Creating an organizational structure is critical for every business.
This is not just a task for large companies either. Even small companies and start-ups benefit from building a functional structure for their business.
A company’s structure is usually visualized through an organizational chart.
However, if you are not familiar with designing an organizational chart, it can be a challenge.
In this post, I’ll explain what an organizational structure is and share the types of organizational charts you can create.
Ready to build your organizational structure? Check out our Organizational Chart Maker or organizational chart templates to visualize your business structure in minutes.
Click to jump ahead:
- 9 common types of organizational structure
- How do you choose the best organizational structure for your business?
- What is a modern organizational structure?
- How to create organizational charts with Venngage
Related: 11 Types of Charts and How Businesses Use Them
9 common types of organizational structure
An organizational structure helps bring a company’s day-to-day processes to life.
Nowadays, there is no shortage of types of organizational structures and understanding which one best suits your business is important for success.
For example, a flat organization structure could be suitable for businesses with multiple departments or even small businesses.
Let’s explore the different types of org structures and the pros and cons of each.
Hierarchical org structure
This is the most common type of organizational structure, where employees are grouped together under centralized leadership.
These org structures usually take the form of a pyramid to visualize multiple levels of authority.
Pros
- Clear definition of authority
- Creates specialized employees
Cons
- Hinders innovation
- Prevents flexibility
Divisional org structure
A divisional structure is often used by large companies that divide teams based on services, products, and geographic areas.
This structure allows each separate department to have its own leadership team and resources.
Pros
- Promotes flexibility and quick decision-making
- Efficient allocation of resources
Cons
- Discourages standardized cross-organizational practices
- Can lead to coordination and communication issues across divisions
Line org structure
A line organizational structure is similar to a hierarchial structure where the authority flows from top to bottom.
It is considered one of the simplest types of organizational structure with departments usually overseen by a general manager.
Pros
- Clear authority
- Efficient decision-making
Cons
- Rigid and resistant to changes
- Overreliance on top management
Functional org structure
A functional organizational structure focuses on functions or he specialties of each department.
Functional structure groups are created for different departments according to their tasks., such as a marketing team, finance, human resources department, or sales team.
Here’s a simple example that outlines this type of organizational structure with functional managers.
Pros
- Promotes employee specialization
- Establishes clear chain of command
Cons
- Hampers fast decision-making due to multiple management levels
- Hinders cross-communication by establishing silos
Process-based org structure
A process-based org structure is similar to a functional organizational structure.
When creating a process-based org structure, one must work around the processes in the company and how employees perform and interact with one another.
Instead of visualizing a chart from top to bottom, a process-based structure works from left to right.
This helps make the organization more linear and efficient.
Pros
- Promotes specialization and expertise
- More adaptable to change
Cons
- Creates silos within a organization
- Can lead to the duplication of tasks
Team-based org structure
A team-based org structure is a flexible structure where employees are grouped together to form specific tasks.
Employees are allowed to move from one team to another once they have completed a project.
The team structure encourages cooperation and collaboration among members of various departments under a project manager.
Plus, it gives employees the opportunity to improve their skills.
Pros
- Promotes cross-functional skill development
- Teams can be formed and disbanded quickly
Cons
- Lack of clear chain of command
- Can lead to disparities in workload
Flat org structure
The flat org structure is also referred to as a horizontal structure because the middle management is removed.
A small business with a lower headcount usually adopts this organizational structure.
This type of internal structure gives employees a lot of autonomy to make their own decisions, allowing them to be analytical and responsible for their actions.
However, there is generally little room for growth in a flat organization.
Pros
- Promotes open communication and organizational unity
- Fast decision-making
Cons
- Can create role ambiguity
- Limited opportunities for promotion
Matrix org structure
For a matrix structure, employees with similar skills are grouped together.
They can report to different managers but reporting relationships depend on the type of company.
The matrix organizational structure is used by big corporations. It encourages sharing of skills and knowledge to achieve business goals.
Pros
- Leads to professional growth as employees get exposed to different teams
- Promotes cross-collaboration communication of teams and employees
Cons
- Complex reporting structure can create confusion
- Can slow down decision-making due to the presence of several stakeholders
Circular org structure
Last but not least is the the circular organizational structure.
This structure positions leaders in the inner rings of the corporate circle. On the other hand, the employees are on the outer rings.
In most organizational structures, different departments work independently but in a circular organizational structures, the objective is to remove this type of separation so employees and leaders can feel part of the same whole.
Pros
- Gives employees autonomy
- Drives innovation
Cons
- Requires strong communication skills
- Lack of clear chain of command
How do you choose the best organizational structure for your business?
The sheer number of organizational structures available to businesses can feel overwhelming.
The best way to decide on the right org structure for your own company is to look at a few aspects of your organizational behavior.
Think about your strategic needs, your current employees, new employees you might hire, business technology, and future business goals.
Choose a more rigid and straightforward structure if your products and services follow a strict process.
It’s also recommended for large corporations where several managers and supervisors are assigned to ensure everyone is working on their tasks.
Here’s one you can use right now.
On the other hand, circular structures are best for industries where changes could happen overnight. These are industries that need to adapt their change management strategy quickly.
Think advertising companies or consulting firms where tasks differ depending on the client.
Since the organizational structures for this type of environment are more relaxed, employees can pitch fresh ideas, which help create better proposals for your clients.
What is a modern organizational structure?
A modern organizational structure does not support any hierarchy.
These new divisional structures remove the boundaries between departments so everyone can work together to achieve business objectives.
This is the kind of structure that is exemplified in Netflix culture, as you can see in the chart below.
While this encourages open communication and sharing of skills, it does have its own disadvantages. Employees can become confused about whom to report to directly for internal issues or concerns.
Despite this, modern organizational structures empower employees at all levels, fostering an environment of learning and growth that removes divisions based on status.
How to create organizational charts with Venngage
What makes an effective organizational chart?
Well, it should be an accurate reflection of your company. The chart should also have room to expand as your company grows.
But creating an organizational chart from scratch can be time-consuming when you have other responsibilities.
It’s best to use customizable templates instead. Venngage has a library of organizational chart templates that will suit any type of organizational structure.
To get started, and sign up for free a free Venngage account to start creating from scratch or edit an organizational chart template.
Our smart templates make it easy to add or remove sections of the chart. Click on the ‘+’ or ‘-‘ button and the node gets duplicated.
When you add text, images, or icons, the nodes automatically resize, so you can design faster. Once you’re done, you can share the chart online or on social media.
Unlock more features with a Venngage Business account. Access real-time collaboration to invite team members and share instant feedback.
You also get priority support with Venngage for business, plus download options. Download in a variety of formats including PNG, PNG HD, PDF, Interactive PDF, and even PowerPoint presentation.
In conclusion: Visualize your organizational structure according to your business needs, now and in the future
Now you know the organizational structure that will best suit your company and your growth plan.
This will help your employees stay aligned, understand who they need to report to, and help your company handle change management processes.
You can also visualize organizational structures using organizational chart templates from Venngage. With a simple yet smart editor, you can easily design org charts that your teams can follow and serve as an ideal addition to a new employee’s onboarding.