Sep 21 2020

How Can Organizational Structure Affect an Organization's Success?

John Mc

Case Studies

Organizational structure as an aspect of a company is focused on a subject of vital importance for operations management, people management, and other business activity between the organizations. There is increasing knowledge on the effectiveness of organizational structure in aligning the success of the company and the performance of the employees. It was noted that organizational structure has an impact on employee performance and also shows that it is necessary to create a good organizational framework for staff to perform well in their job. In this article, we are going to discuss how an organization structure affects the company or organization’s success. 

Why Is It Important to Have an Organizational Structure?

For any business organization, the structure is essential to provide guidelines and clarification on specific issues and concerns, which includes authority. It defines the roles and responsibilities by establishing the authorized reporting relationships which regulate the corporation's workflow. A formal outline of the structure of a company helps facilitate the addition of new positions in the company as well as giving and a useful guideline for development. Some programs can provide the necessary knowledge and skills to excel in the modern corporate world. It is vital that there are now courses available online where you can receive a degree in organizational leadership. With ongoing technological advances and process change, the organizational leader needs applicable management philosophy and strategy skills to thrive. 

Types of Organizational Structure

  • Functional Framework 

Organizational divisions are classified into various positions by areas of specialization, and functional framework, the most common type of organization structure. In a functional structure, people who perform similar roles are grouped together based on specialization, such as all the accountants are put in the department of finance and so on for the departments of marketing, administration, senior management, and human resources. The benefits of this form of structure include fast decision-making since group members can interact easily as it happens mainly within the same function. They can also grow from one another because they already have similar sets of passions and capabilities.

  • Divisional or Projectized Structure 

The whole company is divided into projects in a divisional or projected structure. This framework is usually used by highly competitive and innovative companies such as software developers, design firms, custom construction projects for industrial equipment, and event planning companies. Projects are delegated to people or workers and report to a project manager. Once the job is completed, they would have to be moved to another. The organization may also divide employees into teams focused on products or programs that fulfill the needs of a certain form of client. In this kind of system, the division of labor means that workers producing identical goods can achieve greater productivity and higher production. 

  • Matrix Structure

This approach is commonly used by companies introducing new products and marketing strategies on an ongoing basis. Companies that have project-based systems still use it, but also feel that functional supervision is important and relevant. The team members report to superiors, the functional manager, and the manager of the project. Communication goes from the two bosses to the team members. The matrix organization is built to get the best value from the organizational structure of both functional and division, which makes it more complex. Departmental work is undertaken by employees, and they also perform project work. 

The team members are granted more control in a matrix system and are required to take on more responsibility for their work. This increases the team's effectiveness, encourages greater innovation and imagination, and helps managers to solve decision-making challenges cooperatively through group engagement. This kind of organizational structure requires a lot of preparation and commitment, making it ideal for large organizations with the ability to handle a complex business system.

  • Flat Organizational Structure

There are very few management levels in what is called a flat structure of the organization. In a flat setting, front-line workers are encouraged to take a variety of individual decisions. Knowledge flows in a flat system from top-down and from bottom-up, meaning information is shared from top-level management to front-line employees, and back to top management from front-line employees. An employee with a concept does not have to go through different levels of upper managers to get the idea to the main decision-maker. On a peer-based basis, the employee simply interacts directly with the target. An organization that adopts this form of structure usually develops a separate top-down management framework for temporary projects or incidents for daily purposes.


Without a structured organizational framework, it can be difficult for workers to know who they are accountable to in various circumstances, and it can become uncertain precisely who is essentially responsible for something. The organizational structure increases organizational performance by giving workers consistency at all levels of a company. Besides, a fully defined framework may also include a pathway for internal promotions, enabling businesses to develop clear employee progression tracks for entry-level employees.