A company’s organisational structure affects everything; from how you operate to how well your employees communicate with each other. Establishing a well-defined organisational structure helps employees communicate more efficiently; sets the tone for internal operations; maps out the chain of command and provides transparency in the workplace. Typically a company will adopt either a flat or hierarchical structure according to their size, goals, skills and number of employees. Throughout this article we will determine the advantages and disadvantages of both organisational structures and provide detail on how each of these can operate successfully.
What is a Hierarchical Organisational Structure?
An organisation built on a hierarchical organisational structure resembles a pyramid and depends upon a vertical chain of command. This usually starts with the CEO at the top and several layers of management underneath. Typically, larger companies and government agencies opt for this structure as it allows them to better clarify their reporting relationships.
Advantages
There are plenty of advantages to adopting a hierarchical structure within an organisation. Notably, it provides the type of structure that allows employees to “climb the ladder,” and develop with the organisation. A clearly defined hierarchy means employees have a clear career path to reach more senior positions. It also provides employees with a clear picture of reporting relationships and requirements within the company.
Hierarchical organisations normally consist of several departments and likely have more niche positions, compared to flat organisations. This means employees can grow to become experts in their field, with opportunities to specialise.
Disadvantages
Hierarchical organisational structures are often prone to bureaucracy, communication silos and lack of collaboration between departments. Bureaucratic constraints within a company has been known to hinder overall productivity and slow innovation.
Real-World Example
Amazon is a good example of an organisation with a successful hierarchical structure, predominantly because of its size. This structure works because the company is organised into a number of smaller teams under separate management. This means managers can work more closely with their staff, which facilitates better control over their department.
What is a Flat Organisational Structure?
Comparatively, flat structure organisations have few levels of middle
management between leadership and employees, and in some cases, no middle management at all. Typically smaller organisations or start-ups operate on a flat organisational structure, simply because fewer employees means there’s less need for a hierarchal chain of command.
Advantages
In this type of structure, employees often have more responsibility. The limited bureaucracy in this organisational structure leads to transparency across departments and the workplace. Having fewer levels of management simplifies internal communication and enables fast decision-making, with power and responsibility being evenly distributed throughout the company.
Disadvantages
A flat structure can sometimes prevent employees from specialising in specific roles, where each employee is expected to be a “jack of all trades” and work across a variety of tasks. Managers might also find themselves stretched a bit thin as a result of few (or no) middle management layers. This can sometimes cause confusion among staff and lead to a lack of direction.
Real-World Example
Video game company, Valve, adopts a flat structure in their workplace, with an increasing emphasis on the decision to go completely boss-less. The company does have a founder and CEO, but his role is much more hands-off than most executives. No employees work on projects simply because someone else told them to, they opt-in based on what is important to their customers. In essence, employees work on projects according to who can make the biggest contribution to the project.
POLR Organiser's Organisation Chart Feature
POLR Organiser’s organisational chart feature lets you view the chain of command for your entire company, no matter your organisational structure. This is especially useful for large companies following a hierarchical structure as it provides easy access to reporting relationships across departments and the company as a whole. Find out more about POLR Organiser here or speak to one of our data experts.
