The organization structure can be defined as the framework within which managerial and operating tasks are performed. It specifies the relationships between people, work and resources.
Organization structure is the outcome of the organizing process. An effective structure will result in increased profitability of the enterprise. The need for an adequate organization structure is felt by an enterprise whenever it grows in size or complexity. It is only those enterprises which do not focus on growth that can maintain a particular structure for a long period of time.
A proper organization structure is essential to ensure a smooth flow of communication and better control over the operations of a business enterprise. An organization structure provides the framework which enables the enterprise to function as an integrated unit by regulating and coordinating the responsibilities of individuals and departments.
There are three main types of organizational structure: functional, divisional and matrix structure.
- Functional Structure is set up so that each portion of the organization is grouped according to its purpose.
- Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas.
- Matrix is the third main type of organizational structure, called the matrix structure, is a hybrid of divisional and functional structure.