unlike oth­er struc­tures, sup­port­ive ser­vices do not take place in these orga­ni­za­tions. The main advan­tage of a line struc­ture can be iden­ti­fied as sta­bil­i­ty to the company.

Pros

  • Sim­ple interaction;
  • Rights and respon­si­bil­i­ties are clear­ly delineated;
  • High lev­el of dis­ci­pline and control;
  • Per­form­ers have oppor­tu­ni­ties for career growth.

Cons

  • Man­agers deal with a wide range of issues, which can reduce their focus;
  • The final deci­sions of spe­cif­ic indi­vid­u­als, includ­ing incor­rect ones, affect the entire company;
  • There is no com­mu­ni­ca­tion between per­form­ers and high­er man­age­ment levels;
  • Oppor­tu­ni­ties for abuse of pow­er in a high position.

Find­ings

There are the most com­mon types of orga­ni­za­tion­al struc­tures, but there is no one ​“right” struc­ture. So, which struc­ture will work best for your com­pa­ny? To find the cor­rect answer, you should know your com­pa­ny very well, from cur­rent roles and teams to the strate­gic plan.

How are job func­tions cur­rent­ly orga­nized, and does it fos­ter com­mu­ni­ca­tion and pro­duc­tiv­i­ty? And what about employ­ee growth? Feed­back from employ­ees, lead­er­ship and oth­er stake­hold­ers can be very use­ful in order to find the right approach from many types of orga­ni­za­tion­al for­mats. But the main goal of the best (for you) orga­ni­za­tion­al struc­ture is to sup­port your strate­gic plans.

Con­sid­er this and don’t doubt about using dif­fer­ent flex­i­ble and hybrid types of orga­ni­za­tion­al frame­work. It can change along the life cir­cle and com­pa­ny devel­op­ment. Find your opti­mal path that will sup­port your pro­duc­tive man­age­ment strategy.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​
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