Organisation Structure Archives

If you’re looking to make a change, it can be tempting to try and transplant or improve upon an example that has worked brilliantly for another organisation. Amazing examples that get a mention on a podcast, or in a book can be thought-provoking and provide ideas but ‘lifting and shifting’ a design from one organisation to another rarely works, because just like you, your organisation is unique.

Having said that, there are four broad ‘types’ of organisational structure that you may have heard of, which are useful to understand.

‘Lifting and shifting’ an organisation structure rarely works, because your organisation is unique

The Four Organisational Structures

There are four types of organisational structures that can be seen across most organisations: Function, Product, Geography and Customer.

These four archetypes are the building blocks that organisations typically use when they’re (re)designing and (re)structuring their teams.

There are pros and cons to all four structure types and in reality, you’ll probably see a blend of the different types of organisation structure in use in your workplace today.

There are four types (or archetypes) of organisational structure seen in most companies today

So you’re probably wondering how are the most successful organisations structured?
What’s the ‘secret sauce’ for a great organisation design?
Where should I start if I’m thinking about restructuring my teams and my business?
Which of the four archetypes is most effective?
Well, that depends on what you’re trying to achieve…

Functional

Functional structures organise and group work together by common activity.

In a functional structure, each function within the organisation is a separate ‘entity’ that is managed vertically by a Head of Function or Chief Officer.

Functional areas are sometimes referred to as “silos”. Communication generally follows the reporting lines (or hierarchy) of each function cross-departmental communication is usually handled by the department heads.

Functional structures organise and group work, and therefore teams, by common activity

Functional structures work well when you’ve got a single line of business but can be challenging when you grow your product/service portfolio as nobody has end-to-end responsibility for product/service.
When the work teams do is sufficiently specialised, functional structures can create efficiency and allow teams to focus right in on what they’re great at.
When communication between departments can only be achieved by sending messages up the ‘chain of command’ to be passed at a senior level and cascaded down in another function, this can create blockages, duplication and barriers to productivity.

Product

Product organisation structures will group work by division, category, sector, or business unit.

In a product or divisional structure, it’s unusual to find any overlap between divisions. Typically, divisional leaders have high levels of autonomy and do not need to coordinate activity with other teams.

This usually means that each division is ‘self-contained’ and has its own resources to support that product line, e.g. its own marketing or product development teams.

Product structures are often organised as 'self-contained' and autonomous teams

Many large corporations and multinationals have a multidivisional format, trading through subsidiaries and using the parent company’s brand name and/or intellectual property.
Whilst subsidiaries or divisions benefit from the investment in branding by the parent company, it can be challenging to maintain consistency across each ‘self-contained’ or autonomous team.
Sub-cultures can also be an advantage when well-managed, allowing for inclusion and expression, but can cause damage when allowed to diverge from an organisations core values, purpose, vision and mission.

Geography

Geographic organisation structures will group work by, well, geography!

In a saturated market this might look like an area or regional structure. In new markets, teams may be grouped together by country or territory.

Core products/services may be standardised but geographic teams are empowered to make decisions based on local culture, politics and tastes.

Geographic teams are, well, organised by geography, and usually empowered to make localised decisions

Geographic structures take many forms including satellite offices, websites and offerings tailored to local markets, and area/regional/country/global headquarters. In short, anything to stay close to customers.

Geographically dispersed teams can react more quickly to local events, cultural shits, political changes and the evolving tastes of their customers. Ever noticed that some soft drinks taste sweeter or more bitter in other countries? That’s a great example of a geographic team making a local decision to suit the market, whilst maintaining the core product offering.

Sometimes a geographically distributed team can duplicate resources and effort; I’ve even heard of three teams at one company all working on the same project without anyone realising. Without really top-notch employee engagement and internal communications, the business can end up competing against itself. This has the potential to mix messages for clients, and possibly create waste and inefficiency.

Customer

Customer structures will group work by prioritising the customers’ need for a single point of contact.

It’s fairly common to see customer structures when organisations group activity towards customers with similar buying behaviours.

If you ever meet a sales representative, account manager or customer relationship manager, the chances are that organisation is using a customer structure. It’s nice to know that they’re organised around your needs, eh?

But a customer structure isn’t just for organisations with a product or service to sell. Many not-for-profit organisations and social enterprises offer services for clients with similar needs
Having a single point of contact (often through a caseworker, community officer or advice service) means that customers have consistent contact with someone who can help them with everything. It’s a one-stop-shop built around the needs of the client.
There are drawbacks to customer structures, particularly if the relationship deals with sensitive issues, such as social support services or relationships with vulnerable clients. The customer often sees the person delivering services as ‘the company’ and any changing of the guard can often have a negative impact on clients.

Customer structures organise teams by the need for a 'single point of contact' or common buying behaviours

Many healthcare professionals also operate within a customer structure, e.g. your local GP. When you see a make an appointment at your local health clinic, you’re getting access to a range of general healthcare options via a single point of contact. Specialist care is provided elsewhere and referrals are based on ‘customer’ need.
On one hand the customer structure enables a necessary triage and diagnostic service, on the other hand it creates a blockage and potential ‘gatekeeper’ for patients to ‘satisfy’ before accessing other services.
Human nature being what it is, if you can’t get to your GP or indeed if you don’t want to wait for an appointment, it’s tempting to work around the triage system and use another access point (in this case, A&E).
Perceived inflexibilities for service delivery and issues with capacity, ultimately result in pressure elsewhere in the organisation. Great communication and prudent capacity management are key.

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Tag: Organisation Structure

HR myths busted: “You can ‘Lift and Shift’ an organisational structure from one business to another”