6/13/2021 What Is Organizational Structure of Management? - Types & Examples - Video & Lesson Transcript | Study.

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What Is Organizational Structure of Management? - Types & Examples

In this lesson, we will provide an overview of the different types of organizational structures a company can
utilize. Read on to learn why having an organizational structure is important.

Organizational Structure of Management

An organizational structure lays the foundation for how a company operates. It is a set of policies
and rules that determines:

How an organization controls and delegates tasks and responsibilities

How decisions are made and implemented throughout every part of an organization

How information flows within an organization

Depending upon a company's needs, there are several organizational structures that can be used.
Some common examples include the flat organizational structure, the functional
organizational structure, the product organizational structure, and the geographical
organizational structure. Let's take a look at these four structures in more detail.

Flat Organizational Structure

Typically, small companies with 20 or fewer employees will use a flat organizational structure
that has very few levels of management between the chief executive officer (CEO), or president of a
company, and the lower-level employees. As you might guess, this type of organizational structure
allows for rapid decision making because there are only a few levels of management.

Functional Organizational Structure

A second type of organization structure is the functional organizational structure, which focuses
on job functions or functional areas.

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6/13/2021 What Is Organizational Structure of Management? - Types & Examples - Video & Lesson Transcript | Study.com

As you can see, companies use this type of structure when they want to organize their operations
into departments, grouping employees with shared skills and knowledge, such as marketing or
sales, together.

Product Organizational Structure

A third common type of organizational structure, the product organizational structure, is
organized based upon a company's product lines.

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6/13/2021 What Is Organizational Structure of Management? - Types & Examples - Video & Lesson Transcript | Study.com

This type of structure can typically be found in retail stores that are in multiple cities. Since this type
of structure can be spread out into different locations, there may be a need to have support
departments, such as marketing, operations, and finance, in each place as well.

Geographical Organizational Structure

Our fourth and final example here is the geographical organizational structure, which groups
representatives from each functional department into units that serve a specific market or region.
These units can be very effective if they are located within the regions they serve and employ
workers from that region as well.

This type of organizational structure is designed to allow companies to better serve local markets.

Lesson Summary
The organizational structure of a company determines:

The roles and responsibilities of the employees

How and where decision making happens

How information flows in an organization

The main benefit of a formal organizational structure is that it provides clarity for everyone about
what their roles and responsibilities are within an organization. It also allows managers to do a
better job of coordinating and controlling how work is being done, which allows the company as a
whole to operate more efficiently.

Learning Outcomes
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6/13/2021 What Is Organizational Structure of Management? - Types & Examples - Video & Lesson Transcript | Study.com

After this lesson, you'll be able to:

Define organizational structure of management

Identify what an organizational structure determines and its benefits

Describe four types of organizational structures

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