Organizational structure: types and functions

Organizational structure: types and functions

Every business organization has its structure. Senior management, then middle management as project and product managers, marketing and sales. Finally, the operational staff ranks. Stakeholders are also often part of the company’s structure.

Organizing as a process is a managerial function that is most obviously and directly related to the continuous coordination of many tasks and the establishment of formal relationships between the people who perform them. Organizing is a process of creating the structure of the organization that enables people to work together and effectively to achieve its goals.

The organizational structure is the formally defined framework of power relations and obligations.
The decision for one or another organizational structure in an organization is always made by its top management.

When it comes to choosing an organizational structure, the task of managers is to choose a structure that best meets the goals and objectives of the organization and the impact of internal and external factors.

The “best structure” is the one that best allows the organization to interact effectively with the external environment, productively and appropriately distribute and direct the efforts of its employees, meet the needs of its customers and achieve its goals at a high level. efficiency.

Stages of organizational design

The consistency in the development of an organizational structure coincides with the elements of the formal planning process.

Initially, managers must distribute the organization to broad areas, and then set specific tasks, just as in planning, general tasks are formulated first, and then specific plans are developed.

When creating an organizational structure, the sequence of actions is as follows:

1. Dividing the organization horizontally into broad blocks. At this stage, it is decided which types of activities should be performed by the line divisions/management bodies / and which by the staff/specialists/;
2. Establishing the relations between the powers of the various positions. At this stage, the smaller organizational units are formed. The purpose of this division is to use specialization more efficiently and to avoid overburdening individual managers;
3. Development of job descriptions – refer to specific jobs and are handed over to specific persons.

The organizational structure of any organization is always an object that is subject to design, construction, and operation. It is a long and complicated process.

Each stage contains separate phases, and each phase – separate activities and works. They are carried out with different design methods. In addition, each stage ends with a specific result, which is the reason to start the next stage.

Very often adjustments and improvements of the organizational structure are required. They are usually dictated by changes in the strategic goals of the organization and a change in the external environment. So the process of organizational design is endless.

Bureaucratic organizational structure

The concept of bureaucracy was originally formulated by the German sociologist Max Weber. His theory does not contain a description of specific organizations. He proposes bureaucracy as an ideal that the organization should strive for.

According to Weber, the characteristics of rational bureaucracy are as follows:

1. clear division of labor;
2. hierarchical management structure;
3. existence of a complex system of rules and standards, which ensure homogeneity of the works and tasks performed by the associates and their coordination;
4. formal depersonalization of the persons who perform their duties;
5. employment in the organization is based on rules.

The bureaucratic structure is characterized by a high degree of division of labor, developed pyramid hierarchy, long chain of command, the presence of numerous rules and norms of staff behavior, and selection of personnel according to their business and professional qualities.
Weber called this structure rational because he assumed that the decisions made in it were objective.
The bureaucratic structure is also known as the classic or traditional organizational structure.

Negative characteristics of the bureaucratic organizational structure

1. There is an exaggeration of the importance of standard rules and procedures, which hinders the flexible behavior of the organization.
2. Lack of ability to react quickly and promptly to the impact of the external environment.


To account for differences in the strategy and tasks of organizations, managers use different systems of departmentalization. This concept means the process of dividing organizations into different blocks, which may have different names: departments, divisions, sectors, etc.

Functional organizational structure

Functional departmentalization is a process of dividing the organization into separate elements, each of which has a clearly defined specific task and obligation.

Traditional functional blocks are production, marketing, finance. When the size of the organization is large, the main functional departments in it can in turn be divided into smaller functional units. They are called secondary or derivatives.

The so-called production department is divided into the sector: technical preparation of production, sector repair and maintenance, operational planning sector The main idea of ​​this division is to maximize the benefits of specialization and avoid excessive workload of management.

Advantages of the functional organizational structure

Stimulating business and professional specialization;
Reduction of duplication of efforts and consumption of material resources in the functional areas;
Improving coordination within functional areas.
Shortcomings of the functional organizational structure: a contradiction in the goals of the departments with the general goals of the organization;
In large organizations, the chain of command becomes too long.

Divisional structure

To meet the new challenges, the management of large companies has developed so-called divisional organizational structures. In this type of structure, the division of the organization into elements and blocks takes place by types of goods or services, groups of users, or geographical regions.

Product organizational structure

As a result of diversification in some large companies are formed products with such a volume of production and sales that they prove to be a decisive factor for the success of the organization as a whole.

In these cases, the most appropriate is the divisional-product organizational structure. In it, the structuring is based on the individual product. The authority of the management for the production and sale of a product is transferred to a manager who is fully responsible for this type of product.

User-oriented organizational structure

It is suitable for organizations that cover large geographical areas, especially for those operating in international markets.
The regional structure facilitates the solution of problems related to local legislation, customs and traditions, needs, and specifics of buyers.

Global organizational structure

The global organizational structure is typical for organizations operating on the international market.
The most widespread are two types of global structures – global product structure and global regional structure.

The global product structure is most suitable for companies in which the difference between the products produced is more important than the difference between the different regions in which they are sold.

The regional product structure is most suitable for organizations in which regional differences are more important than differences in manufactured products.

Adaptive structures

Their main characteristic feature is that they enable the organization to react faster and more efficiently to changes in the external environment. They are called adaptive because they can be quickly modified according to changes in the external environment and the needs of the organization itself. Currently, two types of adaptive structures are used – design and matrix structures.

Project structure

The project organizational structure can also be called a temporary organizational structure because it is created to solve a specific task.

The purpose of its creation is to form a team of highly qualified associates of the organization to work on a complex project with a fixed deadline, quality, and cost.

When the project is completed, the team disbands. Employees start working on a new project or return to the inpatient department or leave the organization.

The main advantage of the project structure is the ability to concentrate efforts on solving a single task within the organization.

There are several types of design structures. In the so-called pure project structure, the temporary group of specialists is essentially a scaled-down copy of the functional structure of the organization.

All members of the group are subordinated to the project manager and he manages all the resources provided to him. The clean design structure is suitable for solving large-scale tasks.


Matrix organizational structure

The members of the project team are subordinated both to the project manager and to the head of the stationary department in which they work permanently.

The project manager owns the so-called project authorizations. These powers can range from total linear authority over all project details to virtually purely staff powers. In this type of structure, the project manager is responsible for the implementation of all work and tasks and the allocation of all resources related to the project.

The main disadvantage of the matrix organizational structure is its complexity, related primarily to double subordination. The advantage of the matrix organizational structure is. the ability to achieve certain flexibility that cannot be achieved in functional structures.

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