The Main Types of Organizational Structures

Organizational structure defines how tasks, responsibilities, and authority are distributed within a company. Whether you're in HR managing team growth or IT overseeing system integration, understanding organizational structures is crucial. This guide explores common organizational structures, their benefits, limitations, and best practices—plus practical tips on leveraging modern tools like OneDirectory's org chart software.

What is an Organizational Structure?

An organizational structure outlines how a company organizes employees, teams, and management levels to achieve business goals. It affects communication, decision-making, and operational efficiency.

Why Organizational Structure Matters

• Improves Clarity: Employees clearly understand their roles, responsibilities, and reporting relationships.
• Enhances Communication: Defined structures streamline communication flows within and between teams.
• Supports Strategic Planning: Enables easier identification of staffing gaps and resource planning.
• Fosters Agility: Facilitates smoother restructuring or scaling by clearly visualizing roles.

Common Types of Organizational Structures

Hierarchical Structure (Traditional Pyramid)

Most companies use a hierarchical structure, which is the classic pyramid shape org chart. This is the traditional top-down model: executives at the top, tiers of management in the middle, and staff at the bottom. In a hierarchical org chart, each employee has one direct supervisor (except the person at the top) and a clear chain of command up to the CEO.

Hierarchical charts emphasize defined layers of authority. They can be further divided into functional or divisional setups (which we’ll explain next), but both are still hierarchical at their core. The advantage of a hierarchical org chart is that it’s straightforward – everyone can see the ladder of responsibility. It’s great for clarity in large organizations because it shows the reporting structure clearly.

Example: A simple functional hierarchical org chart. In this functional organization, the company is organized by departments (Research & Development, Marketing, Sales), each led by a Vice President reporting to the CEO. Under each VP, there are managers and then staff. This pyramid layout is typical of a hierarchical structure, grouping roles by function.

In the above image, notice how each department’s staff ultimately roll up to the CEO via their respective managers and VPs. This is a very common arrangement. Many corporate org charts look like this, with perhaps additional layers (directors, senior managers, etc.) inserted as needed. 

Functional hierarchy means each department (function) has its own chain of command under a department head.

Divisional hierarchy (a variation) means the company is split by products or regions – each division has its own functional teams. For example, a large corporation might have Division A and Division B, each with its own mini hierarchy of Marketing, Sales, etc., and all division heads report up to the CEO. On an org chart, a divisional structure might look like multiple distinct hierarchies side by side for each division, all under the corporate umbrella.

Who uses hierarchical org charts? 

Nearly everyone – this is the most common style. Traditional businesses, government agencies, and organizations of all sizes often start with this model because it clearly defines supervision and pathways for promotion. HR professionals find hierarchical charts useful for outlining clear reporting paths and salary grades, while IT professionals might use the hierarchy to set up things like email distribution lists or permission groups aligned with the management structure.

Matrix Organizational Structure

A matrix structure is more complex – it blends two types of organizational structures. Typically, it combines a functional hierarchy with a project-based or cross-functional overlay.

In a matrix org structure, employees have dual reporting relationships: usually to a functional manager and to a project or product manager. This means the org chart isn’t a simple tree; it can look like a grid or have interconnecting lines showing both dimensions.

Example: A simplified matrix org chart. Here, the company has functional departments (R&D, Marketing, Sales under respective VPs) and also project teams led by Project Leads A, B, C. An Engineer in R&D might report to the VP of R&D (functional boss) and to Project Lead A for the project they are working on. Similarly, a Designer reports to the Marketing VP and to a Project Lead. This creates a grid of reporting lines (as illustrated by the horizontal and vertical connections).

In the matrix example above, you can see that each Project Lead (A, B, C on the left) oversees a team composed of members from different functions (Engineers, Designers, Salespeople). Those team members still report to their functional heads vertically, but also to the project lead horizontally. This structure is common in organizations that handle complex projects or product development cycles where cross-department collaboration is crucial – for example, tech companies, consulting firms, or any business where employees frequently work in interdisciplinary teams.

They promote flexibility and better communication across departments. Employees work with colleagues from other departments, which can spur innovation and ensure that projects have input from all necessary functions. For HR, matrix structures can be challenging in terms of performance reviews (an employee has more than one boss to give feedback) but they can improve teamwork company-wide. For IT, matrix structures often mean setting up project-based team spaces or collaboration tools, since the formal org chart alone doesn’t capture everything.

One downside is that matrix org charts can look confusing if drawn on paper – lots of dotted lines or dual connections. This is where org chart software can help by providing interactive filtering (e.g., “show by project” vs “show by department” views). OneDirectory, for instance, could allow you to tag people by project teams, so you could visualize a project’s team even if it’s not a traditional subtree of the main org chart.

Flat Organizational Structure (Horizontal)

A flat structure means minimal or no levels of middle management – it “flattens” the hierarchy so that there are fewer layers between leadership and staff. In extreme cases (like a small startup or a holacracy model), virtually everyone might report to a single leader or operate in self-managed teams with no formal hierarchy at all.

On an org chart, a flat organization might look like one layer of employees under the top level, or a few horizontal layers at most. For example, a company might have the CEO and a team of department heads, and each department head directly oversees all their team members with very few if any intermediate managers. The org chart thus appears very short vertically but can be wide horizontally (because one manager has many direct reports).

The benefits of a flat org chart include faster communication (fewer hoops to jump through for decisions) and often greater empowerment for employees (since individuals might have more autonomy without a dense management structure). Startups often adopt flatter org charts to stay agile and avoid bureaucracy.

HR in a flat organization might have an easier time with communication but a harder time with defining advancement (if there are no manager roles, how do employees get promoted? Often, growth comes by taking on new responsibilities rather than new titles). IT in a flat structure might find decision-making quicker (only one or two approvals needed for things) but they might also need to provide tools that allow everyone to be on the same page since there are less formal channels.

In practice, many organizations aren’t purely one type or another – you might have a primarily hierarchical functional structure with a few matrix teams for special projects, or a flat-ish structure that becomes more hierarchical as the company grows. The key is that your org chart should reflect the reality of how your organization works. It’s also okay to evolve: a startup might start flat and gradually introduce hierarchy as staff count increases; or a traditional company might experiment with matrix teams to break silos.

Divisional Organizational Structure

In a divisional structure, a company is split into semi-autonomous units or divisions, often by product line, market, or geography. Each division operates almost like its own company, with its own functional teams inside. For example, a corporation might have Division X and Division Y. Division X could be focused on one product or region and have its own sales, marketing, HR, etc. Meanwhile, Division Y has its own departments as well. Both division heads report to the top (CEO), but beneath them, the divisions run independently.

On an org chart, a divisional structure might show multiple distinct hierarchies. Imagine two side-by-side org charts: one for Division X’s internal structure and one for Division Y’s, converging at the top under the CEO. It’s still hierarchical within each division, but the chart is segmented by division. This type is common in large conglomerates or companies with diverse product lines. For instance, an automobile company might have a separate division for cars, trucks, and overseas markets – each with its own org chart segment.

The benefit is focus and agility: each division can adapt to its product/market needs without affecting the others. HR might like this for tailoring policies or training to each division’s context. IT might see this reflected in how systems are separated or data is partitioned by division. One challenge, however, is that divisions can become isolated; central leadership needs to ensure all parts of the organization are still aligned with the overall company goals. Org charts for divisional structures help by clearly delineating the boundaries of each division’s responsibility.

Why Does This Matter for HR Managers and Directors?

Understanding these org chart types isn't just academic—it's practical. As an HR professional, you play a pivotal role in shaping the organization's structure to align with its goals and culture. Whether you're scaling a startup, managing a large team, or integrating departments after a merger, choosing the right org chart can make all the difference.

Wrapping It Up

Organizational charts are more than boxes and lines; they're the blueprint of your company's culture and workflow. By selecting the right org chart type, you can enhance communication, boost efficiency, and create a work environment where everyone thrives.

So next time you're tasked with drawing up or revising an org chart, consider which model fits your organization's personality and objectives. And remember, just like no two companies are the same, your org chart can be customized to suit your unique needs.

Need Help Mapping Your Organizational Structure?

Feeling inspired to revamp your organization's structure? Check out our Org Chart  Creator to create dynamic and interactive charts that grow with your company.

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