8 ways to organize a team structure and what to consider when choosing one

Key takeaways

• • There are 8 different organizational structures that can fit various industries and business sizes: hierarchical, flat, functional, project-based, matrix, divisional, network, and holacratic.
  • The steps for building a successful team structure include: assessing company needs, defining team member roles, and establishing communication channels. 
  • Keep in mind that as your company grows, you may have to change your team structure or even combine several types at once.

Benefits of a strong team structure

When everyone knows their role and how it fits into the bigger picture — work flows smoothly. There’s no confusion about who should do what, leading to faster task completion and better use of resources. This clarity also leads to higher job satisfaction and motivation, as employees feel more valued and connected to their work.

Improved decision-making is another key benefit. With clear lines of authority and communication channels, decisions can be made more quickly and effectively. Team members know who to consult and how to escalate issues when needed, reducing delays and bottlenecks.

While it might seem counterintuitive, a good structure actually allows for more flexibility. It’s easier to reorganize or shift responsibilities within an established framework.

A good structure also supports better resource allocation. Managers can more easily identify skill gaps or overlaps, allowing for more effective training and hiring decisions.

A strong team structure often leads to improved customer service. When internal processes run smoothly, it typically translates to better experiences for clients and customers.

Finally, as the global population of developers grows, so does the competition for top talent. And if your company has a clear team structure that fits a candidate’s expectations, you’re more likely to attract and retain skilled professionals.

8 popular team structures

We’ve gathered 8 of the most widely used structures, but it’s important to remember that, in reality, you can’t use only one structure for everything. For example, the general structure in a company may be one structure, but in parts of it, another. It’s important to find a mix that fits the needs of your business and employees.

Let’s take a look at the most effective models of team organization that will help you optimally build the work, both in the company as a whole and in each individual team.

1. Hierarchical structure

A hierarchical structure, also known as the traditional pyramid-shaped structure, is one of the most widely used team models. Authority cascades from the top, typically starting with the CEO, through various levels of management, and finally to lower-level employees.

Traditional hierarchy with multiple levels of authority

Benefits:

• • A clear chain of command makes it easier to understand reporting relationships.
  • Defined career progression paths motivate employees to perform well.
  • Allows for specialization and professional development.
  • Facilitates clear assignment of responsibilities and accountability at each level.

Limitations:

• • Slower decision-making and communication.
  • Bureaucracy stifles agility and innovation in dynamic business environments.
  • “Us vs. them” mentality between different levels of management.
  • Risk of micromanagement.

Best for: large organizations with stable environments.

2. Flat structure

A flat structure minimizes hierarchy and management layers. It’s also known as a horizontal structure, as there are few or no middle managers between staff and executives.

This structure promotes a more egalitarian workplace where employees have more freedom to make choices and can talk directly to their bosses. Instead of only the top people making decisions, everyone gets to help decide things. This means workers have more jobs to do, but also get to help run the company more directly.

A flat structure has fewer levels of management compared to a hierarchical structure

Benefits:

• • Faster decision-making processes.
  • Reduced overhead costs because of fewer management layers.
  • Greater flexibility and adaptability to change.
  • Improved transparency within the company.

Limitations:

• • Can lead to role confusion and a lack of clear career progression.
  • Risk of inconsistent policies or procedures across the organization.
  • Difficulty in coordinating complex projects or initiatives.
  • Potential for power struggles in the absence of clear authority.

Best for: startups and small to medium-sized businesses.

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3. Functional structure

A functional organizational structure groups employees based on their specific skills and areas of expertise. Teams are organized into departments according to their functions, such as marketing, finance, or human resources. Each department has a designated leader who oversees the team’s activities and reports to top management.

In functional structures, each team has members with specialized skills

Benefits:

• • Promotes skill development and specialization.
  • Clear career paths within functions.
  • Easier standardization of processes.
  • Clear chain of command within each function.

Limitations:

• • May slow down cross-functional projects or communication.
  • Potential for departmental goals to overshadow organizational objectives.
  • Less flexibility in responding to changes that affect multiple departments.
  • Can lead to a lack of innovation because of limited exposure to other functional areas.

Best for: organizations with specialized products or services.

4. Project-based structure

In a project-based structure, work is set up around specific projects rather than functional departments. The project manager is in charge. They decide how to use money and people for the project. Team members usually work only on one project at a time.

It’s common for the construction industry, software development, and consulting, where work is often organized into distinct, time-bound projects.

At Purrweb, we also use a project-based structure for our software development teams. We’ve tried different approaches and found that Agile methodology works best for us.

It emphasizes clear communication and flexibility, allowing us to handle projects of any scale. We also prioritize employee growth, supporting team members in expanding or improving their skills.

The project-based structure focuses on rapid interaction and adaptation

Benefits:

• • Clear project focus and priorities.
  • Direct authority for project managers over resources.
  • Improved communication within project teams.
  • Flexibility to adapt to project needs.

Limitations:

• • Potential for resource duplication across projects.
  • Challenges in knowledge transfer between projects.
  • Higher costs due to the dedicated resources required for each project.
  • Requires a significant cultural shift.

Best for: software development and creative industries.

5. Matrix structure

A matrix structure is a hybrid model that combines elements of both functional and project-based structures. Employees report to both a functional manager and a project manager, creating a grid-like reporting system.

In a matrix organizational structure, employees balance functional and project responsibilities

Benefits:

• • Efficient use of resources across projects and functions.
  • Promotes cross-functional collaboration and knowledge sharing.
  • Flexibility to respond to changing customer needs.
  • Balances functional expertise with project requirements.

Limitations:

• • Potential for conflict because of dual reporting relationships.
  • Increased complexity in decision-making processes.
  • May result in power struggles between functional and project managers.
  • Can be stressful for employees to manage multiple priorities.

Best for: organizations with diverse product lines or projects.

6. Divisional structure

A divisional structure breaks a company into smaller units. They are based on products, services, geographic regions, or customer types. Each part acts like a separate entity with different departments. This helps each part focus on its special area, like a certain product or group of customers.

The geographical divisional structure serves markets from different regions

Benefits:

• • Allows for customized strategies for different products or markets.
  • Promotes accountability for divisional performance.
  • Facilitates adaptation to local market needs.
  • Provides clear profit and loss responsibility.

Limitations:

• • Potential for duplication of resources across divisions.
  • May lead to competition between divisions rather than cooperation.
  • Can result in inconsistencies in policies and procedures across the organization.
  • Risk of divisions becoming too independent, losing sight of overall company goals.

Best for: large corporations with multiple business lines or global presence.

7. Network structure

A network organizational structure is a highly decentralized model where a core company works with outside suppliers, distributors, or specialized service providers. This structure uses outsourcing, outstaffing, and other partnerships as the main way to reach the goals of a particular business.

It can also refer to bringing in-house and outsourced teams together. This integration of internal and external resources can quickly adapt to market changes and capitalize on diverse expertise.

Network structure usually unites different teams, both in-house and outsourced

Benefits:

• • High flexibility and adaptability to market changes.
  • Access to specialized expertise and resources without long-term commitments.
  • Ability to scale operations quickly.
  • Increased innovation through diverse partnerships.

Limitations:

• • Reduced control over outsourced operations.
  • Potential for communication challenges across network partners.
  • Possible conflicts in organizational cultures between partners.
  • Risk of knowledge and intellectual property leakage.

Best for: organizations in fast-changing industries or those seeking external expertise.

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8. Holacratic structure

Holacracy is a way of running a company without bosses. It removes the traditional hierarchical structure in favor of a distributed authority system. Instead of a top-down structure, it uses self-managing teams called “circles.” Each circle handles different tasks or goals.

In this circular structure, authority and decision-making are distributed throughout the organization. Everyone has clear jobs and responsibilities, not just those at the top.

Each circle represents a functional area with defined roles and accountabilities

Benefits:

• • Increased organizational agility and adaptability.
  • Enhanced employee autonomy and engagement.
  • Clear roles and accountability.
  • Reduced bureaucracy and faster response to market changes.

Limitations:

• • Complex implementation process.
  • Potential for confusion during the transition from traditional structures.
  • Difficulty in integrating with conventional performance management systems.
  • Requires significant cultural shift and employee buy-in.

Best for: innovative companies seeking to break traditional hierarchies.

How to build an effective team structure

To create a high-performing team, you’ll need to go over these 6 steps. Whether it’s a mobile app development team or a marketing team, the approach will be the same.

1. Assess your company’s needs

This first step lays the foundation for creating a team that aligns with your organization’s goals, culture, and operational requirements.

2. Define clear roles and responsibilities

This step helps every team member know their job and how they help the company succeed. It promotes efficiency and reduces conflicts.

3. Implement effective communication channels

Good communication is important not only for completing tasks on time, but also for maintaining team spirit. Proper communication will help avoid missed deadlines and burned out or ineffective team members. 

4. Foster a culture of collaboration

This step is crucial for creating a team environment that encourages innovation, problem-solving, and shared success.

Collaborative work became the cornerstone of the project when we worked on an app for quitting smoking. Close connection to the client and listening to each other’s ideas helped us overcome development issues and complete the app.

5. Foster leadership at all levels

This measure helps team members grow, take charge, and make the company stronger and more flexible.

6. Regularly review and adapt

Regular reviews ensure your team structure remains effective as your organization evolves and expands. However, avoid changing it too frequently to prevent confusion and instability.

Conclusion

A strong team structure creates a foundation for success. There are different ways to organize teams, and it’s important to choose one that fits your needs. When you do it right, your team can get more done, make better choices, and enjoy their work more.

Keep in mind that as your company grows and changes, you might need to adjust how your team is set up. It’s a good idea to check now and then to make sure your team structure is still working well. This way, you can keep your team strong and successful for a long time.

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