Types of Organizations

1. Flat Organization

A flat organization is unlike any other corporate structure. It’s exactly as its name suggests. While individuals may keep an expertise, hierarchy and job titles are not stressed among general employees, senior managers, and executives. In a purely flat organization, everyone is equal.

Flat organizations are also described as self-managed. The idea behind this organizational structure is to reduce bureaucracy so as to empower employees to make decisions, become creative problem solvers, and take responsibility for their actions. Since there are minimal or no levels of middle management, a company that adopts this structure well can end up being more productive by speeding up the decision-making processes.

Apart from increased productivity, firms with flat organizations have leaner budgets since they don’t involve any pricey middle-management salaries. The only thing to keep in mind is that this structure works best for small to medium-sized companies. This way, a firm can decentralize decision-making while still maintaining its corporate integrity.

2. Functional Organization

Also referred to as a bureaucratic structure, a functional organization is one that divides a firm’s operations based on specialties. Ideally, there’s an individual in charge of a particular function. It’s like any typical business that consists of a sales department, human relations, and marketing department. It means that every employee receives tasks and is accountable to a particular specialist.

A functional organization confers several benefits. For one, there’s a total specialization of work meaning that every employee gets professional guidance from a specialist. Secondly, work is performed more efficiently since each manager is responsible for a single function. The only drawback to adopting a functional organization is the fact that there’s delay in decision-making. All the functional managers must be consulted when making major decisions, which can take time.

3. Divisional Organization

A divisional organization structures its activities around a market, product, or specific group of consumers. For instance, a firm can operate in the United States or Europe or sell products focused on a specific group of customers. Gap Inc. is the perfect case in point. It runs three different retailers – Banana Republic, Gap and Old Navy. Although each one operates as a separate entity that caters to different consumer segments, they are all under the company Gap Inc. brand.

4. Matrix Organization

A matrix organizational structure is a bit more complex in that there’s more than one line of reporting managers. It simply means that the employees are accountable to more than one boss. Most firms that take on this organizational structure often have two chains of command – functional and project managers. However, this organization works best for companies with large-scale projects.

A matrix organization offers several benefits. They include a clear articulation of the company’s mission and objectives, effective use of limited resources, and retention of professionals throughout the life of a company. Additionally, a matrix structure provides a practical way of integrating the firm’s objectives with operations.