the 7 ½ types of organizational structures - … · the 7 ½ types of organizational structures....

The 7 ½ Types of Organizational Structures

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Without Order,There is ChaosLike it or not, structure brings order. As an organization grows, there is more risk of chaos without structure.In an organization, org structure does 2 things:

And it results in:

playe Clarifies roles & reporting relationshipsplaye Supports good communication

playe E�cient and e�ective work process flowplaye More productive employees

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A Brief HistoryFrom where have we come?

playe First org chart in 1855 by the New York and Erie Railroad

playe Until the early 1950s, most U.S. companies were functionally organized

playe Late 1950s- 1960s - Economic and product growth lead to complexities divisional/product structures sought to control

playe 1970s brought globalization and increased regulations which led to matrix structures

playe Late 1970s until today - organizations have sought to be more flexible and creative in








http://www.mckinsey.com/business-functions/organization/our-insights/beyond-the-matrix-organization

The Science behind StructureThe Science behind StructureAccording to a study by McKinsey and Gallup:

playe 84% of U.S. employees were matrixed to some extent playe 49% of employees serve on multiple teams some daysplaye 18% of employees serve on multiple teams every workday but with

di�erent people, though mostly reporting to the same managerplaye 17% of employees report to di�erent managers in their work with

di�erent teams playe Organizations with clear and accountable roles have a 76% probability

of achieving top-quartile organizational health








http://www.mckinsey.com/business-functions/organization/our-insights/revisiting-the-matrix-organization

How Are You Organized?

Not every organization is organized the same. Exactly how it is organized depends on:

playe The functional groupings of work processes

playe The natural groupings of teams, work groups or units

MYCOMPANY

MYCOMPANY








MYCOMPANY

7 ½ Common Business Organizational Structures

MATRIX

FUNCTIONAL

PRODUCT

CUSTOMER

GEOGRAPHIC

FLAT

HOLACRACY

TRIBES & SQUADS








Matrix Organizational StructureFeatures: playe Reporting levels both horizontally as well

as vertically with cross-company teamwork

playe Employees may be part of a functional group (i.e. engineer) while serving on a team (i.e. a specific product)

Advantages:playe Employees have responsibility for their

department and organizational projectsplaye Cross-team collaboration minimizes

departmental and data silos

Challenges:playe Employees may receive direction from

two di�erent managersplaye It may be di�cult to prioritize work

responsibilities

Example of a Matrix Organizationplaye Starbucks


CEO

ManagerAdmin & HR

ManagerProjects

ManagerManufacturing

ManagerEngineering

ManagerMarketing

Project A

Project B

Project C

Corporate Sta�







http://panmore.com/starbucks-coffee-company-organizational-structure

Functional Organizational Structure

Features: playe Individuals are grouped by specific functions

performedplaye Common departments are organized by

separating each area and managing them independent of the others

Advantages:playe Functions are separated by expertiseplaye There are clear roles, responsibilities and

lines of command

Challenges:playe Di�erent functional areas can turn into silos

that focus only on their area of responsibilitiesplaye There can be a lack of collaboration between

departments

Example of a Functional Organizationplaye Microsoft


CEO

Project Manager(expediter)

FunctionalManager

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalResource

FunctionalManager

FunctionalManager







http://billgatesagreatleader.blogspot.com/2013/11/microsoft-organization-structures-part-1.html

Product Organizational Structure

Features: playe Company is organized by specific

product typeplaye Each product has an executive

leader who oversees everything related to that product line

Advantages:playe Products are organized by categoryplaye There are clear roles, responsibilities

and lines of command

Challenges:playe Each product division can create

completely separate processes playe The lack of cross-product

collaboration can result in duplicative processes and ine�ciencies

Example of a Product Organizationplaye Johnson & Johnson


President

CEO

ProductGroup 1

Production AccountingSales R&D



ProductGroup 2

ProductGroup 3







http://www.jnj.com/about-jnj/company-structure

Customer Organizational StructureFeatures: playe Company is organized by customer typeplaye Customer expectations are met by a

customized service approach

Advantages:playe A customer-centered structure specializes

in the needs of each customer groupplaye Customers receive more consistent

experience across channels and touchpoints

Challenges:playe The needs of di�erent customer types may

be ignoredplaye Each customer division may compete with

corporate resources, such as ITExample of a Customer Organizationplaye Tumi


CEO

Retail Online MarketingCustomerService

CustomerExperience

Chief CustomerO�cer (CCO)

Finance Technology& IT

HR & Legal







http://link.springer.com/article/10.1007%2Fs11747-014-0402-9

Geographic Organizational Structure

Features: playe Organization is dispersed across one or more

geographic regionsplaye Typically, a central oversight person leads each

geographic region

Advantages:playe Logistical demands and di�erences in geographic

customer needs can be better supportedplaye Each division can focus its resources and talent to only

its own territory

Challenges:playe Each region may operate with its own processes and

procedures, creating ine�ciencies playe Regions often compete with each other, establishing a

hostile corporate environment

Example of a Geographic Organizationplaye Ford Motor Company


WesternSales Manager

Sales Reps Sales Reps Sales Reps

CentralSales Manager

EasternSales Manager

GeneralSales Manager







http://panmore.com/ford-motor-company-organizational-structure-analysis

Flat StructureFeatures: playe Small number of levels and broad span of

management at each levelplaye Every employee is given equal footing so

decisions are made in collaboration or autonomously

Advantages:playe Employees feel like they are all

contributing equally and therefore similarly valued

playe It’s a simple structure for smaller companies where often people hold multiple roles and reporting relationships are sometimes unnecessary

Challenges:playe Without structure, decisions are made as a

democracy but often can be slowed as everyone has a say

playe Employees can question who is responsible for each task so creativity and

productivity can su�er

Example of a Flat Organizationplaye REVOLVE Clothing


Manager Manager Manager Manager

President







https://www.fastcompany.com/3046371/the-new-rules-of-work/what-kind-of-leadership-is-needed-in-flat-hierarchies

HolacracyFeatures: playe Respects the creativity and openness of a flat

organization but still has some hierarchyplaye Departments and roles are blended so

decisions can be made from anyone and anywhere

Advantages:playe People are organized around Work as opposed

to departments or seniorityplaye A hybrid approach appreciates both structure

and autonomy so employees have authority within boundaries

Challenges:playe Without any designated middle management,

decisions can be delayedplaye An open environment must balance creativity

and collaboration with productivity

Example of a Holacratic Organizationplaye Zappos








http://www.forbes.com/sites/sungardas/2014/01/07/is-flat-better-zappos-ditches-hierarchy-to-improve-company-performance/#178c4d2724d9

Tribes & SquadsTribes & Squads is a form of a Matrix organization but instead of functional leaders managing the teams, project leaders do. The functional leaders may manage other things, such as career paths.


Features: playe Development or functional teams may be

renamed “Squads”, “Crews” or “Troops” who own a certain part of functionality from end to end

playe “Tribes” are a collection of squads within the same business area, such as a product or division

playe A “Guild” is a community of members across the organization who want to share knowledge, tools, and practices

Advantages:playe Promotes team collaboration and innovationplaye Project leaders who are more familiar with the

projects are in charge rather than functional leaders

Challenges:playe Can take time to get used to new jargonplaye People outside of the organization may have a

di�cult time understanding organizational structure

SQUAD SQUAD SQUAD SQUAD

PO PO PO PO

CHAPTER

CHAPTER

SQUAD SQUAD SQUAD SQUAD

PO PO PO PO

CHAPTER

CHAPTER

GUILD

Example of a Tribal Organizationplaye Spotify

Henrik Kniberg & Anders Ivarsson Oct 2012







http://blog.crisp.se/2012/11/14/henrikkniberg/scaling-agile-at-spotify

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