What is Organisational Structure: Importance, Types and Benefits

Organisation or Organisational Structure is a way to streamline things in a company. The detailed content shall help to understand the importance, benefits, features and types in any kind of organisation.

Organisation Structure is synonym to ‘Hierarchy’ or ‘Hierarchical Structure’. I doubt that anyone would deny the fact that structuring or organising things makes our life simple. In the context of an organisation or an enterprise, streamlining anything that may be a reporting process/structure, role or responsibility shall structure the thoughts of the employees and a systematic approach shall yield more productivity.
Be it a Micro Small and Medium Enterprise (MSME) sector/start-up or a large organisation. The channel of information is as important as the information in itself. Hence, organisation structure works like a channel for any employee or a business function to perform their duties. It is a framework that defines the flow of work, accountability of the tasks assigned and the authority to take the business decisions.
A typical organisation structure has a company head i.e. a CEO who may be the founder of the company as well. And different business functions such as Information Technology, Human Resource Management, Finance, Sales and Marketing team have their respective executives or leaders reporting to the CEO of the company. And, the middle management reporting to the executives or leadership team and the remaining staff reporting to these managers who are a part of the middle management group.


Organisation Structure makes the operations efficient, keeps the company’s focus intact and it is much more effective to achieve company goals and objectives by separation of employees and functions into various departments or divisions.

Organisation Structure: Elements and Benefits

In an organisation set up, a smooth flow of information which may be related to the role, position or other critical communication flow to all levels is very crucial. The hierarchal or organisation/organisational structure plays a very important role in such a scenario.
The key elements or features of an organisation/organisational structure include designing Jobs (role and responsibilities) on the basis of functions and the skill set, differentiation among positions, coordinate activities, set up the reporting relationship, departmentalisation (process of grouping activities into departments) and decision making powers of an employee. It forms the line of authority and a delegation flow in a company. The clear flow of corporate communication eliminates duplication of work and results in reduced employee conflict at work.
Now, why organisation structure is important and why it is required?
The benefit of having an organisation or an organisational structure in a company is huge. The structure supports the big financial decision like salary grades and salary ranges for each position in the organisation. It makes the operations efficient, keeps the focus of a company intact and it is much more effective to achieve company goals and objectives by separation of employees and functions into various departments or divisions. The benefit of organisation structure extends to faster decision making, better communication and improved efficiency as stated earlier and of course better employee performance. The operation speed and clarity is much higher in an organisation where a proper structure is followed. It also supports operating multiple locations, especially small businesses that continue to grow and expand. Small companies may open multiple locations in local, regional or domestic economic markets to scale up their business. Hence, the organisational structure supports the business owners to create a management chain for all business locations to operate as per the company’s standard procedures.

Organisation Structure: What are the Types?

In broader terms, the organisation structure is divided into two types i.e. centralised and decentralised structure. Now, what do these terms mean? Centralised structure is a top-bottom approach where decisions are taken by the one in command. And, in a decentralised structure decision making power is evenly distributed at various levels of the organisation. Thus, we can say, decentralised structure leans towards bottom-up approach.
Now, if we narrow the types of structures in the organisation, traditionally, there are four types of organisation structures i.e. Functional, Divisional, Matrix and Flat. In modern times, a new model has been added to the list and that seems to be the need of the hour.

Functional Structure

When an organisation is divided into segments depending on the function performed by the employees i.e. a specialised or similar set of roles/tasks, it is called functional structure. This structure is mostly used in large organisations and it leads to increased efficiency in each function and department. For instance, having a dedicated Human Resources, Sales and Marketing or Information Technology department.

Divisional or Multidivisional Structure

As the word defines divisional or multidivisional structure is when an organisation is divided in different divisions that could be based on the product, market or a geographical location or area. And, each division has its own set of functions. In a multidivisional structure, a large company has many divisions that deal with a product or service.

Matrix Structure

The hybrid version of functional and divisional structure forms a matrix organisation/organisational structure. The hierarchy starts with the CEO and the functional managers reporting to the CEO. In matrix structure, a single employee performs a role in two or more departments.

Flat Structure

Flat structure in companies means where there are no job titles, seniority, managers or executives as everyone is deemed equal. Organisations following the flat structure are also referred to as self-managed companies at times. This structure increases the creativity and innovation within the company. The flow of communication is a lot easier and quicker between the individuals/teams.

Flatarchy Structure

This term may sound new but this is a contemporary structure which may work for big or small companies. Flatarchy means a combination of both hierarchical structure or flatter structure that is more flexible and more independent. In flatarchy, there is no level of management. There could be only one manager in between the executive and other employees in the company.

You may come across the structure with some new terminologies such as Pre-Bureaucratic, Bureaucratic and Post Bureaucratic. However, you shall notice that they are somewhere similar to the ones mentioned in the above section. Let us understand these little more with a brief explanation as stated below:


This type is usually found in the new businesses/start-ups where there usually is one decision maker. And, there are no standards with a centralised structure.


This organisation structure is suitable for large organisations and it has standardised structures.


This kind of organisation/organisational structure follows a strict hierarchy. However, they are very open to the new/modern ideas and methodologies which of course is crucial to scale the business.


HR function/department mainly works for company goals rather than their own as they demonstrate the value of forming up a structure in an organisation.

Organisation Structure in Start-ups and need for it

Start-ups are usually focused on technology. They are adaptable and follow a decentralised work structure to remain fast and agile. Thus, every employee receives a high level of personal support. Start-ups follow decentralised or in narrow terms, they follow ‘Flatarchy Structure’ that flattens the hierarchy and gives its employees complete autonomy.

Role of Human Resources

Today, Human Resources (HR) has moved from administrative tasks to strategic tasks and it supports critical business decisions where an organisation structure is one of its important functions/roles. HR function/department mainly works for company goals rather than their own as they demonstrate the value of forming up a structure in an organisation. HR function/department is the pillar, custodian and the support system in any company. The department identifies the workforce requirement and plans it. HR along with the business keeps a track of any new employee if he/she is the right fit and if is well adjusted to the organisation needs. Thus, any decision with respect to business models/structure are taken while keeping the HR in loop and the organisation structure is no exception.


After going through the entire content if you are curious to know which one is the best organisation structure for your company, the answer isn’t any random pick i.e. one out of the above mentioned structures. Instead, the decision to pick up an organisation structure should entirely depend on the nature of the business of the company and the industry it operates in.
An ideal model of structure for a technology based start-up could be decided post considering certain factors such as the size of the company (number of employees), type/nature of business, number of owners of the company, business goals and objectives to remain efficient and focused.
In absence of a formal structure, it may become difficult for organisations to set the reporting line for employees, evaluate their performance and even become difficult to coordinate between teams to achieve the goals and objectives of the organisation.
Hence, if you are looking forward to setting up a new small business or a start-up, do keep in mind to set up an organisation/organisational structure at the initial stage and bring a change in later stage when the business scales up if need be, to optimise the resources fully. Whatever structure you choose for the organisation, make sure it is flexible as the priorities of an organisation can change quickly and a quick reaction shall be required for the same. In absence of a flexible organisation structure, an appropriate reaction may be delayed which in turn might impact the efficiency and may become the reason for the failure to meet the organisation or the organisational goals.

Roopali Kotwal
Roopali Kotwal
Roopali is a former author with Dutch Uncles, a subject matter expert with over a decade of experience. She writes on Human Resource Management and Business Operations.

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