Types of Organizational Designs:

Organizational designs fall into two categories, traditional and contemporary. Traditional designs include simple
structure, functional structure, and divisional structure. Contemporary designs would include team structure, matrix
structure, project structure, boundaryless organization, and the learning organization. I am going to define and
discuss each design in order to give an understanding of the organizational design concept.

I. Traditional Designs:
1. Simple Structure
A simple structure is defined as a design with low departmentalization, wide spans of control, centralized authority,
and little formalization. This type of design is very common in small startup businesses. For example, in a business
with few employees the owner tends to be the manager and controls all of the functions of the business. Often
employees work in all parts of the business and don’t just focus on one job creating little if any
departmentalization. In this type of design there are usually no standardized policies and procedures. When the
company begins to expand then the structure tends to become more complex and grows out of the simple structure.
2. Functional Structure
A functional structure is defined as a design that groups similar or related occupational specialties together. It is the
functional approach to departmentalization applied to the entire organization.

Revlon, Inc. is organized

around the functions of
operations, finance,
human resources, and product research and development.
Visit Revlon, Inc at www.revlon.com

3. Divisional Structure
A divisional structure is made up of separate, semi-autonomous units or divisions. Within one corporation there
may be many different divisions and each division has its own goals to accomplish. A manager oversees their
division and is completely responsible for the success or failure of the division. This gets managers to focus more
on results knowing that they will be held accountable for them.

Wal-Mart Stores, Inc. is

organized by its divisions such
as Wal-Mart Realty, Wal-Mart
International, Wal-Mart
Specialty Stores, Sam's Clubs, and Supercenters. Visit War-
Mart Inc. at www.walmart.com

II. Contemporary Designs

1. Team Structure
A team structure is a design in which an organization is made up of teams, and each team works towards a
common goal. Since the organization is made up of groups to perform the functions of the company, teams must
perform well because they are held accountable for their performance. In a team structured organization there is no
hierarchy or chain of command. Therefore, teams can work the way they want to, and figure out the most effective
and efficient way to perform their tasks. Teams are given the power to be as innovative as they want. Some teams
may have a group leader who is in charge of the group.
 Whole Foods Market, Inc. is structured
entirely around teams. Each store
composed of an average of 10 self-
managed teams with a designated team
leader, and the team leaders in each store
are a team -- called store team. Visit Whole
Foods Market, Inc at
www.wholefoodsmarket.com

2. Matrix Structure
A matrix structure is one that assigns specialists from different functional departments to work on one or more
projects. In an organization there may be different projects going on at once. Each specific project is assigned a
project manager and he has the duty of allocating all the resources needed to accomplish the project. In a matrix
structure those resources include the different functions of the company such as operations, accounting, sales,
marketing, engineering, and human resources. Basically the project manager has to gather specialists from each
function in order to work on a project, and complete it successfully. In this structure there are two managers, the
project manager and the department or functional manager.
3. Project Structure
A project structure is an organizational structure in which employees continuously work on projects. This is like
the matrix structure; however when the project ends the employees don’t go back their departments. They
continuously work on projects in a team like structure. Each team has the necessary employees to successfully
complete the project. Each employee brings his or her specialized skill to the team. Once the project is finished
then the team moves on to the next project.

Previously known as Oticon

Holding A/S, William Demant
Holding A/S has no organizational
departments or employee job titles.
All work activities are project based, and these project teams
form, disband, and form again as the work requires. Once the
project is completed, employees move on to the next one.
Visit William Demant Holding A/S at www.demant.com

4. Autonomous Internal Units

Some large organizations have adopted this type of structure. That is, the organization is comprised of many
independent decentralized business units, each with its own products, clients, competitors, and profit goals. There
is no centralized control or resource allocation.

Asea Brown Boveri (ABB) is a global

organization. It is actually about 1,000
companies operating in more than 140 countries
around the globe. The whole operation is managed by just
eight top executives at headquarters in Zurich, Switzerland,
but each individual company has its own products, resources,
and so on. Visit Asea Brown Boveri at www.abb.com

5. Boudaryless Organization
A boundaryless organization is one in which its design is not defined by, or limited to, the horizontal, vertical, or
external boundaries imposed by a predefined structure. In other words it is an unstructured design. This structure is
much more flexible because there is no boundaries to deal with such as chain of command, departmentalization,
and organizational hierarchy. Instead of having departments, companies have used the team approach. In order to
eliminate boundaries managers may use virtual, modular, or network organizational structures. In a virtual
organization work is outsourced when necessary. There are a small number of permanent employees, however
specialists are hired when a situation arises. Examples of this would be subcontractors or freelancers. A modular
organization is one in which manufacturing is the business. This type of organization has work done outside of the
company from different suppliers. Each supplier produces a specific piece of the final product. When all the pieces
are done, the organization then assembles the final product. A network organization is one in which companies
outsource their major business functions in order to focus more on what they are in business to do.

ChevronTexaco now
sends most of their
accounting to the Philippines in order to cut costs. They also
send all their computer programming to India . Visit
ChevronTexaco at www.chevrontexaco.com

6. Learning Organization
A learning organization is defined as an organization that has developed the capacity to continuously learn, adapt,
and change. In order to have a learning organization a company must have very knowledgeable employees who are
able to share their knowledge with others and be able to apply it in a work environment. The learning organization
must also have a strong organizational culture where all employees have a common goal and are willing to work
together through sharing knowledge and information. A learning organization must have a team design and great
leadership. Learning organizations that are innovative and knowledgeable create leverage over competitors.