Understanding of organizational structure, functions, types and factors that influence it

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Understanding of organizational structure, functions, types and factors that influence it

Understanding of organizational structure functions types and factors that influence it

Have you ever thought about the importance of the organizational structure? Previous answer this question, what is required of companies and organizations to be successful?

There are many answers to that question. Some people would say the mission is effective; others will say dangan sell products or services that demand high indicates that a successful organization.

In the end, company organizational structures that help determine success.

The organizational structure is defined as “a system that is used to define the hierarchy in an organization. It identifies each job, its functions and where he reported to the organization. “A structure is then developed to define how the organization operates to carry out its objectives.

There are many types of organizational structure. Each organizational structure has advantages and disadvantages of different and only works for companies or organizations in certain situations, or at some point in its life cycle.

According to Gill Corkindale from Harvard University “poor organizational design and organizational structure produce confusing contradictions: confusion in the role, lack of coordination between functions, failure to share ideas, and slow decision making makes managers complex, stress and conflict,”.

“Often those at the top of the organization are not aware of this problem or, worse, think of it as a challenge to overcome or the opportunity to develop.”

In the end, it is important to improve the group organizational structure so that the goal is to succeed.

Understanding organizational structure

Organizational structure is a system used to define a hierarchy in an organization. It identifies every job, it functions and where it reports into the organization.

This structure was developed to determine how businesses operate and help businesses in achieving their goals to enable future growth. The structure is illustrated using the organizational chart.

The organizational structure also determines how information flows between levels in the company. For example, in a centralized structure, decisions flow from top to bottom, while in decentralized structures, the power of decision making is distributed among various levels of the organization.

Having an organizational structure allows companies to remain efficient and focused.

Organizational structure function for businesses

Business requires structure to grow and profitable, if not, you will make people interesting in all the different directions.

Structural planning ensures there is enough human resources with the right skills to achieve company goals, and ensure that responsibilities are clearly set.

Everyone has a job description outlining the task, and every job occupies its own position in the company organizational chart. Here are some organizational structure functions for business:

1. Structure allows better communication

Because the flow of information is very important for the success of the organization, the organizational structure must be designed with clear communication lines.

For example, the Financial Planning and Analysis Department may report to the Head of Finance and Vice President of the Senior Marketing, because the two members of the top management team depend on information and reports provided by financial planning.

2. Clear reporting relationship

Reporting relationships must be clear so that all organizational members understand what their responsibilities and know who they are responsible; If not, the responsibility for a task might fail.

This clear relationship makes it easier for managers to keep an eye on those who are at the lower organizational level.

Every employee benefits by knowing who they can ask for direction or assistance. In addition, managers realize who is outside the scope of their authority, so they do not exceed the limits and disrupt the responsibilities of other managers.

3. Growth and expansion

A rapidly growing company is a company that utilizes its resources as well as possible, including management talents. Good organizational structure ensures that the company has the right person in the right position. The structure may show a weak point or shortcomings in the company’s current management team.

As the company’s growth, the organizational structure must develop with it. Many times more layers of management are made, when one head department has too many individuals who report to him at one time to pay attention and directions needed by each employee so that the employee is successful.

4. Settlement of efficient tasks

Organizational structures well designed with the completion of the project. Project managers can identify better human resources available to them if the coverage of the responsibilities of each department – and the ability of each team member – clear.

A project to develop new products will require market research, for example. The project manager needs to know who in an organization that can provide this study, and permission who must be obtained so that research can be done.

5. Adjust the company’s needs

Companies in different industries require different talent mixtures and relatively greater emphasis on certain management functions.

Software developer companies, for example, often have great development staff. Structuring reporting relations in the development team so that creativity and productivity are maximized, and the deadline is fulfilled, it is very important for the type of company success.

The company often has to go through the reorganization phase where the position of the individual or even the entire department is repositioned in the organizational chart in an effort to better utilize the company’s human resources and make operations run more smoothly.

6. Know what’s wrong

Bad structured organizations found that critical deadlines were not fulfilled because there were no sufficient human resources in each department to resolve all parts of the task given, or because it was not clear the main responsibility of the project.

If individuals are not sure of whom they report, they may find that they are given assignments that are contrary by two or more managers on it.

9 types of organizational structures

1. Functional organizational structure

One of the most common types of organizational structures, functional structures make organizational departments based on public work functions.

An organization with functional organizational structure, for example, will group all marketing into one in one department, group all sales in one separate department, and group all customer service into one in the third department.

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Functional structures allow the presence of high-level specialties for employees, and easily scaled if the organization develops. In addition, this structure is mechanistic – which has the potential to inhibit employee growth – placing staff in the skill-based department can still allow them to explore their fields and find out what they are mastering.


The functional structure also has the potential to create a barrier between different functions – and this can be inefficient if the organization has different product or target market variations.

The obstacles made between departments can also limit the knowledge and communication of people with other departments, especially those that depend on other departments to succeed.

2. Product-based division structure

The division organizational structure consists of several smaller functional structures (i.e. every division in the division structure can have its own marketing team, its own sales team, and so on). In this case – product-based division structure – each division in the organization is dedicated to certain product lines.

This type of structure is ideal for organizations with many products and can help shorten the product development cycle. This allows small businesses to enter the market with a new offer quickly.


It may be difficult to beat the structure of the product-based division, and the organization can end with duplicate resources because different divisions try to develop new offers.

3. Market-based division structure

Another variation of the division organizational structure is a market-based structure, where the division of an organization is based on the market, industry, or customer’s type.

The ideal market-based structure for businesses that have unique products or services for certain market segments, and are very effective if the business has advanced knowledge of the segment. This structure also makes business always aware of changes in demand among different audience segments.


Too much autonomy in each market-based team can cause divisions that develop a system that is not compatible with each other. Division may also end up accidentally duplicate activities that have been handled by other divisions.

4. Geographical division structure

The geographical division structure sets its distribution based – you can guess it – geography. More specifically, the distribution of geographical structures can cover regions, regions, or districts.

This type of structure is most suitable for businesses that need close to the source of supply and / or customers (for example for shipping or for support in place). It also brings together various forms of business expertise, allowing each geographical division to make decisions from a more diverse perspective.


The main disadvantages of the structure of geographical organizations: decision making can easily become decentralized, due to geographical distribution (which can be hundreds, even thousands of miles away from the company’s headquarters) often have great autonomy.

And if you have more than one marketing department – one for each region – you risk creating competing campaigns with (and weakening) other divisions in all your digital channels.

5. Process-based structure

Process-based structure is designed around the end stream to the end of a different process, such as “research & development,” “customer acquisition,” and “order fulfillment”.

Unlike structures that function strictly, process-based structures do not only consider the activities carried out by employees, but also how different activities interact with each other.

To fully understand the diagram below, you need to see it from left to right: Customer acquisition process cannot be started until you have a fully developed product for sale. In the same way, the order fulfillment process cannot be started until the customer has been obtained and there is a product order that must be filled.

The process-based structure is ideal for increasing business speed and efficiency, and is best suited for those in the industry that changes rapidly, because it is easy to adapt.


Similar to several other structures in this list, process-based structures can build a barrier between different process groups. This causes problems to communicate and submit jobs to other teams and employees.

6. matrix structure

Unlike other structures that we have seen so far, the organizational structure of the matrix does not follow traditional hierarchical models. Instead, all employees (represented by the green box) have multiple reporting relationships. Usually, there is a functional reporting line (indicated in blue) and product-based reporting lines (indicated in yellow).

When viewing the organization chart of the matrix structure, the solid line shows a strong direct reporting relationship, while the dotted line shows that the relationship is secondary, or not as strong. In our example below, it is clear that functional reporting is preferred than product-based reporting.

The main attraction of the matrix structure is that it can provide more balanced flexibility and decision making (because there are two command chains, not just one).

Having one project supervised by more than one business line also creates opportunities for this business line to share resources and communicate more openly with each other – things that might not be able to do regularly.


The main deficiency of the organizational organizational structure? Complexity. The more layers of approval that must be passed by employees, the more confused they are about who they must answer.

This confusion can ultimately cause frustration for who has the authority of decisions and products which – and who is responsible for the decision when an error occurs.

7. Circular structure

Although it may seem drastically different from other organizational structures highlighted in this section, the circular structure still depends on hierarchies, with high-level employees occupying a circle in the circle and lower level employees occupy the outer circle.

Even so, leaders or executives in a circular organization are not seen sitting on the organization, sending direction under the command chain. Instead, they are in the center of the organization, spread their vision out.

From an ideological perspective, the circular structure is intended to encourage communication and the flow of free information between various parts of the organization. While traditional structures show different departments or divisions as individuals, semi-autonomous branches, circular structures describe all divisions as part of the same whole.

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From a practical perspective, circular structures can be confusing, especially for new employees. Unlike more traditional up-lower structures, circular structures can make it difficult for employees to know who they report and how they are meant to adjust to the organization.

8. Flat structure

While more traditional structures may look more like a pyramid – with some levels of supervisors, managers and directors between staff and leadership, flat structures limit the level of management so that all staff are only a few steps from leadership.

It may not be always shaped or pyramid, or any form in this matter. As we mentioned earlier, this is also a form of “organic structure” which we recorded above.

This structure is probably one of the most details, employees also considered to be more productive in the environment where fewer hierarchical pressures. This structure may also make staff feel that the managers they have are more like or team members rather than intimidating superiors.


If there are times when the team in a flat organization does not agree on something, such as the project, it may be difficult to adjust and return to track without executive decisions from leaders or managers.

Because how complicated the design of the structure, it might be difficult to determine which managers should be intended by employees if they need an approval or executive decision for something.

So, if you choose to have a flat organization, you must have a level of management or a clearly marked path that can be referred to by the employer when they experience this scenario.

9. Network structure

Network structures are often made when one company works with other companies to share resources – or if your company has many locations with different functions and leadership.

You can also use this structure to explain your company’s workflow if many of your staff or services are subgraded to freelancers or some other businesses.

The structure looks almost the same as the division structure above. However, instead of the office, it might include services that are convicted or satellite locations outside the office.

If your company doesn’t do it all under one roof, this is a great way to show employees or stakeholders how the outsourcing process works outside the location.

For example, if an employee needs help from web developers for blog projects and web developers of trious companies, they can see this type of chart and know which office or person must be contacted outside their own work location.


Chart shapes can vary based on how many companies or locations where you work. If it’s not made simple and clear, there might be a lot of confusion if many offices or freelancers do the same thing.

If you do outsourcing or have several office locations, make sure your organization chart clearly states where each role and function of certain work is so that someone can easily understand the basic process of your company.

Factors that influence organizational structure

Organizational size

Small Business Administration defines the average small business in the world as a company that generates $ 750,000 to $ 35 million per year, and has 100 to 1,500 employees. This is a broad coverage, which is why the size of your organization plays an important role in the structural choices you make.

For example, businesses that only have 10 employees, are best served by simple structures, where you make and apply all strategies and processes, with little or without intermediate management involvement.

However, if you have a business that has 1,000 employees, you can choose top-down structures, which include senior management, middle management, lower management, and your employees, to ensure that your vision is applied correctly.

Business development stage

Organizational structural options are also determined by the life cycle stage of your business. In many cases, companies that are in the early stages of developments they tend to concentrate power and authority in the hands of the founders, and in a small group of trusted advisors.

Many companies at this stage do not have a formal design, because business owners have not mastered the factors that influence the organizational structure. However, when the company enters the growth phase, control often shifts from top-level management to a more resembling structure of the pyramid, where authorities are given at various levels.

Type of business strategy

When trying to understand which factors affect the organizational structure, you must consider the way you position your company on the market.

For example, if you pursue a differentiation strategy to become the first company in your industry that released the best product or service, you need to have a nimble structure that can respond to changes quickly.

The flat structure will be ideal in this scenario, because employees are empowered to make a quick decision without supervisor’s approval.

On the other hand, if your business pursues the existing product and service innovation strategies, the efficiency is the key to success, which may require a high structure or top-down where there is a clear command chain. By aligning your strategy with the example of the most important organizational design principle, you will maximize your chances of sustainable success.


Every organization is different and there is no perfect organizational structure, but one type of organizational structure above may not be all the best for your company.

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