How do organizational structures impact a company?

The multiple kinds of organizational structures are evident today. You must have seen one or the other structure at some point in time. There are seven types of organizational structures and each company does not like to go with the most common hierarchical structure. We will see the reasoning behind why companies like to go with the other structures as well.

Hierarchical Structure

Firstly, there is the hierarchical organizational structure which looks like a pyramid. The organization has a chain of command starting from the top management then finished at the bottom with entry-level employees, with each employee having a supervisor. Some of the pros and cons of such an organizational structure are that the levels of authority and accountability are better defined. Employees are motivated by clear career paths and there are opportunities for advancement. But the cons are that the employees may act in the best interests of their department rather than the company as a whole.

Functional Structure

Secondly, there is the functional structure, which is hierarchical only, but the employees are organized according to their departments/functions. Each of these departments is independent of each others. The pros are that employees can concentrate on their jobs. This is easily scalable in any organization of any size. Whereas the cons are that interdepartmental communication is hampered and obscures processes and strategies for several markets or products.

Flat Structure

Thirdly, the flat structure is suitable for companies with few levels between their upper management and employees. Usually, new businesses or startups follow this structure before they expand. The pros of this structure are employees are given increased responsibilities, encourages a more open flow of communication. This also improves the coordination and speed with which new ideas are implemented. But the cons are that the employees do not have a clear supervisor to report to, this might cause uncertainty and produces employees with a broader spectrum of skills and knowledge.

Divisional Structure

Fourthly, there is the divisional structure where each division has its own IT, marketing, sales team, etc. This structure works best for big companies. The pros are that it assists major corporations in remaining adaptable and encourages self-sufficiency, autonomy, and a tailored approach. The cons are it’s really easy to end up with duplicate resources and it is possible for a firm to compete with itself.

Matrix Structure

Lastly, the matrix structure is for cross-functional companies where employees are making cross-functional teams for different projects. The matrix grid accounts for both the roles and delegation of authority. The pros of such a structure are that it allows project managers to quickly select employees based on project requirements. It provides a more dynamic image of the company. This also encourages employees to apply their expertise in roles other than their original ones. The cons are that it represents a power struggle between department and project managers. It changes more frequently than other forms of organizational charts.

To conclude, we can say that most companies like to have a hierarchical organizational structure, but it is not a suitable structure for all companies. Therefore, companies should research their needs and then decide which structure would be best suitable for them. Personally, I feel that companies with fewer than 50employees should go for the flat structure as employees are better connected with their supervisors and due to less supervision, they are highly motivated, but if it’s a larger company then they should consider what kind of company culture they would like to develop in their organization and then choose of the above structures for themselves.

To strategize your organization structure feel free to contact our HR team here at Merit Services. You can email us at or call at +1(289)378-5345