🏢 Organizational Structure

What organizational structure is and why it matters
Pre-bureaucratic, bureaucratic and post-bureaucratic structures
Functional, divisional and matrix structures
Flat, team, network and virtual organizations
The Hierarchy-Community Phenotype Model
Military command and control and Mintzberg's archetypes
Operational vs. informal structure
Mintzberg's parts, coordination mechanisms and seven configurations

🧭 Core Idea

An organizational structure defines how activities such as task allocation, coordination, and supervision are directed toward the achievement of organizational aims.

It affects organizational action and provides the foundation on which standard operating procedures and routines rest.
It determines which individuals participate in which decision-making processes, and so to what extent their views shape the organization's actions.
It can also be seen as the viewing glass or perspective through which individuals see their organization and its environment.
Organizations are a variant of clustered entities.
An organization can be structured in many ways, depending on its objectives. The structure determines the modes in which it operates and performs.
It allows the expressed allocation of responsibilities for different functions and processes to entities such as the branch, department, workgroup, and individual.
To achieve a sustainable competitive advantage, organizations need to be efficient, flexible, innovative and caring.

🧱 Types of Organizational Structure

Pre-bureaucratic (entrepreneurial) structures

Lack standardization of tasks.
Most common in smaller organizations; best used to solve simple tasks, such as sales.
Totally centralized: the strategic leader makes all key decisions, and most communication is done by one-on-one conversations.
Particularly useful for new (entrepreneurial) businesses, since it enables the founder to control growth and development.
Usually based on traditional domination or charismatic domination in Max Weber's tripartite classification of authority.

Bureaucratic structures

Have a certain degree of standardization.
Better suited to more complex or larger-scale organizations, usually adopting a tall structure.
Weber's analogy: the fully developed bureaucratic mechanism compares with other organizations exactly as the machine compares with non-mechanical modes of production. Precision, speed, unambiguity, strict subordination, reduction of friction and of material and personal costs are raised to the optimum point.
The tension between bureaucratic and non-bureaucratic structures is echoed in Burns and Stalker's distinction between mechanistic and organic structures.

Weberian characteristics of bureaucracy

Clearly defined roles and responsibilities
A hierarchical structure
Respect for merit

How it works

Many levels of management, from senior executives to regional managers, all the way to department store managers.
Decision-making authority has to pass through more layers than in flatter organizations.
Rigid and tight procedures, policies and constraints; reluctant to adapt or change what the company has done since it started.
Organizational charts exist for every department, and everyone understands who is in charge and what their responsibilities are.
Authority is at the top and information flows from top to bottom, which leads to more rules and standards and close supervision of operational processes.

Advantages	Disadvantages
Top-level managers have tremendous control over organizational structure decisions	Can discourage creativity and innovation
Works best for managers with a command-and-control style	Hard for a company to adapt to changing marketplace conditions
Strategic decision-making is faster because fewer people must approve

Post-bureaucratic

The term is used in two senses in the organizational literature.

1. Generic sense

Describes a range of ideas developed since the 1980s that contrast themselves with Weber's ideal-type bureaucracy, such as total quality management, culture management and matrix management.
None of these has left behind the core tenets of bureaucracy: hierarchies still exist, authority is still Weber's rational-legal type, and the organization is still rule bound.
Heckscher describes them as cleaned-up bureaucracies, not a fundamental shift away from bureaucracy.
Gideon Kunda, in his study of culture management at "Tech", argued that the essence of bureaucratic control (formalization, codification and enforcement of rules and regulations) does not change in principle; it shifts focus from organizational structure to the organization's culture.

2. Specific sense: the Post-Bureaucratic Organization

A smaller group of theorists describe an organization that is fundamentally not bureaucratic.
Charles Heckscher's ideal type:
- Decisions are based on dialogue and consensus rather than authority and command.
- The organization is a network rather than a hierarchy.
- It is open at the boundaries, in direct contrast to culture management.
- Emphasis on meta-decision-making rules rather than decision-making rules.
This horizontal, consensus-based model is often used in housing cooperatives, other cooperatives, and non-profit or community organizations, to encourage participation and empower people who normally experience oppression in groups.

Complexity theory

Some theorists are renewing interest in complexity theory and how simple structures can engender organizational adaptation.
Miner et al. (2000) studied how simple structures could generate improvisational outcomes in product development, linking simple structures and improviser learning.
Jan Rivkin, Sigglekow and Nelson Repenning revive an older interest in how structure and strategy relate in dynamic environments.

Functional structure

Consists of activities such as coordination, supervision and task allocation; the structure refers to how people are grouped and to whom they report.
A traditional way of organizing is by function: production, marketing, human resources, accounting.
Strength: specialization leads to operational efficiency, as employees become specialists in their own realm.
Weakness: communication can be rigid (standardized ways of operating and a high degree of formalization), making the organization slow and inflexible. Lateral communication between functions therefore becomes very important, so information flows horizontally as well as vertically.
Best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization are centralized, making a limited number of products or services efficient and predictable.
Efficiency rises further when activities are integrated vertically so products are sold and distributed quickly and cheaply. Example: a small business could make components used in its products instead of buying them.
Functional units may be territorial and unwilling to cooperate. Infighting can cause delays, reduced commitment due to competing interests and wasted time, making projects fall behind schedule and bringing down production levels and company-wide commitment to goals.

Divisional structure

Also called the product structure; it consists of self-contained divisions.
A division is a collection of functions which produce a product. It uses a plan to compete and operate as a separate business or profit center.
Described as the second most common structure for organizations in the United States today.
Employees responsible for certain market services or product types are placed in divisions to increase flexibility.

Examples of divisions

Basis	Example
Regional	A U.S. division and an EU division
Consumer type	One division for companies, one for households
Product type	Separate divisions for trucks, SUVs and cars

Divisions may have their own departments such as marketing, sales and engineering.

Advantages	Disadvantages
Delegated authority lets performance be measured directly for each group, leading to better managers and high morale	Can support unhealthy rivalries among divisions
More efficient coordination between divisions and more flexibility when markets change	May increase costs by requiring more qualified managers for each division
Simpler to change the size of the business by adding or removing divisions	Over-emphasis on divisional rather than organizational goals
More specialization within groups	Duplication of resources and efforts (staff services, facilities, personnel)
Product-based: customer benefits when only a few, very different products are offered
Market- or geography-based: similar functions in different regions, so decisions are coordinated locally

Matrix structure

Groups employees by both function and product simultaneously.
Frequently uses teams to take advantage of the strengths, and make up for the weaknesses, of functional and decentralized forms.
Example: a company with "product A" and "product B" would have a product A sales department, product A customer service, product A accounting, and the same three for product B.

Three forms

Form	Description
Weak/functional matrix	A project manager with only limited authority oversees the cross-functional aspects of the project; functional managers keep control of their resources and project areas
Balanced/functional matrix	A project manager oversees the project and power is shared equally with the functional managers. Brings the best aspects of functional and projectized organizations, but is the most difficult to maintain because sharing power is delicate
Strong/project matrix	A project manager is primarily responsible for the project; functional managers provide technical expertise and assign resources as needed

Advantages	Disadvantages
Improves on the "silo" critique of functional management by diminishing the vertical structure and creating a more horizontal one	Tendencies toward anarchy, power struggles and "sinking" to group and division levels
Information spreads across task boundaries much faster	More complex chain of command, confusing for employees about who is next in line
Specialization increases depth of knowledge	Higher manager-to-worker ratio, causing conflicting loyalties
Individuals can be chosen according to project needs

Examples and related ideas

Starbucks developed a matrix structure supporting its focused strategy, combining functional and product-based divisions with employees reporting to two heads.
The multinational design (Procter & Gamble, Toyota, Unilever) can be seen as a complex form of the matrix, maintaining coordination among products, functions and geographic areas.
Wirearchy: with the growth of the internet, power and authority begin to flow based on information, trust, credibility, and a focus on results rather than hierarchical levels.
Through globalization, competition and more demanding customers, many companies have become flatter, less hierarchical, more fluid and even virtual.

Flat organization

Common in small companies (entrepreneurial start-ups, university spin-offs).
As companies grow they tend to become more complex and hierarchical, with more levels and departments.
In rare cases the organization stays very flat as it grows, eschewing middle managers: Valve, GitHub, Inc. and 37signals (though GitHub later introduced middle managers).
These all operate in technology, which may be significant because software developers are highly skilled professionals, much like lawyers.
Senior lawyers enjoy relatively high autonomy in a law firm, typically structured as a partnership rather than a hierarchical bureaucracy. Accountancy companies and GP surgeries are also commonly partnerships.

Bureaucracy in practice

Growth often results in bureaucracy, the most prevalent structure in the past.
Still relevant in former Soviet Republics, China, and most governmental organizations worldwide.
Shell used to be the typical bureaucracy: top-heavy and hierarchical, with multiple levels of command and duplicate service companies in different regions. This made it apprehensive to market changes and unable to grow; the failure was the main reason it restructured into a matrix.

Team

One of the newest structures, developed in the 20th century, along with team development and team building.
In small businesses, the team structure can define the entire organization. Teams can be horizontal and vertical.
The quality of the structure revolves around the competencies of teams in totality.
Team types: functional, lightweight, heavyweight and autonomous team structures.
Example: each Whole Foods Market store is an autonomous profit center composed of an average of 10 self-managed teams; team leaders in each store and region are also a team.
Larger bureaucratic organizations can benefit from team flexibility; Xerox, Motorola and DaimlerChrysler actively use teams.
Challenge: the scattered nature of team-based organizations makes communication and information sharing across borders difficult, even though knowledge exchange becomes crucial. This can be tackled by concentrating on internal tasks as well as relationships with multiple stakeholders, inside and outside the firm.

Network

Described as "long term purposeful arrangements among distinct but related for-profit organizations that allow those firms in them to gain or sustain competitive advantage", where communication between ranks resembles later consultation rather than vertical command.
Lacks hierarchical aspects; characterized by clusters of interconnected teams and individuals that come together to form unique teams for projects or common goals.
Participants are constrained by specialization and role, but their influence varies as projects and teams develop and dissolve.
Example: separate sales and marketing teams may work independently, but certain projects require individuals from both to partner for the project's duration.
At larger scale the network consists of organizations within a market. Instead of being too clumsy to act and react efficiently, a network organization can contract out any function that can be done better or more cheaply. Managers spend most of their time coordinating and controlling external relations, usually electronically.
Example: H&M outsources clothing to a network of 700 suppliers, more than two-thirds in low-cost Asian countries. Owning no factories, it is more flexible in lowering costs, consistent with its low-cost strategy.

Advantages	Disadvantages
Recent advances in complex networks theory offer opportunities for product design and development and for innovation in markets and industries	Unreasonable design: relations that contrast too greatly cause confusion, delays and complexity
Relies on trust through shared values and norms, avoiding hold-up problems and opportunism	Insufficient supervision: independent working requires effective supervision to avoid shirking or free riding
Removing the uncertainty that one agent will use bargaining power for sole gain avoids related inefficiencies	Poor linkage: some individuals and teams coordinate poorly, causing communication breakdowns and misunderstanding

Virtual

Defined as closely coupled upstream with suppliers and downstream with customers, so that where one begins and the other ends means little to those managing the business processes.
A special form of boundaryless organization.
Hedberg, Dahlgren, Hansson and Olve (1999): it does not physically exist as such but is enabled by software, existing within a network of alliances using the Internet.
The core can be small, yet the company can operate globally and lead its niche.
According to Anderson, the Web's unlimited shelf space makes reaching niche goods dramatically cheaper. Each niche product sells little, but collectively they make a significant profit, which is what made Amazon.com so successful.

Hierarchy-community phenotype model

Even though most organizations are not purely hierarchical, many managers are still blind to the flat community structure within their organizations.
A firm may give employees a sense of belonging and identity, becoming their "village" or community where affective and innovative needs are met, not only a hierarchy striving for maximum efficiency and profit.
Developed by Lim, Griffiths, and Sambrook (2010), borrowing the concept of phenotype from genetics:
- A phenotype is the observable characteristics of an organism, resulting from the expression of its genes and the influence of the environment.
- Gene expression is usually determined by pairs of alleles (different forms of a gene).
- In the model, each employee's formal, hierarchical participation and informal, community participation, as influenced by environment, contribute to the organization's overall phenotype.
- Each organization is a unique phenotype along a spectrum between pure hierarchy and pure community (flat) structure.
The model views an organization as having both a hierarchy and a community structure, equally well established and extensive.
Practical methods:
- The organizational chart studies the hierarchical structure (roles and formal authority).
- Social network analysis maps the community structure (informal influences that often cross workplace boundaries and extend beyond the workplace).

🎖️ Military Command and Control (C2)

Correspondences exist between Mintzberg's organizational archetypes and approaches to military C2.
Machine Bureaucracy: a highly centralized approach to C2, with a narrow allocation of decision rights, restricted interaction patterns and restricted information flow.
Adhocracy: a more networked, less centralized approach, with more individual initiative and self-synchronization, broader decision rights, interaction patterns and information distribution.
Other types (Professional Bureaucracy, Simple Structure) fall in between.
EAST (event analysis for systematic teamwork), per Walker et al.:
- Describes emergent system-level features arising from interactions of human and technical constituents.
- Modelled using task, social and propositional networks, presented through an integrated methodologies approach.
- Key principle of function and approximation: similar individuals and the same technology may reach the same objective via entirely distinct paths and starting points.
- Desirable emergent features such as shared awareness, pace, agility and self-synchronization may appear as humans adjust to the techno-organisational aspects of a system.

🔄 Operational and Informal Structure

The set organizational structure may not coincide with facts, evolving in operational action.
Such divergence decreases performance: a wrong structure may hamper cooperation and hinder completing orders on time and within resources and budgets.
The informal organization (the structure of social interactions that emerges within organizations) tends to lag in integrating into a newly established formal organization, whereas the formal organization (the norms system created by managers) can be changed relatively quickly.
Structures should be adaptive to process requirements, aiming to optimize the ratio of effort and input to output.

🧩 Configurations According to Mintzberg

Five parts of an organization

Part	Meaning
Strategic apex	Leaders of the organization
Middle line	Managers of lower level
Operating core	Workers of the lowest level, directly producing something or providing services
Technostructure	Analysts
Support staff	Help other members perform their function

An additional element is organisational ideology.

Six mechanisms of coordination

Mutual adjustment (without formal, standardized mechanisms)
Direct supervision (one person, the leader, gives direct orders to others)
Standardization of work processes (documents that regulate work, produced by the technostructure)
Standardization of outputs (only the results of work are regulated)
Standardization of skills (preparing specialists outside the organization)
Standardization of norms (based on the organisation's values and ideology)

Seven configurations

Configuration	Dominant part	Dominant coordination
Entrepreneurial organization	Strategic apex	Direct supervision
Machine organization	Technostructure	Standardization of work processes
Professional organization	Operating core	Standardization of skills
Diversified organization	Middle level	Standardization of outputs
Innovative organization	Support staff	Mutual adjustment
Missionary organization	Ideology	Standardization of norms
Political organization	None dominates	None dominates

Entrepreneurial (Simple structure)

Simple, informal structure; the leader coordinates work by direct supervision.
No technostructure, little support staff.
Found where the environment is simple (one person can have significant influence) but changing (one person's flexibility gives an advantage over bureaucratic structures).

Machine (Machine bureaucracy)

Formal rules regulate work; developed technostructure and middle line; centralised and hierarchical.
Common when work is simple and repetitive, or when the organization is strongly controlled from outside.
Common for control-related work (prisons, police) and organizations with special safety requirements (fire departments, airlines).

Professional (Professional bureaucracy)

Coordinates the work of professionals in the operating core through their training (for example, in university).
Large operating core, insignificant middle line and technostructure; professionals do complex work with significant autonomy.
Numerous support staff; professionals take part in administration, so there are many committees.
Common in universities, hospitals, law firms.

Diversified (Divisionalized form)

Consists of several parts with high autonomy.
Common for old, large organizations.

Innovative (Adhocracy)

Gathers specialists from different fields into teams for specific tasks; common when the environment is complex and dynamic.
Two types:
- Operating adhocracy solves innovative problems for its clients (advertising agency, firm developing product prototypes).
- Administrative adhocracy has teams solving problems for the organization itself (NASA during the Apollo program).

Missionary

Coordinates work through organisational ideology; few formal rules.
Decentralized, with insignificant differences between levels.

Political

Occurs when power is mostly used through workplace politics.

Organizational Structure: Business Study Notes