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Organizational structure isn't just an HR diagram—it's the blueprint that determines how information flows, who makes decisions, and whether your company can pivot when markets shift. On your exam, you're being tested on your ability to match structures to strategic situations: centralization vs. decentralization, specialization vs. flexibility, control vs. innovation. Understanding these trade-offs is what separates memorization from actual management thinking.
Don't just learn the names of these ten structures. Know what problem each one solves and what new problems it creates. When an FRQ describes a struggling company or a changing competitive environment, you need to diagnose which structural features are helping or hurting—and recommend changes with confidence.
These structures prioritize clear authority, deep expertise, and operational efficiency. They work best when stability and standardization matter more than speed or flexibility. The trade-off: what you gain in control, you often lose in adaptability.
Compare: Functional vs. Hierarchical—both emphasize control and clear authority, but functional organizes horizontally by expertise while hierarchical emphasizes vertical layers of command. An FRQ might ask you to explain why a company could be both functional AND hierarchical simultaneously (hint: most traditional corporations are).
When organizations need to adapt quickly to different products, customers, or regions, these structures push decision-making closer to the action. The trade-off: flexibility comes at the cost of potential duplication and reduced economies of scale.
Compare: Divisional vs. Project-Based—both decentralize decision-making, but divisional structures are permanent groupings while project-based teams are temporary. If an exam question involves a company launching a one-time product versus expanding into a new region permanently, this distinction matters.
These structures intentionally break down silos to encourage cross-functional work. They're designed for complex environments where no single department has all the answers. The trade-off: collaboration benefits come with coordination costs and potential role confusion.
Compare: Matrix vs. Team-Based—both promote collaboration, but matrix maintains the functional hierarchy underneath while team-based structures often replace traditional departments entirely. Matrix is a hybrid; team-based is a more radical reorganization.
These structures minimize management layers to accelerate decision-making and give employees more autonomy. They're common in startups and innovative companies. The trade-off: empowerment requires mature employees, and scaling becomes difficult.
Compare: Flat vs. Virtual—both reduce traditional management overhead, but for different reasons. Flat structures eliminate hierarchy; virtual structures eliminate physical presence. A company can be flat but co-located, or hierarchical but fully remote.
These structures extend beyond the organization's boundaries, relying on partnerships and outsourcing to achieve scale and flexibility. The trade-off: you gain resource efficiency but lose direct control over quality and coordination.
Compare: Network vs. Hybrid—both involve complexity, but network complexity comes from external relationships while hybrid complexity comes from internal structural variation. Network structures ask "who should we partner with?" Hybrid structures ask "which structure fits which part of our business?"
| Concept | Best Examples |
|---|---|
| Specialization & Control | Functional, Hierarchical |
| Market Responsiveness | Divisional, Project-Based |
| Cross-Functional Collaboration | Matrix, Team-Based |
| Speed & Employee Empowerment | Flat, Virtual |
| External Leverage & Flexibility | Network, Hybrid |
| Dual Reporting Relationships | Matrix |
| Temporary Team Formation | Project-Based |
| Outsourcing-Dependent | Network |
A manufacturing company wants to expand into three new geographic markets while maintaining strong R&D centralized at headquarters. Which structure best balances these needs, and why might they add matrix elements?
Compare and contrast functional and divisional structures: what does each optimize for, and what does each sacrifice?
Which two structures are most likely to create role ambiguity or reporting confusion? What management skills become essential in each case?
A fast-growing startup with 15 employees uses a flat structure successfully. As they scale to 200 employees, what structural problems will likely emerge, and which alternative structures might they consider?
An FRQ describes a company that outsources manufacturing, uses contract designers, and employs only a small core team focused on brand management. Identify the structure and explain two risks the company faces.