Important Types of Organisation with Pros and Cons

Important Types of Organisation with Pros and Cons

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Syed Aquib Ur
Syed Aquib Ur Rahman
Assistant Manager
Updated on Jan 20, 2023 17:58 IST

There are various types of organisational structures that companies can adopt. Each type of organisation has its own set of advantages and disadvantages.

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Every organisation comprises an aggregation of subsystems, all contributing to a singular objective. These subsystems function within a structure that affects how tasks are divided, the way decisions are made, and ultimately how employees are involved. 

Today, this blog takes a closer look at four types of organisation – the common structures all over. 

Hierarchical Organisational Structure

The hierarchical organisational structure is the most common of all. Known as the bureaucratic type, it has a properly defined chain of command. The roles and responsibilities are clear, and the decision-making power is centralised. 

Which Businesses Can Choose It?

Companies with many employees go for this bureaucratic type of organisation. It also benefits companies that can provide a stable environment for employees. 

Pros and Cons of Hierarchical Organisational Structure

Pros Cons
Employees have clarity on their roles and responsibilities Such an organisation lacks flexibility in light of adapting to change 
Managers can exercise control better Decision-making takes longer as there is a defined hierarchy
Employees need to be highly skilled due to the requirement of specialised roles  Employees may not get encouraged to think outside-the-box
There is room for growth in such organisations Lower-level employees may not get to participate in decision-making and that may reduce motivation
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Flat Organisational Structure

The opposite of a hierarchical organisational structure is a flat one. Also known as the horizontal organisational structure, it has a decentralised approach and the decision-making power is not centralised. 

Which Businesses Can Choose It?

This structure is best suited for companies that are in a rapidly changing environment. In such environments, flexibility and adaptability are essential. Such companies also foster innovation and creativity.

Pros and Cons of Flat Organisational Structure

Pros Cons
It encourages flexibility instead of bureaucracy It may lack direction as almost everyone is involved in decision-making and the roles are not clearly defined
Employees are encouraged to think outside-the-box and can contribute directly to the decision-making process Employees may not be able to specialise properly as they have to wear many hats
The decision-making process is much faster than in a hierarchical organisation  Managing a decentralised workforce can become too challenging and it is not ideal for a company with a large number of employees
Maintaining a horizontal structure is less expensive than a bureaucratic one. Miscommunication can increase in this type of organisation

Matrix Organisational Structure

One of the best types of organisations, common today, is the matrix organisational structure. 

It is a hybrid between a hierarchical and a horizontal structure. It combines both functional and product-based teams, where all-employee-decision-making and specialisation of roles are given equal importance. 

Which Businesses Can Choose It?

This type of organisation usually operates in a highly dynamic environment. It may take multiple projects simultaneously. Companies with numerous employees who need to manage umpteen resources go for this.

Pros and Cons of Matrix Organisational Structure

Pros Cons
Resource management is a priority in such companies There can be multiple managers for various projects, so reporting may take the backseat
While there is ample flexibility, such companies also have highly skilled personnel There is no distinct chain of command, which may lead to confusion
There is no room for miscommunication in such type of organisation and employees are trained to work together on multiple cross-department projects Coordination and resource allocation, if not done right, will negatively affect this type of organisation
Decision-making is fast and encourages varying perspectives It can give rise to too many conflicts
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Network Organisational Structure

A network organisational structure features a decentralised approach at a broader level. Here, multiple companies and organisations collaborate and share resources. 

Which Businesses Can Choose It?

This structure is ideal for those businesses operating globally. It is crucial to leverage the resources and expertise of multiple organisations then.

Pros and Cons of Network Organisational Structure

Pros Cons
This type of organisation can improve its global reach There can be a lack of control and direction
Because it is a network, the organisation can easily access the best personnel, the technologies  The network can be too complex to function properly
Cost-effective in the sense that more companies are involved in investing together There can be too much dependence on the partners
Such types of organisations are more competitive as they function on the global scale Coordination and management can suffer
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Parting Thoughts

These are the four important types of organisation that you need to know. The type of organisational structure that a company adopts will depend on its size, environment, and goals. No single structure is best suited for all companies, and companies should choose the most appropriate structure for their needs.

About the Author
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Syed Aquib Ur Rahman
Assistant Manager

Aquib is a seasoned wordsmith, having penned countless blogs for Indian and international brands. These days, he's all about digital marketing and core management subjects - not to mention his unwavering commitment ... Read Full Bio