Traditional Organizational Structures
Functional Organizational Structure
When it comes to org chart creation, this is perhaps the most recognizable structure that promotes centralized decision -
making. The functional org chart divides the organization into departments, by specialty (for example, HR, sales, marketing,
customer service, accounting, etc.). Employees are grouped together based on the similarity of the activities they perform,
and report up to their applicable department heads, who in turn report to upper management or the CEO.
Even though a functional org chart gives employees a clear set of tasks specific to their roles and skill sets, a potential
downside is that it can lead to communication silos, where there is a lack of communication between departments.
Hierarchical Organizational Structure
Another common org structure, the hierarchical model, takes the form of a pyramid, in which you have a clearly laid -out
hierarchy between management levels. Similar to the functional org chart, the chain of command goes from top to bottom.
However, in the hierarchical model, there is typically a staff director that sits between the CEO and department heads. This
director supervises all departments and reports to the CEO.
Slow decision-making is the main consequence of this model. Communication can also be inefficient, especially when certain
information needs to travel from top management all the way down to employees.
This is a very rigid structure with a strict set of guidelines. While the hierarchical org chart provides a clear career path for
employees, it is a very rigid structure that doesn’t promote autonomy in decision-making.
Geographical Organizational Structure
In this model, the org chart is divided by geographic location. Each location has a dedicated regional manager who is
responsible for the inner workings of his or her team. Regional managers report directly to the central headquarters.
This organizational structure makes sense for international companies that need an efficient way of managing their
resources. Decentralized in its nature, a geographical org structure gives each location an opportunity to approach
customers in a culturally significant, localized way. For example, an international company won’t use the same marketing
campaign in the U.S. and in India.
Modern Organizational Structures
Positional Organizational Structure
Traditional organizational planning charts utilize an employee-to-employee reporting structure. More and more, however,
HR departments are pivoting toward a position-to-position reporting structure. This model separates the employee from
the role that they play at the company, instead showing the relationship between positions and their current and future
holders.
Why? In short, employee data and position data, while linked, are inherently different. Employee data (such as name, skills,
and experience) are unique to each person. At any time, an employee can leave the organization, or move to another
position within the organization. Position data (such as a title, department, and salary range), however, are unique to each
position — and, unlike employees, positions are relatively static.
There are several benefits to moving to a positional organizational chart. It allows HR to create an organizational
plan before making personnel decisions, ensuring that everyone understand what is needed at each level prior to hiring. By
planning the structure and head count first, organizations also mitigate the risk of unconscious/conscious biases during the
planning process. Finally, this type of structure enables organizations to plan to cost by using positional salary data rathe r
than individual employee data. For example, positions come with salary bands that may be influenced by experience and/or
location.
Matrix Organizational Structure
The matrix org chart has been popular over the past decade, as it nourishes collaboration and open communication.
Common among startups, it is also used at organizations transitioning from the hierarchical model.
In companies with this type of org structure, employees are grouped both by function and by project, with essentially two
managers: one is the functional manager (oversees daily tasks), while the other is the project manager (oversees the specific
project).
While the benefits of this structure are numerous, it can become unwieldy. Complex matrix structures can cause confusion
in roles and responsibilities, and slow down the decision-making process.
Flat Organizational Structure
In a flat organizational structure, there are fewer, if any, levels of middle management. In short, the large layer between
employees and the C-Suite is eliminated in this decentralized model.
This model can take any shape or form since there is an equal distribution of decision-making power. The absence of middle
management leads to improved efficiency and faster implementation. However, issues similar to those with the matrix —
confusion in roles and responsibilities, plus difficulties with scalability — can make this model difficult for large and
growing organizations.
Next-Gen Org Structure: The Helix Model
The helix organizational model, developed by McKinsey & Company, is one of the latest organizational structures designed
to help companies become more agile and adaptable in the face of rapidly changing markets and technology.
The model is based on the spiral-shaped helix. According to McKinsey, “the secret of the helix lies in disaggregating the
traditional management hierarchy into two separate, parallel lines of accountability — roughly equal in power and
authority, but fundamentally different … one line develops people and capabilities, sets standards for how work is done, and
drives functional excellence; the other focuses those people and capabilities on the priorities for the business (including
overseeing their day-to-day work), creates value, and helps deliver a full and satisfying customer experience.”
The goal: minimize complexity by, “freeing senior engineers, designers, salespeople, and other functional experts from the
burden of serving as day-to-day supervisors” while also empowering employees who no longer have multiple bosses with
competing or conflicting interests.
