Organizational structure can be flat or tall depending on a company's size.
Organizational structure pertains to the manner in which companies arrange their top management and employees. Companies usually create various positions or job titles, then rank these positions accordingly. The ranking provides a formal reporting structure for completing projects and operating the business. The typical organizational structure is highly contingent on the company's size and industry. Most companies center their organizational structures around various departments.
Characteristics
Typical organizational structure is often depicted by a series of boxes and lines. The boxes represent various employees and their titles. Boxes that run horizontally represent employees of similar rank. Top boxes usually represent the presidents or chief executive officers of companies. Boxes that fall below other boxes represent lower-ranking employees. Small companies typically use a flat organizational structure because there are very few levels of management. Larger companies usually employ taller organizational structures to better manage the vast number of employees.
Types
Some common types of organizational structure include functional, product or customer-based organizational structures. Companies that use functional organizational structures typically divide their departments by functional areas, such as marketing, accounting and finance. Many consumer products companies use functional organizational structures. Companies that use a product organizational structure divide their companies by product types. For example, a department store may have a both a vice president and manager of housewares or sporting goods. A company may also structure their organization around various customers. Companies that produce software or highly technical products may use a customer organizational structure. These high-tech firms often serve a wide variety of customers, such as consumers, corporations, banks and even hospitals.
Advantages
Functional organizational structures are often used because they are more efficient, according to Reference for Business. Grouping departments by marketing and finance employees, for example, better harnesses the knowledge, skills and talents of employees. A company that uses a functional organizational structure also makes better use of its resources. The advantage of a product organizational structure is product expertise. Companies will typically use a product organizational structure when product development and distribution are paramount. Customer-based organizational structures better service the customers' needs than the other types of organizational structures.
Disadvantages
One disadvantage of a functional organizational structure is an isolation of department efforts. Departments often focus more on their individual projects and less on what the company is doing as a whole. However, cross-management teams can often rectify departmental isolation. Product and customer-based organizations can often lead to a duplication of resources. For example, marketing managers may be used in separate product or customer-based departments, when one marketing manager could efficiently perform the job.
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