Types of Organizational Structures to Consider for Your Business

What is an organizational structure?

An organizational structure is the framework of rules, roles, relationships and responsibilities that guide how a company operates to meet its business goals. It defines how information flows between different levels of the business and clarifies the reporting lines among staff, managers, executives and owners. 

While many organizational structures follow a traditional hierarchy, others emphasize flatter, more collaborative approaches. In fact, recent research shows that many organizations are starting to shift toward more agile and collaborative models so they can respond better to rapid market changes.

According to Harvard Business School, a well-designed organizational structure incorporates four key elements: task identification, departmentalization with clear chains of command, coordination mechanisms and an appropriate balance of centralization or decentralization of power. 

How many types of organizational structures are there?

At first glance, you might read that there are only two types of organizational structures: centralized and decentralized. While this distinction is useful, it is also too broad to capture the way most businesses actually operate. 

In fact, experts generally recognize eight main organizational structures, each of which falls into either the centralized or decentralized category:

• Hierarchical structure (also called line structure)
• Functional structure
• Divisional structure (also called multidivisional structure)
• Flatarchy structure (also called horizontal or flat structure)
• Matrix structure
• Team structure
• Network structure
• Projectized structure

Most of these models are centralized, meaning decision-making authority is concentrated at the top with C-suite executives and owners. By contrast, flat, team and network structures are decentralized, giving more decision-making power to non-executives and staff members.

Trends in organizational structure 

Recent research shows that more organizations are adopting agile, collaborative structures to stay responsive in fast-changing markets. For example, 85 percent of leaders in Deloitte’s 2025 Global Human Capital Trends report say their companies need greater agility in how work is organized to meet evolving demands.

Other trends include:

• Data from a Nakisa expert panel indicates that more organizations are shifting toward flexible team models, cross-functional work, and roles that adapt rather than rigid job descriptions.
• Research from MIT Sloan shows that flatter structures often attract employees who value autonomy, creating cultural shifts that can reshape how businesses operate.
  
• Research from a 2025 systematic review highlights a growing emphasis on dynamic capabilities such as faster decision-making, innovation and workforce agility, with organizations redefining structure across multiple dimensions rather than simply flattening hierarchies.

These changes suggest companies are moving away from strictly hierarchical structures toward models that give more autonomy to teams and leaders, rely less on rigid reporting lines and leverage technology and team collaboration to stay nimble.

Types of organizational structure to consider for your business

With eight main types of organizational structures, you might be wondering which one is best for your business. The truth is, the right choice depends on your company’s size, goals and culture. Here’s a breakdown of each structure to help you decide which model best supports your current operations and future growth.

1. Hierarchical structure

A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Its chain of command is likely what comes to mind when you picture a company: Power flows from the board of directors to the CEO and down through the rest of the organization. This makes the hierarchical structure a centralized organizational model.

In this setup, department heads or directors oversee their teams and report directly to the CEO. Because of its clarity and stability, this structure can work well for businesses across many industries.

Recent research from Bugisu Cooperative Union found that clearly defined roles in hierarchical structures strongly support improved productivity (about a 0.7 correlation). However, the same study noted that when decision-making is too centralized, job satisfaction tends to drop (about a -0.45 correlation).

Advantages of a hierarchical structure:

• It clearly defines reporting relationships, project organization and authority.
• It outlines the company’s corporate ladder and promotional paths, encouraging high-quality work.
• It helps employees specialize in their roles.
• It cultivates stronger relationships among employees within a team.

Drawbacks of a hierarchical structure:

• Bureaucratic hurdles can delay projects and discourage risk-taking.
• Employees may prioritize their own department or supervisor over the company as a whole.
• Workers may feel they have little say in how to approach their projects.

2. Functional structure

The functional structure is another centralized model that closely resembles the hierarchical structure. The difference is that each department has its own head who reports directly to the CEO, rather than one staff director overseeing all departments. Companies with several moderately sized departments often find this structure to be a good fit.

Contemporary organizational design research shows that functional structures remain popular, with configuration theory emphasizing how design features create both internal and external alignment within organizations.

Advantages of a functional structure:

• It helps employees develop specific, specialized roles.
• It boosts the self-sufficiency and innovation of individual departments and employees.
• It scales easily for companies of all sizes.

Drawbacks of a functional structure:

• It limits communication and collaboration among different departments.
• It can hide key details of departmental processes and strategies from employees outside the department.

3. Divisional structure

The divisional structure is a centralized model often used by enterprise-level companies with many large departments, markets or territories. For example, a food conglomerate may organize this way so that each product line can operate with full autonomy. 

In a divisional setup, each division has its own top executive overseeing operations. Large organizations, especially in manufacturing, are often the best fit for this structure.

Advantages of a divisional structure:

• Departments have the flexibility to operate separately from the company as a whole.
• It’s more adaptable to customer needs.
• Individual divisions have more autonomy and room for innovation.

Drawbacks of a divisional structure:

• It risks accidental duplication of resources.
• It limits communication and collaboration among departments.
• It can foster internal workplace competition between divisions instead of uniting the company against outside competitors.

4. Flat structure

A flat structure is a decentralized organizational model in which nearly all employees share equal power. Executives may hold slightly more authority, but business decision-making is largely distributed. This approach is common in startups that favor modern, flexible work arrangements or lack the staff size to justify multiple departments. Flat structures are seen quite a bit in the tech industry, which is home to many small, fast-moving startups.

Organizational behavior research published in Frontiers in Psychology in 2024 shows that flat hierarchies accelerate information flow and improve decision-making efficiency, enabling organizations to respond more quickly to change. 

However, experts disagree about the best way to implement these structures, noting that challenges about role clarity and power dynamics can arise. For example, a 2024 study in Nigeria found that flat hierarchies promote open communication but can be difficult to sustain in cultures where traditional respect for hierarchy conflicts with organizational needs.

Advantages of a flat structure:

• Employees gain more responsibility and independence.
• It improves communication and interaction among employees.
• It allows faster implementation of new practices or ideas with less risk of error.

Drawbacks of a flat structure:

• Employees receive little supervision.
• Reporting procedures can be unclear.
• Staff may not develop specialized skills.
• Scalability becomes difficult as the company grows.

5. Matrix structure

The matrix structure is a more flexible take on the classic hierarchical model. In this centralized setup, employees can shift between departments as projects require. You’ll often see this structure in industries that rely on highly skilled specialists who may be the only experts in their field within a company.

Advantages of a matrix structure:

• Supervisors can choose the best employees for each project.
• It supports a dynamic org chart with changing responsibilities.
• Employees can learn and build hard and soft skills outside their primary roles.

Drawbacks of a matrix structure:

• Conflicts may arise between project needs and departmental priorities.

The organizational chart changes frequently, which can create instability.

6. Team structure

A team structure is a decentralized but formal model that enables department heads to collaborate directly with employees from other departments. It resembles a matrix structure, but instead of employees moving fluidly across departments, supervisors coordinate more flexibly. This creates a decentralized functional structure. Industries that favor flat or matrix setups often also use team structures.

Advantages of a team structure:

• The lack of compartmentalized labor boosts productivity, growth and transparency.
• It emphasizes employee experience over seniority.
• It reduces the need for intensive human capital management tasks.

Drawbacks of a team structure:

• Employees may feel confused when traditional executive and staff roles are blurred.
• It can obscure the corporate ladder, reducing motivation for promotion-driven performance.

7. Network structure

A network structure is well-suited for large, multi-city or international businesses. Instead of organizing only the relationships among departments within one office, it also defines how different locations, freelancers, third-party providers and outsourced B2B partners connect and collaborate.

Recent academic research highlights network organizations as a growing trend, especially as ICT-based networks help overcome the limitations of traditional hierarchies. Network structures often thrive in environments that demand innovation and customization, offering clear advantages in fast-changing markets.

You’ll often find network structures in distributors, tech firms and logistics providers with international operations.

Advantages of a network structure:

• It clarifies how roles are distributed among on-site staff, remote employees, freelancers and external partners.
• It increases flexibility, allowing departments or locations to delegate tasks to one another.
• It encourages communication, collaboration and innovation.
• It defines workflows and reporting lines in large, complex organizations.

Drawbacks of a network structure:

• It can be highly complex, especially for out-of-office processes.
• It may create uncertainty about which employee, department or office has final decision-making authority.

8. Projectized structure

In a projectized structure, the organization’s focus is placed squarely on one project at a time. This centralized model gives project managers authority over resources, decision-making and supervision.

Unlike other structures, projectized organizations disband teams and reallocate resources once a project is complete. Still, like other centralized models, they maintain a clear hierarchy. Software development teams often use this approach, as it suits the complexity of building apps, websites or other digital products.

Advantages of a projectized structure:

• It streamlines decision-making and communication.
• The urgency around project completion fosters cooperation.
• It helps employees build flexibility and versatility.

Drawbacks of a projectized structure:

• Strict deadlines can increase workplace stress among employees.
• Authority may be overly concentrated in the hands of the project manager.
• It offers fewer opportunities for long-term skill development.

Organizational structure chart

Here’s a reference chart to help you understand the eight types of organizational structures at a glance.

Which organizational structure is best?

No single organizational structure works best for every business. The right choice depends on how much decision-making power you want to give employees, how much room you want to allow for innovation, the size of your company and how important employee interaction is to your company culture.

Here are a few guidelines that can help your decision:

• For rapid innovation and flexibility: Network and flat structures often perform best in fast-changing environments. Decentralized models give teams more autonomy, which can make it easier to adapt during digital transformation.
• For established operations requiring efficiency: Hierarchical and functional structures are strong options when stability and productivity are the top priorities, even if they don’t always inspire the same level of engagement.
• For project-based work: Matrix and projectized structures balance resources and authority well. They let managers pull in the right people for each project while still giving employees room to grow new skills.
• For large, distributed organizations: Network structures can be especially effective for global or multi-location companies, since they clarify how different offices, departments and external partners should work together.

Recent research from MIT’s Center for Collective Intelligence also suggests looking beyond traditional charts altogether. Its “supermind design” framework highlights how people and technology can be configured to work together more intelligently, showing that the best structure isn’t fixed — it evolves as workplaces and tools change.

After weighing these factors and considering what works in your industry, you’ll be better positioned to choose the structure that fits your business today. And remember, no choice is permanent — many companies adjust their organizational model as they grow and adapt to new challenges.