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

Summary

This video script from 'Business School 101' explores six common organizational structures: hierarchical, functional, flat, divisional, matrix, and network. It outlines their advantages and disadvantages, emphasizing the importance of choosing the right structure for a company's size, industry, and stage. The script highlights the need for clear communication, efficient workflows, and adaptability in organizational development.

Takeaways

• 🏢 Organizational structure is crucial for defining roles, workflows, and development within a company.
• 🔝 Hierarchical structures provide clear control and career paths but can suffer from poor communication and slow decision-making.
• 🛠 Functional structures enhance productivity and skill development but may hinder decision-making and create inter-departmental competition.
• 📈 Divisional structures promote accountability and local market advantages but can increase operating costs and rivalries.
• 🔁 Flat structures reduce costs and improve communication but may be challenging for large organizations and lack clear promotion paths.
• 🌐 Matrix structures encourage collaboration and efficiency but can lead to unclear roles and slow decision-making processes.
• 🔗 Network structures offer flexibility and cost reduction through outsourcing but risk loss of control and reliability.
• 🌟 Six main organizational structures were discussed: hierarchical, functional, flat, divisional, matrix, and network.
• 🛑 Each structure has its own advantages and disadvantages, and the best choice depends on the company's needs and industry.
• 💡 Companies should consider employee empowerment, innovation, size, and interaction when choosing an organizational structure.
• 📊 The effectiveness of an organizational structure can impact a company's ability to adapt and compete in its market.

Q & A

What is the backbone of all operating procedures and workflows at any company?

The backbone of all operating procedures and workflows at any company is the organizational structure.

What are the six most common types of organizational structures introduced in the script?

The six most common types of organizational structures are hierarchical, functional, flat, divisional, matrix, and network structures.

What are the advantages of a hierarchical structure?

The advantages of a hierarchical structure include control orientation, clear career and promotion path, and clearly defined authority.

What are the disadvantages of a hierarchical structure?

The disadvantages of a hierarchical structure include poor communication, slow decision making, and added costs due to corporate overhead.

How does a functional organizational structure benefit from grouping employees by specialty?

A functional organizational structure benefits from increased productivity, skill development, clarity, and minimized cost of operation by grouping employees with similar knowledge and skills.

What are the potential disadvantages of a functional structure?

The disadvantages of a functional structure include hindered decision making, competition between departments, and a narrow scope of work for employees within departments.

What is a divisional structure and how does it segment employees?

A divisional structure is a system where a company segments its employees based on products, markets, or territories, rather than their job roles.

What are the advantages of using a divisional structure?

Advantages of using a divisional structure include accountability and transparency, gaining local competitive advantage, improving company culture, and increasing offerings efficiently.

What are the disadvantages of using a divisional structure?

Disadvantages of using a divisional structure include higher operating costs, loss of economies of scale, encouraged rivalries between divisions, and fostering silo mentality.

What is a flat organizational structure and what are its advantages?

A flat organizational structure is a model with fewer levels of middle management, aiming for minimal hierarchy. Its advantages include lower operating costs, improved communication, and increased employee motivation and satisfaction.

What are the disadvantages of a flat structure?

Disadvantages of a flat structure include difficulty for large organizations to manage, low employee retention due to limited promotion opportunities, and potential power struggles among employees.

What is a matrix organizational structure and what are its advantages?

A matrix organizational structure is a combination of different kinds of organizational structures, such as project management or functional management. Its advantages include encouraging collaboration, increasing efficiency, and developing new skill sets.

What are the disadvantages of a matrix structure?

Disadvantages of a matrix structure include unclear managerial and team roles, slow decision-making process, potential work overload, and difficulty in measuring performance.

What is a network structure and how does it benefit a company?

A network structure is where multiple organizations combine to produce a good or provide a service. Benefits include clearer focus on core competencies, lower costs through outsourcing, and flexibility in operations.

What are the disadvantages of a network structure?

Disadvantages of a network structure include lack of reliability and consistency, potential loss of secrecy, loss of control over operations, and sacrificing potential profit.