The structure an organization builds can be rigid, flexible or something in between. Rigid organizations employ the functional structure, which features many management layers and a central authority figure at the top. This structure’s bureaucracy and control hamper agility and ill suits companies in rapidly evolving marketplaces. These businesses may organize as the network structure, the loosest organizational structure. In choosing a structure for your small business, consider its environment and strategic goals, and try to strike a balance between control and adaptability.

Functional Structure

The functional structure groups people by work functions, such as sales or finance. These departments tend to focus on their own concerns, becoming non-responsive to company-wide competitive interests. The problem becomes acute in complex companies. One solution is to reorganize the company into strategic business units that devote themselves to a single niche — either a product, territory or customer served. Creating divisions around a single focus allows personnel to better coordinate, communicate and cooperate, resulting in greater agility than the functional structure allows.

Team Structure

The team structure relies on teams rather than departments or divisions to accomplish its vision. The organization includes few managers and, therefore, little hierarchy. Remaining managers oversee several teams, which have decisive power to meet goals and perform and change processes. Teams bring together people with complementary skills and knowledge. Decisions rely on the expertise of members. So empowered, teams can react quickly to adapt and innovate. Additional agility comes from the company’s ability to dissolve and re-form teams as competitive challenges arise.

Matrix Structure

Though the team structure boasts agility, it lacks the kind of control the functional structure offers. To gain both agility and control, some businesses adopt a hybrid organization called the matrix structure. The matrix builds a functional hierarchy vertically, and then pulls from across departments to make cross-functional teams. Each employee ends up reporting to both a team and a functional manager. Though this dual reporting can create conflicts of interest, the matrix does accomplish the goal of increasing the agility of a functional structure. As with the team structure, teams can be created quickly, providing added responsiveness.

Network Structure

The network or virtual structure consists of a small command unit that hires outside companies to serve as functional departments. It might, for instance, outsource manufacturing, call center operations and distribution. This keeps overhead down while allowing the company to only needed hire services. It can ably adapt to the marketplace by quickly adjusting its supplier network. Some loss of control is unavoidable, since outside companies control processes. A partial solution lies in maintaining close contact with suppliers to ensure desirable outcomes. The network structure is the most flexible and agile of all the structures.

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