What is Organizational Structure?

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on January 11, 2021

Organizational Structure Definition

Organization structure refers to a system which dictates the flow of command and activities within a company. 

It describes the rules, roles, and responsibilities of workers at every level. 

Organizational structures allow companies to operate with optimized efficiency and efficacy in terms of productivity.

Centralized or Decentralized?

Organizational structures may be centralized or decentralized. 

A centralized structure is one in which the chain of command is hierarchical and each level has distinct and separate duties. 

Decisions flow from the top down to the bottom. 

This type of structure is losing popularity among businesses, but can still be seen in some companies or organizations such as the military. 

A decentralized structure is one in which the lower levels of the hierarchy maintain some level of autonomy and decision-making ability. 

An example would be fast-food chain restaurants, in which each individual restaurant has its own management, performs its own hiring, and can make some decisions without needing corporate approval. 

The Four Main Subtypes of Organizational Structure

There are also four main subtypes of organizational structure. 

They are:

1. Functional/Bureaucratic: 

This is the most common type of organizational structure, and it involves breaking up a company’s workforce based on specialization. 

For example, sales and marketing may be split up into different departments.  

Many small to medium sized companies use this structure. 

2. Divisional/Multidivisional: 

This type of organizational structure is more common among large companies with many different branches.

It involves splitting up a company’s leadership based on products, projects, or subsidiaries.

3. Flatarchy: 

This structure is common among startups. 

It flattens the chain of command, giving each employee autonomy. 

This structure allows for the quickest implementation of decisions and changes.

4. Matrix: 

This is the least common structure.

 It mixes employee responsibilities across supervisors, divisions, and/or departments. 

For example, an employee may have duties for both the sales and customer service departments.

What is Organizational Structure FAQs

Organization structure refers to a system which dictates the flow of command and activities within a company.
Organizational Structures describe the rules, roles, and responsibilities of workers at every level.
Organizational structures allow companies to operate with optimized efficiency and efficacy in terms of productivity.
There are also four main subtypes of organizational structure: 1. Functional/Bureaucratic 2. Divisional/Multidivisional 3. Flatarchy 4. Matrix