10 types of organizational structures (+ org charts for implementation)

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What is an organizational structure?

An organizational structure outlines how responsibilities and roles are assigned and grouped throughout an organization.

At some point, you have likely seen an organizational chart for your company. And we can probably guess what it looked like.

The typical org chart looks like a pyramid, your C-level executives at the top with lines stretching down to middle management and finally staff-level employees.

But not every company functions best with a hierarchical organizational structure. Many types of organizational charts exist because many types of organizational structures exist.

In this post, we go through the 10 common types of org structures and reasons why you might consider each of them.

1. Hierarchical org structure

Hierarchical org chart example (click on image to modify online)

The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. It’s the most common type of organizational structure—the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and lower-level employees), and each employee has a supervisor.

Pros

Better defines levels of authority and responsibility
Shows who each person reports to or who to talk to about specific projects
Motivates employees with clear career paths and chances for promotion
Gives each employee a specialty
Creates camaraderie between employees within the same department

Cons

Can slow down innovation or important changes due to increased bureaucracy
Can cause employees to act in the interest of their department instead of the company as a whole
Can make lower-level employees feel like they have less ownership and can’t express their ideas for the company

2. Functional org structure

Functional org chart example (click on image to modify online)

Similar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. Each separate department is managed independently.

Pros

Allows employees to focus on their role
Encourages specialization
Help teams and departments feel self-determined
Is easily scalable in any sized company

Cons

Can create silos within an organization
Hampers interdepartmental communication
Obscures processes and strategies for different markets or products in a company

3. Horizontal or flat org structure

Horizontal or flat org chart example (click on image to modify online)

A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. Many startup businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees.

Pros

Gives employees more responsibility
Fosters more open communication
Improves coordination and speed of implementing new ideas

Cons

Can create confusion since employees do not have a clear supervisor to report to
Can produce employees with more generalized skills and knowledge
Can be difficult to maintain once the company grows beyond startup status

4. Divisional org structure

In divisional organizational structures, a company’s divisions have control over their own resources, essentially operating like their own company within the larger organization. Each division can have its own marketing team, sales team, IT team, etc. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives.

Depending on your organization’s focus, there are a few variations to consider.

Market-based divisional org structure

Divisions are separated by market, industry, or customer type. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) from its food or logistics divisions.

Market-based divisional org chart example (click on image to modify online)

Product-based divisional org structure

Divisions are separated by product line. For example, a tech company might have a division dedicated to its cloud offerings, while the rest of the divisions focus on the different software offerings—e.g., Adobe and its creative suite of Illustrator, Photoshop, InDesign, etc.

Product-based divisional org chart example (click on image to modify online)

Geographic divisional org structure

Divisions are separated by region, territories, or districts, offering more effective localization and logistics. Companies might establish satellite offices across the country or the globe in order to stay close to their customers.

Geographical divisional org chart example (Click on image to modify online)

Pros

Helps large companies stay flexible
Allows for a quicker response to industry changes or customer needs
Promotes independence, autonomy, and a customized approach

Cons

Can easily lead to duplicate resources
Can mean muddled or insufficient communication between the headquarters and its divisions
Can result in a company competing with itself

5. Matrix org structure

Matrix org chart example (click on image to modify online)

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.

Pros

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

Cons

Presents a conflict between department managers and project managers
Can change more frequently than other organizational chart types

6. Team-based org structure

Team-based org chart example (click on image to modify online)

It’ll come as no surprise that a team-based organizational structure groups employees according to teams—think Scrum teams or tiger teams. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control.

Pros

Increases productivity, performance, and transparency by breaking down silo mentality
Promotes a growth mindset
Changes the traditional career models by getting people to move laterally
Values experience rather than seniority
Requires minimal management
Fits well with agile companies with Scrum or tiger teams

Cons

Goes against many companies’ natural inclination of a purely hierarchical structure
Might make promotional paths less clear for employees

See why forming tiger teams is a smart move for your organization.

Learn more

7. Network org structure

Network org structure example (click on image to modify online)

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.

Pros

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

Cons

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

Consider the needs of your organization, including the company culture that you want to develop, and choose one of these organizational structures.

8. Process-based structure

Process-based structure example (click to use template)

A process-based structure organizes employees into groups or departments based on 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.

Pros

Can lead to faster and more efficient processes
Promotes teamwork within departments and across departments

Cons

Can lead to barriers between departments
Can lead to miscommunication between departments, especially during handoffs

9. Circular structure

Circular org chart example (click to use template)

A circular organizational structure puts leaders of the organization at the center rather than the top so they can share information outward rather than pass it down a chain of command. Employees in different departments are also seen as part of a larger whole rather than siloed off by department.

Pros

Promotes the flow of information across the organization
Promotes communication and collaboration between employees and departments

Cons

Can cause confusion around who to report to, especially for new employees
Can take longer to make decisions

10. Line structure

A line structure is one of the simplest organizational structures as authority flows from top to bottom. Each department is ran by a manager and works toward a common organizational goal.

Pros

Reporting structure is clear
Stable environment

Cons

Can be inflexible
Can limit innovation and specialization
Can lead to managers having a lot of power

Once you've chosen the right org structure to pursue, learn the steps in the company reorganization process.

About Lucid

Lucid Software is the leader in visual collaboration and work acceleration, helping teams see and build the future by turning ideas into reality. Its products include the Lucid Visual Collaboration Suite (Lucidchart and Lucidspark) and airfocus. The Lucid Visual Collaboration Suite, combined with powerful accelerators for cloud and process transformation, empowers organizations to streamline work, foster alignment, and drive business transformation at scale. airfocus, an AI-powered product management and roadmapping platform, extends these capabilities by helping teams prioritize work, define product strategy, and align execution with business goals. The most used work acceleration platform by the Fortune 500, Lucid's solutions are trusted by more than 100 million users across enterprises worldwide, including Google, GE, and NBC Universal. Lucid partners with leaders such as Google, Atlassian, and Microsoft, and has received numerous awards for its products, growth, and workplace culture.

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