organizational structure (2023)

Organizational structure (OS) is the systematic arrangement of human resources in an organization to achieve common business objectives. It outlines the roles and responsibilities of each member of the organization to allow work and information to flow smoothly and ensure the smooth running of an organization.

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An operating system shows how the different resources of an organization come together and align towards its objectives. Clearly define the roles of employees that allow them to work smoothly and efficiently. This reduces wasted resources and increases productivity. A company's operating system determines its workflow. Without a proper operating system, chaos would engulf a business. Therefore, a company needs to create a centralized or decentralized operating system based on their workflow needs.

  • What is the organizational structure?
    • organizational structure explained
      • Centralization or centralized organizational structure
      • Decentralization or decentralized organizational structure
    • Types of organizational structures.
      • #1 – Hierarchical
      • #2 – Plano
      • #3 – Flatarchy
      • #4 – Functional
      • #5 – Division
      • #6 - Matrix
    • examples
      • Example 1
      • Examples #2
    • Benefits
    • Frequently Asked Questions (FAQs)
    • Related Posts

The central theses

  • An organizational structure is the arrangement of an organization's workforce according to responsibility and the hierarchy of work.
  • Ensures the smooth running of an organization by establishing its chain of command and workflow.
  • The key elements of an organizational structure are work design, departmental assignment, delegation, hierarchy, and leadership.
  • The different types of organizational structures are hierarchical, flat, flat, functional, divisional, and matrix.
  • The organizational structure allows agility in decision-making and better coordination and communication between employees, resulting in greater productivity.

organizational structure explained

An organizational structure is the grouping of resources at different levels depending on their responsibilities, authorities, and job titles. It helps the different departments of a company to share data, coordinate and work together to achieve business objectives.

A company develops an organizational structure to ensure that the right people with the right skills fill every position in the company. The operating system reveals the responsibility and authority of each role. This removes any uncertainty related to task completion and reporting and increases employee productivity.

A company must clearly define its objectives before creating an operating system. Then, group similar activities to create departments, identify resources for each unit, and create a hierarchy of employees based on their roles.

(Video) 6 Most Common Types of Organizational Structures (Pros & Cons) | From A Business Professor

The operating system of said company:

  • It forms the basis for reports and employee relationships.
  • Decide on the positions of employees in their administrative areas
  • Formulates a system of coordination and interdependence in an organization.
  • Establishes a clearly defined workflow aimed at achieving organizational objectives

Every operating system contains the following six essential elements:

  • Job Design: defines the nature and job description of a specific position
  • Administrative division: consists of grouping jobs into departments to facilitate work coordination.
  • Delegation: It means the power granted to each employee and department of the organization.
  • Management Ratio: Refers to the number of employees who report to a manager.
  • Hierarchy: Creates different levels of authority arranged in the order of delegated powers in the organization.
  • Centralization or Decentralization: It represents the way of working that is followed in an organization.

Centralization or centralized organizational structure

In this system, all decision-making powers are at the top level of management. They take the shape of a pyramid, with the leader or leadership team at the top being responsible for all decisions. Below that are the department heads who oversee the supervisors. These supervisors lead workers at the lowest level of the hierarchy.

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A centralized OS structure ensures consistent policies when operating units face conflicting strategic goals and objectives. It also streamlines the decision-making process. This type of operating system is widely used in retail.

Decentralization or decentralized organizational structure

In this operating system, an organization's middle and lower managers make decisions based on local culture or laws. This frees up senior management to focus their attention on important decisions. This type of operating system levels the hierarchy and empowers employees. It is widely used in the hotel industry.

The hospitality industry must comply with local laws to function properly in the areas of food and beverage, human resources (HR) and operations. Therefore, decentralization is necessary, since the management of guests, food, employees and processes is not possible with a centralized structure.

Types of organizational structures.

Organizations implement different types of operating systems depending on the nature of their business, customer needs, types of products demanded, and services required. Here are some of the most popular organizational structures.

#1 – Hierarchical

This is a type of centralized organizational structure. There is a hierarchy of workers with leaders at the top, workers below, and supervisors positioned in the middle to get the job done. It's more of a linear operating system, with power coming from top management. It is a widespread form of operating system and is used in companies likeamazonas.

(Video) Organizational Structure

This system concentrates decision-making at the highest level. As a result, the organization suffers from a lack of creativity as innovative ideas have to go through different levels of management. In addition, each employee communicates only with his immediate superior and subordinates. This reduces coordination between different levels of power and departments. However, it is a prominent feature of most government organizations.

#2 – Plano

This organizational structure is free of any hierarchy. No one commands or controls the employees. Instead, decisions are made at all levels of management. Therefore, it is more used in small companies with few employees or start-ups. However, over time and as the company grows, a kind of hierarchy creeps into the organization; Otherwise, there may be chaos and inefficiency in the organization.

#3 – Flatarchy

It includes features of hierarchical and flat operating systems. It is a temporary form of operating system that only appears when a new product is developed, a new service is tested, or when a company wants to develop a new customer service system.

By using Flatarchy, an organization can have specialized teams to handle the development of new products or services more creatively and efficiently. It is the best tool for a company to manage the ever-changing market or industry sentiment without creating capital-intensive departments or overhauling the operating system.

#4 – Functional

The functional organizational structure creates a fixed group of departments based on specific functions like human resources, accounting, marketing, etc. Segregate the workforce based on the needs of each department. for example aaccountingaccountingThe accounting department is responsible for preparing financial statements, maintaining a general ledger, paying bills, preparing customer invoices, payroll, and much more. In other words, they are in charge of managing the entire economic front of the company.keep readingYou'll hire accountants and work to better manage the company's finances.

The human resources department is also in charge of hiring,PaysheetPaysheetPayroll refers to the total remuneration owed by an organization to its employees on a given date for a given period of service rendered in the entity. This total net compensation includes salary, salaries, bonuses, commissions, deductions, fringe benefits, and other benefits.keep reading, and business management. Also, the functional operating system allows employees to work in a specific functional role without having to worry about other departments. For example, a sales manager does not have to worry about a company's accounting and vice versa.

#5 – Division

This type of organizational structure comes into play when a company grows exponentially and becomes a giant in its industry. For example, a large clothing company needs separate departments based on customer groups, product types, and geographic locations.

Thus, it will create a women's fashion department, a children's clothing department, a men's clothing department and a popular clothing department. Each department will have its own production, marketing, human resources, IT, and sales teams. In this way, the company could manage themproduct lineproduct lineThe product line refers to the set of related products that are marketed under a single brand, which may be the main brand of the company in question. Typically, companies expand their product offerings by adding new variants to existing products in the expectation that existing consumers will buy products from the brands they already buy.keep readingor geography with all the necessary functional characteristics.

#6 - Matrix

Under this organizational structure, there is no clear delineation of the roles and responsibilities of the resources. Resources can be shared between different teams to ensure maximum utilization. It is the least used operating system as it is quite complex, confusing and can be counterproductive.

(Video) Types of Organizational Structure in management

Employees have to play a double role in this operating system. For example, at many banks, the account manager also acts as the teller. He can reduce operating costs, but has a detrimental effect on the quality of the work of employees and the efficiency of the company. It is a form of decentralized operating system.


Let's use examples of organizational structures to better understand how the operating system works.

Example 1

This is an example of the healthcare industry using the organizational structure to achieve its business, customer service, employee relations, and healthcare objectives. Suppose a multi-specialty hospital, Life-medical Healthcare Ltd, offers 247365 patient services including surgery, emergency services, and outdoor services.

Therefore, he creates an OS chart for the best services and medical care to meet the needs of his patients. The operating system divides the hospital into functional departments. Specialized personnel are deployed in each department based on their needs. The roles, responsibilities and reports of each employee are defined. The operating system diagram would look like this:

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Examples #2

Let's say a Sipping Paradise cafe has expanded its operations to the west, north, east, and south of Japan. Thus, you create a line-of-business operating system in which your business operations are segregated based on the geographic locations of the business.

Sipping Paradise divides its operating areas into West, North, East and South divisions to properly monitor and control the business. Each department has separate departments for accounting and finance, human resources, marketing, and operations. Each department makes its own operational decisions.

This operating system will allow the company to offer localized services and quickly respond to customer needs in a specific location. However, this can lead to duplication of resources and higher costs for the business.


An ideal operating system helps to run a business efficiently. Some of the advantages of the operating system are as follows.

(Video) What is Organizational Structure?

  • Possibility of rapid decision-making – The organizational structure allows an easy flow of information between the different levels of management. Allows quick decision making.
  • Coordination between the different geographical departments of a company - OS facilitates the management and operation of an organization in multiple locations. A well-defined operating system allows for better coordination between different entities in different locations to ensure that common business objectives are achieved.
  • Increases efficiency and productivity: OS improves efficiency because the employees know their roles and responsibilities and the manager knows what to expect from his subordinates. Thus, it improves the overall productivity.
  • Empower Employees – When employees are assigned specific roles and responsibilities based on their skills, they learn and become competent. This is how the operating system builds their trust and empowers them.
  • Reduces conflicts within an organization - When an employee knows the scope of their work, there is no possibility of conflict with other employees. This is how the operating system reduces friction between workers.
  • Better communication between members: OS creates excellent communication between management, supervisors and workers. This promotes an effective flow of information and work.

Frequently Asked Questions (FAQs)

Why is organizational structure important?

The organizational structure is important for any company, since it helps to create homogeneity of roles and management throughout the organization. It supports the efficient management of the labor force and allows better coordination between the different areas. In addition, an organized structure helps to respond to the needs of the clients and increase the income of the company.

What types of organizational structures exist and which is the most common?

The different types of organizational structures (SOs) are hierarchical, functional, divisional, flat, and matrix. The most common operating system used in all businesses is the work operating system. This template categorizes the workforce into different groups and departments based on their job role and role like HR, Accounting, Marketing, etc.

What is a healthcare organizational structure?

(Video) Steve Jobs - Organizational Structure

The healthcare industry needs to respond to the needs of patients with different medical conditions that can be treated by specialists. Therefore, the health sector uses the functional organizational structure to group patients with similar types of disease. Subsequently, these groups of patients are assigned to autonomous departments, which determine the appropriate physicians for these patients. In this way, patients, doctors and specialized departments are efficiently coordinated under the functional operating system.

Related Posts

This was a guide for the organizational structure in companies. We discuss types of organizational structures like matrix and functional with examples. You can learn more about accounting in the following articles:

  • financial structure
  • accounting responsibility
  • outsourcing


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