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Organizational structure:
Modern approaches as a blueprint for success

If you’ve followed us for some time, you know we’re not big on corporate hierarchy. Autonomy and psychological safety are rarely part of structures with the usual corporate job titles. There are many organizational structures based on less hierarchy that work — or none at all. The rebels of our bucket list show us how. You can even learn from them, through our courses. So, what’s the deal with organizational structure?


Consider these elements when changing the organizational structure.

01.
Company restructuring
When discussing company restructuring, we refer mostly to internal organizational structure. The internal hierarchy of an organization. It is possible to change it, with the right preparations. Find out what the strengths and weaknesses are in the current structure. In fact, understand your current problems as a whole. Also, look at the business strategy. What are priorities and why?
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02.
Hierarchy
Organizational structure is all about hierarchy. Hierarchy is like the traditional backbone of organizational structure – it's the pecking order that defines who reports to whom. Traditionally, it works top-down. There are C-level executives at the top, followed by middle management, and then the dedicated staff forming the foundation. Information cascades from the summit to the base.
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03.
Leadership
As traditional hierarchy changes, so will leadership. Leaders in modern companies are more like coaches or motivators. That sounds a bit cheesy - well, very cheesy - but it is true. The power is with the people. Did you barf inside your mouth a little yet? There’s no need. Plenty of evidence shows that flat organizations have less employee turnover and more happiness among staff members overall.
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04.
Management
In hierarchical organizations, management is most often centralized. That has benefits, like better buy-in prices because there are bigger numbers. Also, it offers the possibility to build a company-wide company culture, not just branch or department-related. There is a lot to say in favor of the implementation of flat organizations. For management, that typically means...
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05.
Self-management
Self-management is an organizational structure that flips the script on traditional hierarchy. In a self-management setup, teams or individuals are empowered to make decisions autonomously. This flat organizational structure fosters a culture of responsibility, accountability, and collaboration, where everyone has a stake in the success of the whole organization.
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What exactly is ‘organizational structure’?

Organizational structure is like the blueprint that shapes how a company's activities are directed to achieve its goals. Picture it as the game plan that sets the rules, roles, and responsibilities within an organization.

This structure also dictates the flow of information between different levels of the company. In a centralized setup, decisions trickle down from the top. It stops at a certain level, often middle management. On the other hand, a decentralized structure spreads decision-making authority across various levels.

Whether an organization embraces the classic pyramid-style org chart or a more unconventional setup, like a matrix or flat structure, the chosen organizational structure significantly impacts how a company functions. It matters to everyone who works there.

As organizations evolve, it’s important to explore and understand different organizational structures, for strategic alignment with objectives and overall success.

Usually, organizational structures are pictured in charts, the (in-)famous org charts. Want to learn more about our vision?

Read: Blow Up The Traditional Organization Chart

Choosing the structure for an organization

The structure a company takes on is not always part of a well-thought-out process. When a company grows after the startup phase, a top-down hierarchy is easily formed.

That doesn’t mean you can’t change it at any time.

Difference in organizational structures

When we look at different organizational structures, there is a clear difference between centralized and decentralized organizational structures.

Centralized organizational structure

In a centralized setup, decision-making authority is concentrated at the top level of the organization. This structure ensures a clear chain of command and uniformity in decision implementation. On the flip side, it can sometimes lead to slower responses to local issues, as decisions need approval from the ‘main office’.

Decentralized organizational structure
A decentralized structure distributes decision-making power across different levels of the organization. Imagine it as a network of interconnected hubs, each with its decision-making autonomy. This allows for quicker responses to local challenges and promotes flexibility and innovation. However, without a central authority overseeing everything, there's a risk of inconsistency.

Examples of structures

There are many organizational structures that companies can adopt. They’re usually based on a clear philosophy. Do you need help deciding which fits your organization best? With our courses, you get insight in the structures taken on by pioneers like Haier, Viisi and Buurtzorg.

A functional structure is a common type of business structure that organizes a company into different departments based on areas of expertise, grouping employees by specialty, skill, or related roles. It’s based on levels of hierarchy, typically divided around different departments. Each has its own designated leader. While this structure clarifies roles and responsibilities, it may slow down employee growth as it works with silos, limiting cross-departmental communication and opportunities for employees to broaden their skills.

For companies with a broad reach, the geographical structure aligns with local nuances. Process-based structures, like the functional model, enhance efficiency but demand robust communication to prevent silos.

Alternative organizational structures, like the matrix, offer flexibility but can confuse lines of accountability. A matrix structure is an organizational design where employees report to more than one manager or supervisor. Circular structures distribute authority from the center, promoting communication.

In the realm of innovative structures, flat organizations champion minimal hierarchy, promoting collaboration and quick decision-making. Holacracy, a self-management system, represents a departure from traditional structures, emphasizing distributed authority and dynamic adaptability.

The organic structure, departing from vertical hierarchies, fosters open communication and a positive culture. Choosing the right structure involves understanding current roles, aligning with strategic plans, and gathering stakeholder feedback for a unique blend that suits the company's goals.

Many more organizational structures work. The companies that have chosen more autonomy, flexibility, and less hierarchy almost always have a more engaged workforce. This leads to less employee turnover and, in the end, to more innovation and success.

Elements of
organizational structure

A top-down hierarchy doesn’t lead to happy employees. Satisfied team members are more engaged, stay longer with the company, and make it stronger, better, and bigger.

Most elements of the organizational structure look a little different if you let go of the old-school org chart.

Chain of command

Even in flat structures, there’s usually some form of chain of command. It might be less rigid, with more emphasis on team collaboration. The flow of authority and communication might be more circular than hierarchical. Leadership may change or rotate, for example on a project basis. Often, team members choose who is their manager.

Departments

In non-hierarchical organizations, departments or teams typically have more autonomy. They might be responsible for making their own decisions and solving problems, which can make the organization more responsive to changes.

Span of control

In flat structures, managers often have a wide span of control, overseeing big teams. This leads to more employee autonomy, but it might also increase the risk of role ambiguity.

Centralization

Flat structures are, by definition, less centralized. Decision-making authority is spread out, often leading to quicker decision-making and problem-solving. Employees have more power to take initiative and be creative in their work.

Formalization

Even in flat structures, there’s usually some degree of formalization. It might be less rigid, with more flexibility for teams to adapt their roles and procedures as needed.

Food for thought.
Better yet,
food for action

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