Organizational Structure: Definition, Types & Examples Video

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  • 0:03 Organizational Structure
  • 0:51 Hierarchy, Flat, & Flatarchy
  • 2:25 Functional &…
  • 3:55 Matrix Structure
  • 4:38 Lesson Summary
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Lesson Transcript
Instructor: Darlisha Oliver
Organizational structure influences how a business operates from the inside out. In this lesson, we'll explore the three most common forms of organizational structure relevant to today's business.

Organizational Structure

Every system in the world has a structure that defines how it works. Thank goodness for structure! What if the plants and trees decided they were tired of supplying oxygen and had the freedom to pick up another job? I wonder how long we'd last?

The organizational structure of a business defines its entire culture. It affects how its employees communicate and operate to achieve the goals of the company. Organizational structure also influences productivity, employee relations, and marketing strategies. It is important for a company to define the most strategic organizational structure that will allow it to effectively and efficiently accomplish its goals. The organizational structure of a small company may differ from that of a large company. Let's take a look at some of the most common organizational structures.

The Hierarchy, Flat, & Flatarchy

Almost all organizations have some form of a hierarchy in its organizational structure. The hierarchical structure is linear in nature as authority, information, and tasks flow from the top down. Generally, there is a top executive that filters information to subordinate employees without regard to the employee's ability to contribute or improve work processes. This type of structure is good for maintaining authority, but does not allow for free thinking, work efficiency, or collaboration.

The flat structure is totally opposite from the hierarchy. This structure doesn't implement titles, seniority, or job descriptions and allows for employees to freely contribute to the work as they feel necessary. Flat structures are most common in start-ups and small to mid-size businesses. However, most organizations that start off with a flat structure eventually end up taking some form of a hierarchy. As the business grows, it becomes less practical as the need for streamlined processes increases.

The flatarchy structure is a hybrid of a hierarchy and flat structure. Organizations that operate under a flatarchy have linear authority and specialized teams that allow for creativity and innovation. This type of structure is common when an organization is developing a new product, service, or business process that requires input from different individuals from different parts of the organization. Although this structure doesn't reassign job duties or titles, it allows the organization to effectively address market and industry changes without having to restructure the organization's personnel.

Functional & Divisional Structure

This one's pretty easy to remember. A functional structure organizes a business by activity or purpose. Most businesses that use this structure have departments dedicated to a single function. Some common examples are the accounting, marketing, and human resources departments that exist at almost every company.

A major benefit of this type of structure is that it fosters focus and the use of specialized skills for one function. The accounting department employs skilled accountants that focus on the company's financial data and do not have to worry about producing goods or providing services. The production department manufactures the goods and does not spend its time analyzing financial statements. If they did, there would not be any goods to sell.

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