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Organizational structure describes and aligns the reporting aspect as well as functional culture of a company. There are several types however in general, there are four types: functional, divisional, matrix, and flat. Each of these types have advantages and disadvantages associated with them and depending upon the organization, some will work better than others.
For a functional structure, this tends to be used often by organizations that have an R&D department that delivers a physical product. According to the Society for Human Resources Management (2021), this is essentially a vertical parsing hierarchy where the functions of various groups is used as the division. For example, Finance and Product Quality Assurance are two different functions and are thus divided accordingly. Advantages of this is that it allows for experts in their fields to efficiently complete their tasks.
Divisional structures tend to divide organizations in ways such as a geographical level. According to Noe et al (2019), these divisions work for organizations that depend upon the quick turnaround from local sources. Organizations such as banks with international branches do well with a divisional structure since their services tend to revolve around the local population of said bank. In the case of a geographical divisional structure, the main advantage is that each division can react quickly to changing and immediate needs without having to wait for hierarchical decisions from places that might be on opposite timezones.
A matrix structure is essentially a cross functional collaboration between various expertise groups lead by a main project leader. This is advantageous because this combines the various departments in an effort to have the greatest knowledge base in the most efficient way. A flat structure is one where the standard hierarchy is not strictly implemented. This works well with start-ups of various kinds because it allows free communication between all individuals involved. Both of these structures promote the most collaborative and communicative efforts culture and working environment.
References
Noe, R, Hollenbeck, J., Gerhart, B., & Wright, P. (2018). Human resource management (11th ed.). New York, NY: McGraw-Hill Education.
Society for Human Resources Management (SHRM). (2021). Understanding organizational structure. https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/understandingorganizationalstructures.aspx. Retrieved November 24, 2021.
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