The 4 types of business organization systems

A summary of the most important types of organization systems in companies.

Although from the outside it may seem that companies are all organized in the same way, the truth is that there are different types of structures depending on their size and the activities carried out in them.

Some may be more hierarchical, with managers in charge of different departments who, in turn, have other managers in charge of reporting on everything they do. Others, on the other hand, may dispense with this hierarchy altogether, and it could even be said that there is no management at all.

There are different types of organizational systems, each with its own peculiarities and suitability depending on the case.. Next we are going to discover them.

What is a company's organizational system?

Organizational systems are the structures on which organizations are configured. These structures define how each division of a company is organized, the hierarchy of who reports to whom, and how communication flows at different levels of the organization. communication flows at the different levels of the organization. With a well-defined organizational system, all workers know what is expected of them and to whom they should report, since the hierarchy is well defined and there is fluidity in the communication between the different levels.

There are several types of organizational systems, and although some say that some are better than others, the truth is that in the workplace each one is better suited to the organization depending on the activities carried out in it, its size and other factors.

Having a well-defined organization system brings many benefits, among them better efficiency, higher productivity and smooth decision making, which is why it is necessary to know and choose the most appropriate organization system for each case.For this reason it is necessary to know and choose the most appropriate organizational system for each case.

Types and characteristics of organizational systems

As we said, there are different types of organizational systems, some more suitable than others depending on the characteristics of the organization. Here we see the main types that exist, as well as some examples from real life.

Functional system

In the functional system there are several specialized departments, such as sales, finance and operations. At the top of the departmental hierarchy is a manager who oversees all departments.

The flow of communication is fairly clear and basic, since each employee is responsible for informing or reporting his or her activities to his or her manager.. In turn, the heads of each department report to top management, i.e., the manager who oversees the entire structure.

As the organization is segmented into specialized departments, its workers are also specialized, which contributes to a well-established path to growth.This contributes to a well-established path to growth. Since each employee is very clear about what he/she has to do and does not go outside his/her scope of intervention, there is no room for ambiguity.

However, just as this structure has these advantages, its main disadvantage is that interdepartmental communication is complicatedIn many cases, it is non-existent, since everyone reports upwards. As a negative consequence, the sharing of ideas is infrequent, except when top management intervenes.

2. Divisional system

In the divisional system the organization is divided into work teams, each working on different projects.. Many different types of teams can be included in this type of organizational system.

Teams are purposely created to address specific projects that are significant to the company's performance and progress. For example, an automotive company might have several separate teams, each dedicated to the development of a different car model.

Each project team is overseen by a manager, but also has autonomy within the organization.. Because each team is dedicated exclusively to its project, employees can become deeply familiar with the work of their team.

However, the weakness of this type of organization is very similar to that of the functional system. The divisions of the organization are fully aware of the work of their colleagues within the project team, but they do not know what the other teams are doing, nor is there usually any communication between them.

3. Matrix system

The matrix system is a combination of the two previous systems. The business system is configured as a functional system from the top, that is, having a traditional hierarchy and specialized departments..

However, when we look at the departments, we can see that each of them is organized in a divisional way, with different teams in charge of carrying out different projects.

This system is complex, which requires a lot of It requires a lot of planning as well as developing a fluid and fast internal communication to avoid any misunderstanding.The complexity of the organization eliminates many of the problems associated with the divisional and functional modes.

This type of organization allows communication to reach the right people at the right time. Workers receive information quickly, thus increasing productivity.In addition, the fact that all parts of the company communicate with each other allows holistic thinking because all teams know what the others are doing. Added to this, cross-collaboration is encouraged.

However, there can be a problem associated with this type of structure. While there is a certain hierarchical structure, from the bottom up, the fact that everyone involved is intercommunicating can bring with it the disadvantage that you don't quite know who you have to report to when you perform a certain task.

4. Flat system

Finally, we have the flat system in which, as its name suggests, it "flattens" a large part of the hierarchy, giving workers greater autonomy. Although they may have formal structures, in companies with a flat organizational system, work is usually divided by setting up temporary work teams..

It should not be thought that in this system there is no hierarchy at all. There are still employers and employees, since there are still top managers who run the operation. However, this system tries to completely avoid traditional hierarchical structures, which have often been associated with communication problems.

In the flat system this is avoided, and in fact in it there is a significant increase in communication between teams, eliminating the communication problems that can occur when messages travel through a hierarchical structure too extensive but confusing.

But even though it has its advantages and is considered by many to be the ideal system for every company, in practice the flat system cannot be used for all companies, In practice, the flat system cannot be applied in large organizations..

This system is difficult to maintain when the company grows and needs more structured and therefore hierarchical communication systems. In addition, workers in this type of organization may feel overwhelmed by having to do too many different tasks and not have much chance of being promoted.