What is Organizational structure? How are Traditional and Modern Organizations structured?

 Organizational structure

Organizational structure refers to the way in which an organization is structured and organized.  Many organizations and businesses have many different types of structures that they use to organize their employees, management, and operations. Based on the organization’s nature, an organization is broadly divided into two types:   Traditional Organization and Modern Organization.

1) The Traditional Organization

In a traditional, hierarchical organization structure, tasks and objectives are set out at every level in an organization. Every member of an organization is aware of his or her specific task and its relation to larger organizational goals. In these types of organizations, employees have very specific roles; they fulfill those roles because it helps move the organization forward, and they often move up through seniority within their own department to secure better jobs as they gain experience. Three types of organizational structures are often observed in traditional organization: function-based, market based, and product-based organization.

i) The Function Based Structure

In a traditional organization, departments focus on a specific function. Each department is largely autonomous and employees typically don’t move between departments very often. This type of structure is good for specialized tasks, such as product design or manufacturing, but may not be good for creative tasks or corporate strategy. In these situations, it is important to have staff with highly-specialized skills working together in a group. This structure may be appropriate for companies that provide a product or service that requires specific skills and training, such as a law firm or an engineering firm. A company's organization and hierarchy is based on its functions.

ii) The Market Based Structure

A market-based organizational structure is based on either product or service lines. In that case, product management or services management makes most of the strategic decisions for those particular areas. This type of structure tends to work well in large organizations that need greater specialization in order to function effectively. It is less common for small businesses and startups because it generally makes it more difficult for those organizations to adjust quickly to changing market conditions.

iii) Product based structure

Product based organization is dedicated to creating a single product. Most well-known companies, such as Sony and Coca-Cola, have some aspect of a product based structure in place: they focus all resources on designing, producing and marketing their main product or service.

In a product based structure, each department is devoted to creating and selling one product. This type of structure can help focus an organization’s direction and decision making, but when it comes to innovation or pivoting, it can be slow and restrictive.

2) Modern organizations

Business organizations are no longer structured as they were decades ago, and the types of organizations have changed with the times as well. In fact, modern organizational structures came into existence as a response to the challenges faced by business due to the fast paced world of our time. Modern organizations can be categorized into three different types:

i) Matrix Structure

In a matrix structure, workers are divided into two or more teams that work in parallel. They may work on different projects with their primary team, or they may perform different duties within one project. These duties could be technical (designing) or functional (marketing).

In many companies with matrix structures, each supervisor has a defined set of duties and reports to two bosses (a functional manager and a project manager). The first boss oversees all company-wide operations, while a second boss oversees daily operations. This is common in organizations that must collaborate with outside vendors or suppliers for materials or services.

ii) Network Structure

In a network structure, employees have many roles and those roles connect to other roles in a chain. This organizational structure has no dedicated departments. Instead, employees work across all functions and collaborate to get things done.

In a network structure, each employee has only one supervisor. This makes sense for many small businesses. Network organizations are very flat in their hierarchy and rely on processes to keep things running smoothly. This type of organization is usually good for startups or small companies with limited budgets because it uses less overhead than other structures. As long as all employees are fully trained in carrying out their responsibilities, a network structure can work well without much micromanagement or oversight from upper management. This structure encourages horizontal communication (communication with same status)

iii) Virtual Organization

In a virtual organization, each member or team works from their own location. Virtual organizations have all kinds of structures, but they tend to avoid rigid hierarchies because individuals have more freedom in terms of where they do their work and who they work with. This can lead to more flexibility—but also a lack of structure that may leave some employees feeling frustrated if not supported by managers and leaders. These types of organizations depend heavily on technology and software to communicate with their remote workforce.