Better understand how the communication and exchange of inputs flow within an organisation

Understand the pros and cons of each of the most typical business hierarchies

Typical of public organisations, the pyramidal org. structure is the most common form of hierarchy that you will experience in your professional career.

The chain of command is very much streamlined: inputs come from the above, and the lower the level, the lower the responsibilities, the lower the decision-making faculty.

People at the “officer” level perform tasks and activities that pertain to their specific area of interest only (i.e., finance) and respond to their director exclusively.

The functional org. structure works similar to the pyramidal framework.

Indeed, most of times, pyramid structures are further break down into functional arrangements so as to favor a more granular visualization of the chain of command and the people in charge of each of the given role – at any given layer.

The assumption is the same: people with higher level of seniority occupy top positions and organize their staff based on specific competences, skills and expertise

The horizontal/flat chart is quite common in small organisations or start-up-like companies that, by nature, can afford fewer layers between employees and upper management.

An internal organisation is also quite often established among the professional firms’ ecosystem (i.e., lawyers, accountants, architects, etc.) with limited internal diversification of competences, expertise and responsibilities.

In general, this type of structure works best when the firm/organisation is highly specialised on a limited number of products/services – hence there is no need to establish further departments.

Slightly more complex compared to the others, the divisional org. structure takes into consideration the company’s breakdown into its fundamental divisions, each of which operates like a “firm within the firm”.

Each division represents a specific strand of the many businesses one organisation might be involved in.

This structure is typical of medium-large consulting companies and other businesses operating at the same time in more than one field.

It is common that each division has its own marketing, accounting, IT, HR, etc., executive teams so as to favour great autonomy and self-dependence.

Market-based org. structure

Product-based org. structure

Geo-based org. structure

The divisions are separated based on the different industries/markets occupied by the firm or the customers served

The divisions are separated based on the different product/service line offered by the firm

The divisions are separated based on the geographic markets served by the firm

Examples

• Division 1: gluten-free
• Division 2: vegan
• Division 3: bio
• …

Examples

• Division 1: Coca-Cola
• Division 2: Fanta
• Division 3: Sprite
• …

Examples

• Division 1: North-America
• Division 2: South-Europe
• Division 3: Balkans
• …

A matrix organizational structure comes into place in very specific circumstances, and it is usually adopted to show how cross-functional team collaborate to carry out project that are limited in time.

In this case, people will find themselves responding to other teams and other departments that are not, as per traditional organizational chart, responsible for their work and delivery.

Matrix structures are fairly more challenging to manage due to the higher complexity that comes with managing such diverse cohort of expertise, know how, expertise and nonetheless, expectations, work attitudes and experience.

Again, very common in a small organisation (i.e., star-up) that provides for a narrow-specialized offer.

As the name implies, the team-based organisational structure breaks down the organisations in teams, more or less cross-functional and diverse in the sense of competences involved

Team-based structures are meant to streamline operations, flatten the hierarchies within the organisation and give employees more control over the tasks/activities they are responsible for…

Without any doubt, the most complex framework applied to a firm structure.

Very trendy and in vogue among large multinational organisations, the network organizational structure implies the very reframing of the hierarchy concept as normally understood and conceived.

The network structure fragments the organisation into a macro-cluster of functions more or less dependent on one another. Each cluster can be organised following one of the many frameworks analysed already or a hub itself of a further sub-network.

PROS

• Clear decision-making flow
• Perfectly displayed layers of authority and responsibility
• Well-intuitive career path ahead of the employee
• Specialization and diversification of roles (i.e., less fragmentation and dispersion of efforts)
• Well-identifiable chain of command and location of control in case of support is needed

CONS

• Isolation from other departments and sense of alienation from the whole value chain
• •High level of bureaucracy with lower margin of autonomy in decision making
• Overall rigidity and less flexibility in the execution and performance of tasks
• High fragmentation in communication from strategy to execution with larger margin of errors and misinterpretations

PROS

• Greater specialisation of employees
• Higher sense of ownership for the outputs associated with that given function
• Easily replicable at all levels
• Sense of comrade & discipline
• More robust and reliable sense of self-autonomy
• Less dispersion of energies and efforts within the same functions

CONS

• Risk of too high self-isolation of the given function and loss of systemic focus
• Hampering cross-functional dialogues with negative impacts on knowledge flow
• Overall rigidity and risk of loss of locus of control/understating of the sub-functions within the same technical field
• Higher fragmentation at the horizontal dimension

PROS

CONS

• Higher risk of entropy due to the lack of a centralised locus of control (or a well-identified supervisor to which to report)
• Fewer opportunities for specialisation
• Greater risk of disruptions impacting the whole business due to the inefficiency/ineffectiveness of a specific function
• Sustainable only for small companies and relatively limited fields of application overall

PROS

CONS

• High risk of entropy within the division and headquarter
• High absorption of financial and economic resources that cannot be shared among divisions
• High risk of competition between divisions (i.e., competition for markets’ niches, competition for internal resources, etc.).

PROS

CONS

• Risk of conflicts between locus of control due to different “cultural” and professional approaches to project management and the final outputs/outcomes expected by the project
• Turnover in staffing, with consequent slow-downs of the workflow for the other functions – even if not necessarily interested in the staffing dynamics
• Susceptible to changes more than any other framework due to its temporary nature and highly dependent on the given project

PROS

CONS

• Very challenging to sustain whenever differences in work approaches arise (very likely nonetheless)
• Reduced clarity of the chain of command and decision-making flow overall
• In general, not sustainable for companies highly diversified in the products/services provided, and markets/industries covered
• Higher risk of entropy

PROS

CONS

• Fairly complex to manage and keep under control, specifically when a large portion of the value generation process is decentralised
• Greater difficulties for lower-level employees in understating the source of certain directives / who’s really responsible for certain issues and concerns