Every company needs an organizational structure—whether they realize it or not. The organizational structure is how the company delegates roles, responsibilities, job functions, accountability, and decision-making authority. The organizational structure often shows the “chain of command” and how information moves within the company. Have an organizational structure that aligns with your company’s goals and objectives. This article describes the various organizational structures, the benefits of creating one for your business, and specific elements that should be included.

1. Organizational
Structure:
Running A
Successful
Business
Seta Ariawuri Wicaksana
www.humanikaconsulting.com

2. Seta A. Wicaksana
0811 19 53 43
wicaksana@humanikaconsulting.com
• Pendiri dan Direktur Humanika Consulting dan hipotest.com
• Business Psychologist
• Certified of Assessor Talent Management
• Certified of Human Resources as a Business Partner
• Certified of Risk Professional
• Certified of HR Audit
• Dosen Tetap dan Peneliti di Fakultas Psikologi UP
• Penulis Buku: Sobat Way (2016), Industri dan Organisasi: Pendekatan Integratif dalam
menghadapi Perubahan (2020), Human Faktor Engineering: Integratif Desain Manusia dan Lingkungan
Kerja (2021), Psikologi Industri dan Organisasi (2021), Psikologi Umum (2021), Manajemen
Pengembangan Talenta (2021), PIODiagnostik: Pengukuran Psikologi di Lingkungan Kerja (2021),
Transformasi Digital: Perspektif Organisasi, Talenta dan Budaya Organisasi (2021), Psikologi Pelayanan
(2021) dan Psikologi Konsumen (2021).
• Dosen Tidak Tetap di: Program Pasca Sarjana Ekonomi di Univ. Pancasila, STP
TRISAKTI, Fakultas Psikologi Universitas Mercu Buana, STIKOM IMA
• Wakil Ketua Asosiasi Psikologi Forensik Indonesia wilayah DKI
• Pembina Yayasan Humanika Edukasi Indonesia
• Ilmu Ekonomi dan Manajemen (MSDM) S3 Universitas Pancasila
• Fakultas Psikologi S1 dan S2 Universitas Indonesia
• Sekolah ikatan dinas Akademi Sandi Negara

3. Background
• Every company needs an organizational
structure—whether they realize it or not.
• The organizational structure is how the company
delegates roles, responsibilities, job functions,
accountability, and decision-making authority.
• The organizational structure often shows the
“chain of command” and how information
moves within the company.
• Have an organizational structure that aligns with
your company’s goals and objectives.
• This article describes the various organizational
structures, the benefits of creating one for your
business, and specific elements that should be
included.

4. Organizational Theory: Models and Structure
Theory Model Structure
Scientific management - Functional
Systems Theory (Closed and
Open)
Mckinsey’s7S Model
Galbraith’s Star Model
Nedler’s Congruence Model
Weisbord’s Six box Model
Burke-Lithwin’s Model
Humanika’s SOBAT Model
Divisional Matrix/ Project
Complexity Theory Nadler’s Update Congruence
Model
Holonic Enterprise Model
Network
Cluster, Virtual

5. Organizational Structure
• A company’s organizational structure is the hierarchy of the business’s
teams, leaders, managers, and individual contributors. Organizational
structures determine what employees do, whom they report to, and how
decisions are made. At a minimum, an org structure chart should include
employees’ titles and basic relationships across teams.
• Organizational structures can use functions, markets, products, geographies,
or processes as their guide, and cater to businesses of specific sizes and
industries.
• What's the point of an organizational structure? As a business leader, do you
even need one? As your company gets bigger, an organizational structure can
also be helpful for new employees as they learn who manages what
processes at your company.
• Employees want to understand their job responsibilities, whom they report to,
what decisions they can and should make, and how they interact with other
people and teams within the company. An organizational structure creates
this framework.
• Organizational structures can be centralized or decentralized, hierarchical or
circular, flat or vertical.

6. Centralized vs.
Decentralized
• Many companies use the traditional
model of a centralized organizational
structure. With centralized leadership,
there is a transparent chain of
command, and each role has well-
defined responsibilities.
• Conversely, with a decentralized
organizational structure, teams have
more autonomy to make decisions and
there may be cross-collaboration
between groups. Decentralized
leadership can help companies remain
agile and adapt to changing needs.

7. Hierarchical vs. Circular
• A hierarchical organization structure is the
pyramid-shaped organization chart many people
are used to seeing. There is one role at the top of
the pyramid and the chain of command moves
down, with each level decreasing in
responsibilities and authority.
• On the other hand, a circular organization chart
looks like concentric circles with company
leadership in the center circle. Instead of
information flowing down to the next “level,”
information flows out to the next ring of
management.

8. Vertical vs. Flat
• A vertical organizational chart has a clear chain of
command with a small group of leaders at the
top—or in the center, in the case of a circular
structure—and each subsequent tier has less
authority and responsibility. As discussed below,
functional, product-based, market-based, and
geographical organizational structures are vertical
structures.
• With a flat organization structure, a person may
report to more than one person and there may be
cross-department responsibilities and decision-
making authority. The matrix organizational
structure described below is an example of a flat
structure.

9. Benefits of Creating an
Organizational Structure
• Provides accountability
• Clarifies expectations
• Documents criteria for promotion
• Designates decision-making authority
• Creates efficiency
• Fosters collaboration

10. History of organizational model
• The history of organizational models dates back to the early 20th century when
businesses were growing and becoming more complex.
• The traditional hierarchical model was no longer effective, and a new way of
organizing people was needed.
• One of the earliest pioneers in organizational modeling was Frederick Winslow
Taylor, who developed the scientific management approach. Taylor's goal was
to improve efficiency by breaking down tasks into smaller parts and optimizing
each one.
• In the 1930s, Elton Mayo conducted experiments at Western Electric's
Hawthorne Works that led to the human relations movement.
• He discovered that productivity wasn't solely based on working conditions;
social factors such as employee morale also played a role.
• During the post-World War II era, many organizations began adopting
bureaucratic models inspired by Max Weber's work. These models utilized
strict rules and regulations to ensure consistency across departments but
were criticized for being too rigid.
• As time passed, more flexible models emerged, such as matrix structures
which allowed individuals from different functional areas to collaborate on
projects. Today, organizations are still experimenting with new ways of
organizing people in response to changes in technology and business needs.

11. Five Basic Elements of
Organizational Structure
• Chain of command
• Roles and responsibilities
• Scope of control
• Decision-making authority
• Departments or teams within
the organization

12. Mechanistic
vs. Organic
Organizational
Structures

13. • Bureaucratic structures, are known for having narrow
spans of control, as well as high centralization,
specialization, and formalization.
• They're also quite rigid in what specific departments are
designed and permitted to do for the company.
• This organizational structure is much more formal than
organic structure, using specific standards and practices
to govern every decision the business makes.
• And while this model does hold staff more accountable for
their work, it can become a hindrance to the creativity and
agility the organization needs to keep up with random
changes in its market.
Mechanistic Structure

14. Organic Structure
• Organic structures (also known as "flat" structures)
are known for their wide spans of control,
decentralization, low specialization, and loose
departmentalization.
• the flexibility that an organic structure allows for
can be extremely helpful to a business that's
navigating a fast-moving industry, or simply trying
to stabilize itself after a rough quarter.
• It also empowers employees to try new things and
develop as professionals, making the organization's
workforce more powerful in the long run.

15. Types of
Organizational
Structure
Functional
Organizational
Structure
Product-Based
Divisional
Structure
Market-Based
Divisional
Structure
Geographical
Divisional
Structure
Process-Based
Structure
Matrix
Structure
Circular
Structure
Flat Structure
Network
Structure

16. Functional Organizational Structure
• One of the most common types of
organizational structures, the
functional structure
departmentalizes an organization
based on common job functions.
• An organization with a functional org
structure, for instance, would group
all of the marketers together in one
department, group all of the
salespeople together in a separate
department, and group all of the
customer service people together in
a third department.
• The functional structure allows for a
high degree of specialization for
employees, and is easily scalable
should the organization grow.

17. Advantages and Disadvantages
Advantages
Allows employees to focus on their role
Encourages specialization
Help teams and departments feel self-
determined
Is easily scalable in any sized company
Disadvantages
Can create silos within an organization
Hampers interdepartmental communication
Obscures processes and strategies for
different markets or products in a company.

18. Nonprofit Organizational Structure Example: Flat Type
• Nonprofits are structured differently than a company
and are usually much smaller and scrappier. In this
nonprofit organizational structure example, we see a
flat type of structure, where every employee is only
just a few steps away from the director.
• There are no internal movement opportunities, which
works well at most nonprofits. Instead, the focus is on
steering the organization to meet its program goals.
• Notice that the leader is not the director, but rather the
board, who interfaces directly with the director to relay
organizational decisions.

19. Marketing Organizational Structure Example:
Functional Type
• A marketing team’s organizational structure will vary
depending on the size of a company.
• In this example, we see a functional structure type,
where the teams are split based on job function. Here,
the marketing team is headed by a chief marketing
officer (CMO), who overlooks smaller departments
divided into six functions: Social media, content,
product, SEO, website, and acquisition.
• Your marketing team, however, can also adopt a
matrix organizational structure if you laterally divide
your contributors and managers based on region,
country, project, or another factor.

20. Sales Organizational Structure Example: Functional Type
• In this example of a sales organizational
structure, roles are not as hierarchically
structured, and instead divided based on
function.
• The VP of sales overlooks a varied team,
which includes a director of sales, a sales
development manager, a director of revenue
operations, a sales enablement manager, and
an account enablement manager.
• While these are each at different stages of
their careers, they are all at the same level
and are responsible for a specific function
within the team.

21. IT Organizational
Structure Example:
Functional Type
• This is another functional org chart
example, but this time, it’s for IT.
• In this example from the University of
Michigan, the IT department is divided
based on function.
• Overseen by a Chief Technology Officer,
three directors supervise security,
infrastructure, and operations;
applications; and institutional research
and effectiveness.

22. Product-Based
Divisional Structure
• A divisional organizational structure is comprised
of multiple, smaller functional structures (i.e.
each division within a divisional structure can
have its marketing team, its own sales team, and
so on).
• In this case — a product-based divisional
structure — each division within the organization
is dedicated to a particular product line.
• This type of structure is ideal for organizations
with multiple products and can help shorten
product development cycles.
• This allows small businesses to go to market with
new offerings fast.

23. Advantages and Disadvantages
Advantages
Companies and their employees can
experience the benefits of the product-based
divisional structure.
If one division performs poorly, this does not
automatically translate across the
organization.
Because of their separation, divisions may
flourish (or fail) concurrently. This system
allows companies to mitigate risk.
Disadvantages
It can be difficult to scale under a product-
based divisional structure.
The organization could end up with duplicate
resources as different divisions strive to
develop new offerings

24. Product Organizational
Structure Example:
Divisional Type
• For product organizations, the most common
organizational structure is divisional, where
teams are divided based on the product they’re
working on.
• Within each product team, there’s typically a
product manager, an engineer, a marketer, and
even a customer support manager.
• Depending on how big or small your company is,
you may have multiple product managers for one
product.

25. Product Organizational
Structure Example:
Divisional Type
• Conversely, if there’s only one product, then the entire company
may be a product organization. This time, the organization would
be structured based on process, like the example
• The company is divided by processes such as product
management, sales and marketing, product development, service
and support, and operations. This is a good example to follow if
your company is small.

26. Market-Based
Divisional Structure
• Another variety of the divisional
organizational structure is the market-
based structure, wherein the divisions of
an organization are based on markets,
industries, or customer types.
• The market-based structure is ideal for an
organization that has products or services
that are unique to specific market
segments and is particularly effective if
that organization has advanced
knowledge of those segments. This
organizational structure also keeps the
business constantly aware of demand
changes among its different audience
segments.

27. Advantages and Disadvantages
Advantages
Because this organizational structure focuses
on specific market segments, it provides each
division with autonomy.
The divisions work separately, which allows
employees to work independently and enables
them to focus on the needs of their particular
industry.
Disadvantages
Too much autonomy within each market-
based team can lead to divisions developing
systems that are incompatible with one
another.
Divisions might also end up inadvertently
duplicating activities that other divisions are
already handling.

28. Geographical Divisional
Structure
• The geographical organizational structure
establishes its divisions based on — you
guessed it — geography. More specifically,
the divisions of a geographical structure
can include territories, regions, or
districts.
• This type of structure is best-suited to
organizations that need to be near sources
of supply and/or customers (e.g. for
deliveries or for on-site support). It also
brings together many forms of business
expertise, allowing each geographical
division to make decisions from more
diverse points of view.

29. Advantages and Disadvantages
• Geographical divisions allow companies the advantage of catering to a specific customer.
Based on the differences in language, culture, and customs one would find across the world,
companies cannot necessarily expect the same operations to work in different locations.
• Not only does it allow organizations to tailor their approach based on geography, but it allows
the division to react quickly and efficiently to any geographical market changes.
Advantages
• It can be easy for decision- making to become decentralized, as geographic divisions (which
can be hundreds, if not thousands of miles away from corporate headquarters) often have a
great deal of autonomy.
• When you have more than one marketing department — one for each region — you run the risk
of creating campaigns that compete with (and weaken) other divisions across your digital
channels.
Disadvantages

30. Process-Based
Structure
• A process-based structure organizes
employees into groups or departments
based on the steps of a process.
• The leader of the company is listed at the
top, as they oversee all processes.
• Each step of the process has a
supervisor and employees who do work
in that process.
• The chart reads from left to right. One
process can not begin until the process
before it is completed.

31. Advantages and Disadvantages
Advantages
Can lead to faster and more efficient
processes
Promotes teamwork within departments and
across departments.
Disadvantages
Can lead to barriers between departments
Can lead to miscommunication between
departments, especially during handoffs.

32. Matrix Structure
• A matrix organizational chart looks like a grid, and
it shows cross-functional teams that form for
special projects. For example, an engineer may
regularly belong to the engineering department
(led by an engineering director) but work on a
temporary project (led by a project manager).
• The matrix org chart accounts for both of these
roles and reporting relationships.).
• Having a single project overseen by more than
one business line also creates opportunities for
these business lines to share resources and
communicate more openly with each other —
things they might not otherwise be able to do
regularly.

33. Advantages and Disadvantages
Advantages
An advantage of a matrix structure is that it
promotes collaboration and communication.
Allows supervisors to easily choose
individuals by the needs of a project
Gives a more dynamic view of the organization
Encourages employees to use their skills in
various capacities aside from their original
roles.
Disadvantages
Presents a conflict between department
managers and project managers
Can change more frequently than other
organizational chart types

34. Company Organizational Structure Example: Matrix Type
• This matrix organizational structure example for an
imaginary engineering company starts with the CEO
at the helm. However, instead of including a C-suite
(such as a chief marketing officer, a chief finance
officer, a chief technology officer, and so on), it
includes vice presidents who then oversee
individual contributors.
• Each contributor works cross-collaboratively with
members of other teams on a specific customer
project. This is a good example to follow if you run a
small-to-medium company in a project-based or
region-based firm.

35. HR Organizational Structure Example: Matrix Type
• This HR organizational chart is an excellent
example of the matrix structure type. Here,
the VP of HR oversees three different regions,
all of which have an HRBP, two recruiters, and
one trainer. Horizontally, the HRBPs,
recruiters, and trainers are all aligned.
• This is an excellent example to follow if your
company is a large enterprise with hiring
operations in different regions. It’s especially
useful if there are different hiring laws in each
region where you operate.

36. Circular Structure
• While it might appear drastically different from the other
organizational structures highlighted in this section, the
circular structure still relies on hierarchy, with higher-level
employees occupying the inner rings of the circle and lower-
level employees occupying the outer rings.
• The leaders or executives in a circular organization aren't
seen as sitting atop the organization, sending directives
down the chain of command. Instead, they're at the center
of the organization, spreading their vision outward.
• From an ideological perspective, a circular structure is
meant to promote communication and the free flow of
information between different parts of the organization.

37. Advantages and Disadvantages
• Advantages
• Most examples of organizational structure have a top-down hierarchy.
Alternatively, this type of structure follows an outward flow and contributes to
information flowing freely across the business.
• Its benefits include keeping all employees aligned with the processes and goals of
the company and encouraging employees to collaborate between departments.
• Disadvantages
• From a practical perspective, the circular structure can be confusing, especially
for new employees.
• Unlike with a more traditional, top-down structure, a circular structure can make it
difficult for employees to figure out who they report to and how they're meant to fit
into the organization.

38. Flat Structure
• While a more traditional organizational structure might
look more like a pyramid — with multiple tiers of
supervisors, managers and directors between staff
and leadership, the flat structure limits the levels of
management, so all staff are only a few steps away
from leadership.
• It also might not always take the form or a pyramid, or
any shape for that matter. As we mentioned earlier, It's
also a form of the "Organic Structure" we noted above.
• This structure is probably one of the most detailed, It's
also thought that employees can be more productive
in an environment where there's less hierarchy-related
pressures. This structure might also make staff feel
like the managers they do have are more like equals or
team members rather than intimidating superiors.

39. Advantages and Disadvantages
• Advantages
• The elimination of middle management employees defines the flat structure type. Its advantages
are instantaneous. First, it reduces the expenses of the company.
• Second, it allows staff to build direct relationships with upper management.
• Lastly, it shortens the decision-making process.
• Disadvantages
• If there's a time when teams in a flat organization disagree on something, such as a project, it can
be hard to get aligned and back on track without executive decisions from a leader or manager.
• Because of how complicated the structure's design is, it can be tricky to determine which
manager an employee should go to if they need approval or an executive decision for something.
• If you do choose to have a flat organization, you should have a clearly marked tier of management
or path that employers can refer to when they run into these scenarios.

40. Network Structure
• These days, few businesses have all their
services under one roof, and juggling the
multitudes of vendors, subcontractors,
freelancers, offsite locations, and
satellite offices can get confusing.
• A network organizational structure
makes sense of the spread of resources.
It can also describe an internal structure
that focuses more on open
communication and relationships rather
than hierarchy.

41. Advantages and Disadvantages
Advantages
Visualizes the complex web of onsite and
offsite relationships in companies
Allows companies to be more flexible and
agile
Give more power to all employees to
collaborate, take initiative, and make
decisions
Helps employees and stakeholders
understand workflows and processes.
Disadvantages
Can quickly become overly complex when
dealing with lots of offsite processes
Can make it more difficult for employees to
know who has final say

42. How To Choose the Best Organizational Structure
Current roles and teams within the company. How are job functions currently organized? Does it
foster communication and productivity? Does it impede or encourage employee growth?
Your strategic plan. What are your company’s goals for the short-term and long-term?
Feedback from employees, leadership and other stakeholders. What do those within your company
say about how the company is structured? What feedback do you have from other stakeholders,
such as customers and suppliers?
Alignment. What structure will best support your strategic plans and address any feedback
received?

43. Navigating Organizational Structures
Organizational structures are central to a successful team. Employees can
move comfortably, confidently, and efficiently when given a clear definition of
their role within an organization.
Structure types will vary from business to business, so it’s important to
remember that these structures are not one size fits all.
Every type may not suit your organization, but chances are, one of them will.
Use this post to determine which organizational structure works for you, and
then it’s time for the real work to begin.

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