How Organizational Culture is Influenced by Organizational Structure

The type of organizational structure you implement can make or break your company culture. By understanding how organizational structure influences organizational culture, companies make more informed decisions that create a positive and productive workplace.

Organizational structure is the arrangement of employee roles, functions, and activities required to achieve company goals. In practice, it defines the relationships between departments and how the chain of command passes through. On paper (or in the cloud), it’s a visual map of your operational hierarchy.

Choosing the right org structure for your business has the power to spark innovation, promote collaboration, and drive success. The wrong org structure, on the other hand, can wreak havoc on workplace culture and lead to poor performance.

Here are five characteristics that contribute to a positive organizational culture, and the different organizational structures that promote these values.

1. Open communication

The way information flows throughout an organization can have a significant impact on workplace culture. A company’s communication style is responsible for how employees share ideas, distribute resources, and work together to achieve business objectives.

Companies that foster a culture of open and honest communication:

• Build trust and empower collaboration.
• Encourage innovation and creativity.
• Enhance employee engagement and knowledge sharing.

Organizational structures that are best for open communication are those that promote a flatter hierarchy, fewer bureaucratic layers, and a culture of transparency. These include:

Flat organizational structure

• Reward: In this type of organization, there are fewer levels of management, which means communication can flow more easily between employees and managers. This can lead to faster decision-making, increased employee engagement, and a culture of innovation.
• Potential risk: With fewer layers of management, communication can become more frequent and intense, potentially subjecting team members to information overload. Employees who feel overwhelmed by the amount of information they receive may struggle to prioritize tasks and make decisions.

Matrix organizational structure

• Reward: A matrix organizational structure is designed to break down silos and promote cross-department communication. This structure is particularly effective when teams need to work on complex projects that require input from different areas of the organization.
• Potential risk: The inherent structure of the matrix requires a high level of communication between different departments and teams — and this structure can quickly become unwieldy. If communication isn’t well managed, misunderstandings, duplicated efforts, and missed deadlines can result.

2. Collaboration and teamwork

Collaboration and teamwork are key to short- and long-term strategic growth. Yet, many companies are still structured in a way that can impede these critical efforts. In hierarchical structures, for example, employees may be hesitant to share ideas and resources without approval from their supervisor. The same can happen with structures that rely on heavy departmentalization. Here, teams can develop a “my work is more important than yours” mentality — making them less likely to share ideas and resources — and, ultimately, they may lose sight of the bigger picture. Both environments can stifle camaraderie and collaboration, leading to disengagement and a lack of trust.

In contrast, organizational structures that promote collaboration and teamwork:

• Enhance creativity and innovation.
• Improve problem-solving.
• Increase efficiency and productivity.
• Provide opportunities to learn and grow.

 

Closely aligned with open communication, some organizational structures make it easier to achieve strong collaboration:

Functional organizational structure

• Reward: Because the functional org structure groups employees into departments (HR, sales, marketing, customer service, accounting, etc.), it follows that collaboration occurs naturally due to the similarity of activities performed.
• Potential risk: Employees may neglect to collaborate with other departments or challenge the status quo.

Flat organizational structure

• Reward: This structure empowers employees to collaborate directly, creating an environment that thrives on teamwork and idea-sharing.
• Potential risk: Without a typical hierarchy, this structure can lead to a lack of accountability and groupthink.

Matrix organizational structure

• Reward: The matrix structure encourages cross-functional teamwork and collaboration. Project teams can work together to achieve a shared goal, leading to a more integrated approach to work.
• Potential risk: As mentioned previously, this structure can be complex and difficult to manage, leading to confusion and unclear lines of authority. Balancing collaboration with specialization can be challenging, and employees may become overwhelmed with competing project demands.

3. Empowerment and autonomy

Having control over one’s work and the ability to make decisions is paramount to employee satisfaction. Organizational structures that value empowerment and autonomy:

• Generate trust.
• Promote knowledge-sharing.
• Enhance job satisfaction.
• Encourage accountability.

Divisional/Geographic organizational structure

• Reward: In a divisional structure, a company is divided into semi-autonomous divisions or business units based on products, services, customers, or geographic regions. Each division operates as a separate entity, with its own functional departments such as marketing, finance, and operations. This structure allows for specialization and efficiency within each team. When departments are recognized as the experts in their field, the higher-ups tend to give them more autonomy. This makes employees feel empowered to make decisions and take ownership of their work.
• Potential risk: In some cases, employees can become so focused on their specific role that they may be less open to learning complementary skills or pitching in to help with outside tasks. They can form a narrow perspective, which hinders the capacity for innovation.

Matrix organizational structure

• Reward: This structure allows employees to work on multiple projects at the same time, giving them more control over their work and allowing them to develop their skills in different areas.
• Potential risk: If multiple project demands and stakeholders aren’t adequately staffed, employees can become overworked. Over time, this has the opposite of the intended effect — those who feel burnout aren’t empowered or in control of their own work.

4. Flexibility and adaptability

The pandemic made it clear that the ability to respond quickly to changes in the business environment is critical to success. Organizations designed to be highly flexible and adaptable can:

• Pivot amidst changing work conditions and environments.
• React to unexpected changes and challenges.
• Restructure roles and responsibilities to meet current and future needs.
• Offer strong opportunities for job growth.
• Improve employee well-being.

While the attributes of both flat and matrix structures make it easier to adapt to changing circumstances, there are additional structural aspects to consider:

Positional models

Instead of utilizing an employee-to-employee reporting structure, a positional model separates the “employee” from the “role” that they play, instead showing the relationship between positions and their current and future holders. The reason for doing so: Employees can leave or move around the organization, but position data (title, department, salary range, etc.) are relatively static.

As a result, this structure allows HR to plan organizational structure before making personnel decisions, and plan to cost by using positional salary data. Having a finger on the pulse of the organization at all times makes it easier to know where to add or reduce staff due to changes in the business climate.

Span of control

Organizational structure helps determine the appropriate span of control, or the number of subordinates, under each manager. To be nimble during change, striking a balance between a narrow span of control (small number of subordinates, many management layers) and a wide span of control (larger number of subordinates, fewer layers of management) is key.

Also known as a tall organizational structure, a narrow span of control may be appropriate in situations where close supervision is necessary or where there is a high level of complexity in the work being performed. However, it may not be suitable for organizations that require more flexibility and innovation.

5. Diversity, equity, and inclusion

Diversity, equity, and inclusion (DEI) efforts are gaining ground at both large and small organizations alike. Not only does a diverse workforce lead to a broader range of experiences and insights, but it can also:

• Improve talent acquisition and retention.
• Enhance reputation and brand image.
• Promote employee engagement and well-being.
• Increase the bottom line.

A strong DEI strategy must be woven into an organization’s very fabric. It is essential to consider how various organizational structures can impact or promote diversity, equity, and inclusion within the workplace.

Flat organizational structure

• Reward: Flatter organizations with fewer management layers and a more horizontal hierarchy promote DEI by reducing barriers to communication and collaboration. This structure empowers employees to share their ideas and insights, regardless of their background, and helps build a more inclusive culture.
• Potential risk: Without clear lines of authority or accountability, there is a risk that some employees’ voices might be overlooked or ignored, leading to experiences of exclusion or inequity.

Matrix organizational structure

• Reward: The matrix structure, encouraging cross-functional teamwork, fosters a diverse and inclusive environment by bringing together employees from different backgrounds, departments, and areas of expertise. This collaboration can lead to a greater appreciation for diverse perspectives and increased innovation.
• Potential risk: As mentioned previously, the complexity and potential confusion within a matrix structure can sometimes result in unclear lines of authority, which could lead to issues related to equity and inclusion if not managed properly.

Functional organizational structure

• Reward: Grouping employees into functional departments based on their expertise creates opportunities for mentoring and skill-building among employees from diverse backgrounds. This structure supports equity by providing opportunities for growth and development for all employees.
• Potential risk: Employees might become siloed within their departments, limiting exposure to diverse perspectives and hindering cross-departmental collaboration. This separation can contribute to a lack of understanding or appreciation for diversity’s value.

Divisional/Geographic organizational structure

• Reward: In a divisional or geographic structure, each division operates as a separate entity, supporting DEI by fostering a sense of ownership and autonomy within each team. This structure also encourages hiring diverse talent tailored to each division or region’s needs and culture, promoting a more inclusive environment.
• Potential risk: Divisions might become overly focused on their specific area of expertise or region, potentially leading to a lack of cooperation and understanding between diverse teams. This separation can hinder the development of a truly inclusive organizational culture.

Structure Your Organization for Success

Organizational culture is a critical component of a company’s success, and understanding how various structures influence this culture is essential. By carefully considering the impact of your organizational structure on communication, collaboration, empowerment, flexibility, and DEI, you can create a positive and inclusive culture that promotes employee satisfaction, innovation, and ultimately, the success of your organization.

Remember that no single organizational structure is perfect, and each has its unique rewards and risks. The key is to find the right balance for your organization and adapt as needed to maintain a strong and vibrant organizational culture.

The good news: No matter what type of org structure you employ, OrgChart helps HR departments track metrics in a clear, visual format. Now, you can identify areas of weakness and model future states to help with planning for a strong, adaptable, and diverse workforce.

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