Organizational Structure

Catalog
Use this catalog to inform the organization’s
structure options.

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Introduction This catalog includes:
• Definitions and visual representations of six common types of
organizational structures: Functional, Divisional, Matrix, Vertical, Flat,
and Network.
• Benefits and challenges for each type of structure.

Table of Contents

1. Functional Structure

2. Divisional Structure

3. Matrix Structure

4. Vertical Structure

5. Flat Structure

6. Network Structure

There is no one-size-fits-all structure. Differences in an

organization’s strategy, value propositions, locations, markets, and
more translate into different structural designs. McLean & Company
does not recommend a specific organizational structure.

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Functional Structure
Definition: A functional structure organizes its employees into different work units and departments based on areas of
expertise (or function). These departments often appear to have silos – isolated groups of employees with minimal cross-
functional collaboration (“Functional Organizational Structure,” The Org, 2023).

President

VP,
Research & VP,
VP, Finance VP, HR
Developmen Marketing
Sr. t Sr. Sr. Sr. Manager, Sr.
Sr. Sr. Sr. Manager,
Manager, Manager, Manager, Brand Manager,
Manager, Manager, Talent
Develop Accounti Digital Managemen Compens
Testing Finance Management
ment ng Marketing t ation
…Continued… …Continued… …Continued… …Continued…

Benefits: Challenges:
• Standardized processes within functions, leading to • Silos and inhibited cross-functional collaboration.
output consistency. • Inefficient decision-making processes, especially when
• Enhanced operational efficiency due to high levels input is required from multiple functions.
of specialization. • Misalignment between goals and strategies across
• Clear career paths. functions.
• Cost efficient due to a consolidation of resources • Lack of broader perspective of organizational goals due
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and skills. (“Functional Structure Organization Strength & Weakness,” Chron,focus.
to narrow 2019; “Functional
Organizational Structure,” Boardmix, n.d.)
Divisional Structure
Definition: A divisional structure divides employees into segments by markets, products, or locations. Each segment
operates as a separate organization with its own set of resources (“What are Divisional Organizational Structures,” The Org,
2023).
Example: Divisional Structure by Location

CEO

President, President,
Shared
North North
Services
America America

Sales & Sales & Human

Product Product Recruitm
Marketin Logistics Marketin Logistics Resource Finance
Dev. Dev. ent
g g s

Benefits: Challenges:
• Focused expertise in specific areas, leading to better • Resource duplication resulting in inefficiencies and higher
customer service and product quality. costs.
• Increased sense of ownership and accountability within each • Different divisions may pursue their own goals and
division. priorities, which can conflict with the organizational
• Enhanced decision-making based on the unique markets, strategy.
products, and locations. • Restricted
(“Divisional Organizational Structure,” Chron, 2020; “Divisional Organizational
knowledge sharing due to lack of McLean
cross-& Company | 4
Structure,” Boardmix, n.d.) divisional communication.
Matrix Structure
Definition: A matrix structure has employees reporting to multiple leaders, usually horizontally and vertically, visualized
through solid and dotted lines of chain of command. Employees often report to a department lead as well as a project
manager (Asana).

CEO

Director,
Director, Director, Director,
Project Director, HR
Design Marketing Sales
Management

Project Marketing Sales

Designer HR Manager
Manager Manager Manager

Project Marketing Sales

Designer HR Manager
Manager Manager Manager

Project Marketing Sales

Designer
Manager Manager Manager

Benefits: Challenges:
• Shared resources between departments. • Reporting confusion may result in conflicting
• Improved cross-functional collaboration. expectations and priorities.
• Greater creative thinking and problem-solving cross- • Increased complexity as there are multiple paths of
functionally. responsibility and accountability.
• Improved flexibility as employees move freely • Difficulty coordinating efforts across different projects
throughout the organization to support different and departments. McLean & Company | 5
projects. (Vittana)
Vertical Structure
Definition: A vertical structure has a top-down management structure. The highest level of leadership is at the top,
followed by middle management, and then individual contributors – resulting in multiple levels of hierarchy (Indeed).

A vertical structure is not mutually exclusive from functional, divisional, or matrix structures. Vertical
structures can exist within other types of structures.
CEO

VP, Research &

VP, Finance VP, Marketing VP, HR
Development
Sr. Sr. Sr. Sr. Manager, Sr.
Sr. Sr. Sr. Manager,
Manager, Manager, Manager, Brand Manager,
Manager, Manager, Talent
Develop Accounti Digital Managemen Compensat
Testing Finance Management
ment ng Marketing t ion
Manager, Manage Manager, Manage Manager, Manager, Manager, Manager,
Develop r, Accounti r, Digital Digital Talent Compensat
ment Testing ng Finance Marketing Marketing Management ion
Supervis Supervis
Supervi Supervi Supervisor, Supervisor, Supervisor, Supervisor,
or, or,
sor, sor, Digital Digital Talent Compensat
Develop Accounti
Testing Finance Marketing Marketing Management ion
ment ng
…Continued…

Benefits: Challenges:
• Well-defined roles and responsibilities. • Silos and reduced cross-functional collaboration.
• Clear career paths. • Difficulty adapting quickly to market changes.
• Scalable organizational growth. • Slow decision-making due to multiple levels of
management. McLean & Company | 6
(“Advantages & Disadvantages of Vertical Organizational Design,” Chron,
2021)
Flat Structure
Definition: A flat structure has few levels of hierarchy – often due to a reduction in middle management (Indeed).

A flat structure is not mutually exclusive from functional, divisional, or matrix structures. Flat
structures can exist within other types of structures.

President

Manager, Research & Manager, Manager, Manager,

Development Finance Marketing HR
Researc Financi Marketing
Research Accounta Social Media HR
h al Coordinato HR Specialist
Analyst nt Coordinator Specialist
Analyst Analyst r

Benefits: Challenges:
• Improved transparency and access to leadership. • Difficult to implement and sustain as organizations
• Faster decision-making due to fewer levels of middle grow and headcount increases, resulting in
management. unmanageable spans of control for leaders.
• Improved communication between employees and • Limited career progression due to fewer levels of
senior leadership. middle management.
• Increased collaboration as employees work more • With fewer defined roles and levels of leadership,
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closely together. (“Pros & Cons,” Chron, 2019) may experience confusion around their
employees
Network Structure
Definition: A decentralized arrangement of work units that operate as a network of autonomous business units or teams
collaborating to achieve common goals (AIHR). Each unit is responsible for its own performance and contributes to the
overall success of the network.

Freelance Texas
Customer Online
Copy Video
Support Support
Chicago Operational
Design Corporate Support
Headquarters

Marketing Operations
Outsourced
IT HR Payroll Recruiting

Benefits

Benefits: Challenges:
• Improved collaboration across teams and with • Decision-making is spread out, which can cause
external partners. conflicting objectives or priorities.
• Increased flexibility, as the organization can adjust • Ensuring consistent quality across different can be
the network to seize opportunities and mitigate challenging, as each business unit may have their own
challenges. standards and procedures.
• Fosters open communication channels, allowing for • Extra effort is required to manage teams, requiring
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knowledge sharing. (“Network Organizational Structure,” Boardmix,
strong governance.
n.d.; Masterclass)
Works Cited
“Advantages & Disadvantages of Vertical Organizational Design.” Gaille, Lousie. “19 Advantages and Disadvantages of Matrix
Chron, 9 Feb 2021. Accessed 28 June 2024. Organizational Structure.” Vittana, 19 Feb 2020. Accessed 28 June
2024.
Baumgarten, Mike. “Functional Organizational Structure.” The Org, 4
May 2023. Accessed 28 June 2024. Griffin, Dana. “Pros & Cons of a Flat Organizational Structure.” Chron,
11 Jan. 2019. Accessed 28 June 2024.
“Comparing Horizontal vs. Vertical Organizational Structures.”
Indeed, 20 Feb 2023. Accessed 28 June 2024. “Network Organization.” AIHR, n.d. Accessed 28 Aug 2024.
Davoren, Julie. “Functional Structure Organization Strength & “Network Organizational Structure: Definition, Pros and Cons.”
Weakness.” Chron, 25 Jan 2019. Accessed 28 June 2024. Masterclass, 15 Nov 2019. Accessed 28 Aug 2024.
“Divisional Organizational Structure.” Chron, 13 November 2020. “Network Organizational Structure: Pros, Cons, Tips and Examples.”
Accessed 28 June 2024. Boardmix, n.d. Accessed 28 Aug 2024.
“Divisional Organizational Structure: Pros and Cons.” Boardmix, n.d. “What is a Matrix Organization and How Does It Work?” Asana, 22
Accessed 28 June 2024. Feb 2024. Accessed 28 June 2024.
Ellis, Chinue. “What Are Divisional Organizational Structures?”
TheOrg, 15 Feb 2023. Accessed 28 June 2024.
“Functional Organizational Structure: Pros and Cons.” Boardmix, n.d.
Accessed 28 June 2024.

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