What are the most common types of organizational structures?

1 Functional structure

A functional structure is one where the organization is divided into departments based on their functions, such as marketing, finance, human resources, and production. Each department has its own manager who reports to the top-level executive. This structure is suitable for organizations that have a stable and predictable environment, a clear and focused strategy, and a high degree of specialization. A functional structure can foster efficiency, expertise, and accountability within each function. However, it can also create silos, communication barriers, and coordination problems across functions.

2 Divisional structure

A divisional structure is one where the organization is split into units based on their products, services, markets, or regions. Each unit has its own resources, functions, and manager who reports to the top-level executive. This structure is suitable for organizations that have a diverse and dynamic environment, a broad and diversified strategy, and a high degree of differentiation. A divisional structure can foster flexibility, responsiveness, and customer orientation within each unit. However, it can also create duplication, competition, and conflict across units.

3 Matrix structure

A matrix structure is one where the organization combines both functional and divisional structures. Employees have dual reporting relationships: they report to both a functional manager and a project or product manager. This structure is suitable for organizations that have a complex and uncertain environment, a multidimensional and innovative strategy, and a high degree of interdependence. A matrix structure can foster collaboration, creativity, and integration across functions and units. However, it can also create confusion, ambiguity, and power struggles among managers.

4 Network structure

A network structure is one where the organization outsources some of its functions or activities to external partners, such as suppliers, contractors, consultants, or distributors. The organization retains its core competencies and coordinates with the partners through contracts, agreements, or alliances. This structure is suitable for organizations that have a turbulent and competitive environment, a flexible and adaptive strategy, and a high degree of outsourcing. A network structure can foster agility, scalability, and cost-effectiveness for the organization. However, it can also create dependency, risk, and quality issues with the partners.

5 Hybrid structure

A hybrid structure is one where the organization adopts more than one type of structure to suit its needs and goals. For example, it may use a functional structure for its core functions and a divisional structure for its new ventures. Or it may use a matrix structure for its global operations and a network structure for its local operations. A hybrid structure is suitable for organizations that have a diverse and evolving environment, a balanced and customized strategy, and a high degree of complexity. A hybrid structure can foster alignment, diversity, and innovation for the organization. However, it can also create inconsistency, complexity, and confusion within the organization.