Organizational Structure

Reviewed by Sweta | Updated on Jul 26, 2021



Organisational structure refers to a system comprising multiple activities and the flow of these activities within an organisation. Each sub-set of activities have their roles, responsibilities, and reporting mechanisms within the organisation. An organisation’s structure determines the flow of information between different departments. Companies having a well-planned organisational structure are efficient and better coordinated.

Understanding Organisational Structure

Broadly, there exist two types of organisational structures, the centralised structure and the decentralised structure. The centralised structure involves a top-to-bottom approach with decision making vesting with the management. In a decentralised structure, the decision making vests with the different departments of the organisation.

An organisational structure defines the level of hierarchy in the organisation. An organisational structure, which defines each employee’s roles and responsibilities, is able to meet its goals in a definite manner. Also, structuring helps in representing the flow of activities and the coordination between them. It helps in planning the activities, choosing the right employees, and meeting the objectives of the organisation.

Generally, the organisational structure is in the form of a shape, such as a pyramid. The management or the board of directors making decisions sit at the top, while the operational staff doing groundwork or with least decision making power sit at the bottom. The organisation defines the roles and responsibilities of all employees and the chain of command within the organisation.

There are four types of organisational structures, namely (a) A functional structure where the different core functions form the basis for the organisation’s structure (b) A multidivisional structure where a large company has multiple divisions dealing with a product or service (c) A matrix structure where a single employee perform roles in two or more departments; (d) A flatarchy structure which follows less hierarchy and gives more flexibility to employees.


In the absence of a formal structure, organisations may find it difficult to set the reporting lines for employees, evaluate performance, and coordinate between teams to achieve the objectives of an organisation. A formal structure helps in making optimum use of resources, including manpower.

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