The 5 Types Of Organizational Structures For The New World Of Work
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The concept of organizational structures has been around since the dawn of ancient civilizations, ever since the coordination of large groups of people was needed for things like administration, trade, and the military.
You look back as far as ancient Egypt for instance to see that to construct the pyramids there had to be an organizational structure of architected, engineers, labor coordinators, foreman, and workers.
In Mesopotamia the Code of Hammurabi was the first known written set of laws and in it was a description of a structured society with responsibilities and accountabilities.
In feudal Europe lords managed estates with a clear top down hierarchy overseeing vassals and serfs.
Then came the Industrial Revolution which transformed organizational structured as we focused on mass production and more developed types of structures where managers had to oversee production, workers operating machines, clerks, etc. The official bureaucracy was born! During this time people like Frederick Taylor introduced scientific management, aiming to optimize worker productivity through standardized processes and tasks. Employees would be timed to shave seconds off of t their tasks.
Of course we have seen even more change thanks to advances in technology, changing values and expectations, and a post-pandemic shift towards focusing on people first with things like flexible work. Today many organizations around the world are reevaluating their organizational structures to move away from traditional hierarchies.
What are their options? In the rest of this article available for paid subscribers only, I’ll explore the 5 types of organizations structures and give you a fantastic visual that breaks down the difference between each.
The 5 types of organizational structures are:
- The traditional hierarchy
- Flatter organizations
- Flat organizations
- Flatarchies
- Holacratic organizations
The image below gives a great visual of the differences between all 5.
1. Traditional Hierarchy
Historically the most common and recognized form of organizational structure. The Traditional Hierarchical structure is reminiscent of a pyramid. At the peak sits the top-tier leadership, which trickles down to middle management, followed by the broad base of general employees. The pyramid is the visual we always see online and in memes that mock business today.
It provides a clear chain of command and delineation of responsibilities. This is the most rigid structure and Gary Hamel has even described it as the most resilient structure ever created by man.
The main criticism is its inflexibility. Information primarily flows top-down, limiting bottom-up feedback which can stifle innovation and adaptability. Major corporations have fallen because of an over-reliance on this model. Kodak, for instance, failed to pivot to digital photography quickly enough, with its hierarchical structure being a major roadblock to identifying new opportunities and taking advantage of them.
Unfortunately, many organizations still operate like a traditional hierarchy.
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2. Flatter Organizations
Flatter Organizations emerged as a response to the rigidity of hierarchies. By reducing layers and opening up the lines of communication, these structures promote a more democratic environment where open dialogue is encouraged across levels. The shift is significant but not radical, making it attractive for larger corporations wanting to modernize without a complete overhaul. By promoting bi-directional communication and cutting down on bureaucratic red tape, decisions are made faster, leading to a more responsive and agile organization. Companies like Tesla have successfully integrated this approach, leading to swift adaptations in their manufacturing processes and product launches. Microsoft and American Express (both companies I have worked with) also both fit under this structure
3. Flat Organizations
Taking the concept of a non-hierarchical structure to its absolutely maximum are Flat Organizations. In such setups, the traditional corporate ladder is entirely done away with. Instead, every employee is seen as an equal contributor, emphasizing autonomy, personal responsibility, and empowerment. Valve Corporation, the video game giant, has famously employed this structure. Employees freely choose or initiate projects based on personal interests and expertise. While this can foster a highly innovative environment, critics argue that such a system can also lead to confusion, overlaps, and potential inefficiencies, especially in larger entities. The manufacturing company, Morningstar Farms, is another company that fits into this structure.
4. Flatarchies
A fusion of the hierarchical and flat models is the Flatarchy. It’s an adaptive structure, morphing according to the organization’s needs. During certain phases or projects, a more hierarchical approach might be taken, while in others, a flat approach is employed. This flexibility means the organization can be stable yet innovative when required. It’s a balance of structured strategy and entrepreneurial spirit. This model is especially appealing for companies looking to foster innovation without sacrificing operational efficiency. Google, with its innovative projects often breaking away from its core operations, is a good example of this approach in action.
Lockheed Martin which has since gotten much flatter, is famous for their Skunk Works division which is the innovative arm of the aerospace giant. The main structure of the organization is more hierarchical while the Skunk Works division is much flatter in nature.
5. Holacratic Organizations/Experimental
Finally, there’s Holacracy, a structure that’s more of a radical rethinking than a mere organizational tweak. Holacracy dismisses traditional roles and instead establishes fluid roles based on the task at hand and the organization’s evolving needs. There’s an emphasis on autonomy, with teams self-organizing and choosing how to best achieve their objectives. Zappos is a notable company that transitioned to this model. While it promises adaptability and a dynamic work environment, it’s not without its challenges. Implementation can be rocky, as old paradigms are hard to break, and there’s a significant learning curve for employees accustomed to traditional structures. In fact, Zappos has since abandoned their efforts to shift to a holacratic organization and this concept has all but died off.
I put “experimental” next to this structure because there are several other fringe models which are floating around out there which are not mainstream but still represent a direct challenge to anything resembling a traditional organizational structure.
From all 5 above, FLATTER organizations seem to be the most practical, applicable, and yield the highest benefit. They are similar to a more traditional hierarchy but with greatly reduced leaders and open lines of collaboration and communication. Some hierarchy is actually good for business!
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