Types of Organizational Structures in Business

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There are many different types of organizational structures for businesses. Companies use different structures to organize tasks and responsibilities. Which one is right for you?

This blog post explores the four most common types of business structures: functional, product line, matrix, and project-based. We also discuss what each type entails and how it can help your organization succeed.

What Is Corporate Structure?

A corporate structure is a way to organize employees and business units in relation to each other. That’s why it’s important to choose a corporate structure for your business. The type of organizational structure your company uses can have a major influence on its culture, its performance, and its ability to implement strategic initiatives. This is why it’s important for managers and leaders to find the best fit possible based upon their organization’s current needs and goals.

8 Common Business Organizational Structures

Hierarchical Organizational Structure

A hierarchical organizational structure is one in which employees are arranged into levels of authority. Smaller companies usually have employees report to a single manager. Larger organizations may require multiple managers at different chains of command.

This type of structure works well when the company needs centralized decision-making and personal contact between management and staff. For example, insurance brokers and retail stores often rely on this type of structure.

It can also be useful for providing specialized training opportunities such as individual career paths within large corporations.

Matrix Organizational Structure

This business structure features departmental teams that share responsibility across functional lines. Each team member reports to two bosses. One is from their general area and another represents the project they’re working on, such as with a new product launch). This can be an effective structure when multiple projects are happening at once but the company doesn’t want to create more levels of management.

Functional Organizational Structure

This is a business structure wherein employees work on tasks related only to their functional area rather than working on cross-functional teams or reporting to one manager. Employees don’t usually have “line authority” over others. If they do, it’s usually within their own department.

Functional organizations may perform better with stable products where each project spans several years and needs substantial training for staff members who frequently rotate due to short-term goals and the fast pace of change. In this type of structure, managers tend to focus on the optimization of individual workgroups.

Product Line Organizational Structure

A product line organizational structure involves arranging employees into different business units based upon which products they manage. This can be helpful when you’re working with multiple brands or sub-brands that require specific training and resources to develop each unique offering well.

Like functional structures, it also works best in situations where there are few projects happening at once rather than many simultaneously occurring ones. This is because product lines often span several years before new releases come out.

Project-Based Structures

This type of business structure is one in which teams take responsibility for specific project goals only until the project is complete. After that the team disbands.

It can be an effective business structure when you want employees to work together on cross-functional teams but you don’t need ongoing resource support or long-term commitment between workers and managers.

However, project teams are not great for training new hires since they come and go so quickly. It’s also difficult for companies that rely on these types of organizational structures to retain specialized knowledge. This is because expertise tends to get spread out across multiple projects rather than concentrated in one group.

Customer Organizational Structure

This organizational structure is one in which managers group employees by the customers they support. This can be a great business structure when you need individualized customer service and want to create opportunities for career growth within your company. This is because each employee will work with different clients frequently throughout their time at the organization.

However, companies that use this type of organizational structure run the risk of losing focus on their overall goals. This is because there’s no clear way to prioritize projects or measure performance across all customers and markets equally well.

Geographic Organizational Structure

This is a business structure in which different divisions are arranged according to the geographical location of their staff. Geographic organizations can be helpful when you need flexibility and don’t want employees’ primary loyalties divided by region. However, this type of company may run into trouble if some locations have more resources than others or fail to support key markets equally well. This can happen due to unclear performance measurements across all geographies.

Network Organizational Structure

This is a business structure in which employees are organized by the specific people they work with. This works best for projects that require intensive collaboration and information-sharing between key parties. The downside of this type of company is that it can be difficult to measure individual performance or identify areas where different divisions need more training or resources. This can happen when team members often don’t have direct contact with each other daily.

Conclusion

Understanding the different types of organizational structures can help you decide which is best for your company. We’ve provided a list that will give you an idea about what each type entails and how it might impact your business. So take some time to learn more about them today.