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What is an Organizational Structure?

By Jeri Sullivan
Updated May 16, 2024
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An organizational structure is the term used to define how employees of a company work together to support their mission. There are several types of organizational structures, including hierarchy, cross-functional, and matrix. The number of managers in the organization typically depends on the number of employees and on the type of structure the company adopts.

The purpose of an organizational structure is to clearly define roles and responsibilities. Having a defined structure makes it easier to know who should be doing what and who to bring issues to for resolution when things do not go as planned. Though mostly used by businesses, an organizational structure may also be seen in other groups such as clubs and churches.

The structure may also refer to how companies work together. This is true when a large parent company has many subsidiaries in different industries. A well known example of this is General Electric, which started with light bulbs but today is involved in electronics, finance, jet engines, and media. Each of these areas is a subsidiary of the parent company, General Electric, and operates on its own as a stand-alone company but reports into the General Electric organizational structure.

A hierarchy structure is a type of organizational structure where one main person or group manages all of the others. An example would be the Catholic Church, in which the pope manages all of the other people and groups within this organization. This is also known as a tops down organization structure and when illustrated will resemble a pyramid. Small businesses also commonly use the hierarchy structure with a single owner who runs the business and employs others to report to him.

A cross-functional organizational structure instead focuses on a specific goal to form its structure. People from different areas come together to form a team or department outside their normal hierarchy structure. Typically a cross-functional team is project-based and after the project is completed, the team members move back into their traditional roles. This type of structure is especially helpful when working on projects that require specialized expertise from different departments, such as engineering, sales, and finance. Normally, those groups would not report to the same manager but instead report to separate departments with managers who report into a general manager or CEO.

Matrix organizations are a hybrid between a hierarchy and cross-functional organizational structure. A matrix organization is usually run by managers who have responsibility for both projects and departments. A functional matrix is most similar to the cross-functional organization structure in that the organization is run by a project manager who has authority over the details of the project only, while individual department managers still maintain authority over the employees on the project. A project matrix is also run by a project manager. In this case, authority over all aspects of the project is with the project manager, and individual department managers are called in only for technical questions and when additional staffing may be needed.

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Discussion Comments
By Primemobi — On Dec 12, 2013

You can learn a lot about an organization by examining the organizational management structure. How power and authority is distributed and how departments are interconnected are useful pieces of information for employees of any organization. Most importantly, is the organization actually adhering to its organizational chart?

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