Ask Christa! Why Organizational Structure Matters!! (S2E19)

Hi everyone and welcome to Ask Christa! the place where you can ask questions about how to work through business challenges and workplace issues. I'm Christa Dhimo and today I’m offering bonus content from Episode 18. Episode 18 answered the question, “Does management training matter?” and as part of my answer, I talked about how two common organizational structures demonstrate how—YES—management training matters. 

Part of why it matters so much is because employees deserve to thrive at work, and a big part of that is having an effective manager. It doesn’t take that much of an investment for companies to offer that kind of environment to employees where respect and dignity surrounds all employees like the air we breathe.

But even if an organization doesn’t place that level of value on people, there’s the practical aspect of why management training matters: we are not born knowing how to navigate different organizational structures in an effective or efficient way, and I’m offering this bonus segment to spend a little time on the business challenges of organizational structures—which is an important part to know about a business if you’re an entrepreneur or just… business curious.

So….

Here’s the first thing to know about organizational structures: they are put in place to enable work to get done, and the better the structure for your kind of business, the better the work tends to get done. 

It’s a framework for how you organize your employees, your teams, your competencies (meaning what you do best as a business) and your capabilities (meaning how you do it within your organization—and hopefully, do it better than anyone else). 

You want predictably good work to be done at a predictably high level of performance with the right amount of communication, initiative, and responsiveness. Remember: the ultimate goal is to meet or exceed your organizational goals and perpetuate ongoing success, and some of the biggest success factors in business are about decision-making, speed of work within quality standards, time to innovation, reduction of risk… those kinds of things.

Your organizational structure should be aligned to what will make your business run its best without needing your good humans pulling all kinds of levers every day to keep it going. 

You want a structure that allows for the right level of controls so you don’t waste too much, but the right level of flexibility to you have room to innovate, which means you have to learn, grow, make mistakes that do not kill your business, and offer an environment where your employees will thrive.

You also want decisions to happen at the ground level or the operating level when possible, where your experts are doing the work and are very capable of making good decisions. If top leaders had to make all the decisions, you can see how nothing would ever get done—there just aren’t enough hours in the day, and in fact, that is often one of the biggest issues a business faces: employees feeling or (in reality) understanding they cannot make tactical day to day decisions without getting permission first. 

There are times when an approval may be needed, but this is when organizational structure can facilitate the right level… of… structure. 

For example, if you own an electrician business, and one of your electricians is at a customer’s house, you should expect decisions about the wiring for a new ceiling fan to happen in the moment and by the electrician on site. 

Now as the decisions begin to affect the organization, or affect several other teams, you want a structure that enables swift review by those who might be impacted and decisions made without being too bogged down with permission layers.

For example, if that same electrician is asked by the client to install outdoor lights in addition to the ceiling fan, when outdoor lights are not on the project sheet, you would want the electrician to call his or her supervisor or project lead (whoever is managing the project for that site) before installing outdoor lights. That decision will impact the electrician’s time, the cost for installation, other projects the electrician is likely scheduled for that day, the scope of the work, the invoicing—potentially even the liability for the job because the job site has moved from being indoors to outdoors.

Now this is important: the check-ins with a supervisor or project lead aren’t to control the employee, it is to control the work through a project structure because of how resources are assigned and utilized in  a project environment. The employees at the ground level—working at the client sites—should be able to make swift decisions based on their expertise and the work they are there to do, and that’s understood in large part because of the organizational structure. We just don’t talk about it that way.

Making decisions is just one feature associated with organizational structures.

And so, I want you to view organization structure being about how to operate smoothly, make shifts and changes when needed, give good humans the chance to make decisions and get good work done, using their smarts and their experience to do the work without being bogged down with having to ask permission for what should be changes they can make in the moment.

Good organizational structures also signal to employees how their work will impact others so that they communicate if there IS a change or a new request or an improvement that can be made, and those who may be affected hear about it and can weigh-in BEFORE the change or new request or improvement begins.

Organizational structure is usually one of the most important discussions founders and leaders will have just before a large inflection point when things are about to shift, such as from a big investment that adds a large infusion of cash, or taking on larger client accounts, or conversely: preparing to downsize. When companies talk about a “restructure,” they are changing all or part of their organizational structure so they can run smoother and better—at least, that’s what SHOULD happen.

There ARE some industries that have built-in org structures. For example, project-based and hourly-rate organizations often use a matrix organizational structure where a project team has 1-2 members from key functions assigned to the project. This kind of structure enables an organization to tightly assign and utilize resources based on project needs, and those projects are what gets the revenue-generating work done.

So again, when you think about organizational structures, I want you to think about structure not to constrict work flow, but to open it up and the organization is able to run as smoothly as possible.

So here are a few common structures:

A very common structure is a Functional Structure where teams are together based on their organizational function: Sales, Finance, Operations, etc. It lines up the expertise based on specialized knowledge and experience, and creates strength and scale, which often promotes efficiency because each function has such depth and expertise. The downside?  Functional thinking, a silo’d view of the business, and inability to see past what the functions’ needs are or how their work might impact others. This is why you may see the phrase “cross- functional collaboration” in job descriptions. 

Another very common structure is a Matrix Structure, which I talked about earlier, where resources are pulled from various functions and “matrixed teams” are formed such that everyone has a role based on their functional expertise in order to contribute to a project or product deliverable. One could say The Avengers is the ultimate matrixed team. 

In a matrix structure there are often two managers involved for every team member: the direct manager who the team member reports to (the boss), and then the project or product lead who the team member ALSO reports to—for the sake of the work or project deliverable. If there’s a question about the project, you contact the project lead. If there’s a question about whether you can attend a training session to develop yourself, you contact your direct manager.

Then there’s a Division Structure which happens in large enterprise-level organizations where products and markets are very clearly segregated, either because of customer base, product, or geography. Think of the Walt Disney Company—in fact, as of today they refer to it as the Family of Companies: parks, media, studio and production, etc. Another example is General Electric, organized—as of today—by product, but also structured to support various geographies. 

In divisional structures, each division runs like their own business to provide operational control that is specific for their—business. The biggest issue? If demand or scale changes, you may consolidate one division into another, which usually means layoffs because there will be duplication of roles across the two divisions. It’s also not always easy to unify your global employee base to “One Company” thinking, especially if you have divisions as a result of an acquisition… at the same time, that’s not always necessary, either. 

Then there’s a flat structure which has gotten a lot of attention in the last many years. There’s almost no hierarchy, and when creativity is the goal with optimal ownership of collaboration and deliverables, and you want to open up possibilities and keep a smaller organization moving with innovation and early-stage trials, then a Flat Structure is probably best. 

It’s the ultimate trust structure that offers ultimate empowerment. It also means there has to be trust such that empowerment is taken seriously, because flat structures run the risk of role confusion, a breakdown in taking action, and reduced or non-existent accountability. I see flat organizations work wonders for early-stage start-ups. As they grow and scale, and the organization becomes more about the big goals and blocks of work that has to get done, and employees are better known at a more local level, structure usually keeps good humans feeling grounded and supported.

For your resources, I’ve selected some that go deeper into the technical considerations for building or scaling an organization, using structure as a primary means to ease such expansion. I’ve also included a few that go beyond what I’ve offered to you, and a couple that may not be exactly aligned to what I’m saying based on MY experience and training, which I think is good because you’ll have some breadth in your learning, too.

The first I’m pointing out is an article that gets a bit technical, but it’s thorough and offers a broad spectrum of what is often behind selecting or changing an organizational structure: scaling or growing your business. 

It’s an HBS Blog called “How to adapt your organizational structure,” written by contributing writer Brad Einstein and reviews key aspects of org structures such as task and interdependencies of such tasks, departmental responsibilities, span of control of how big a team should be compared with what it’s tasked to do, and structures that lead to decisions and the root of power, whether it’s centralized or decentralized. It was published in January 2025, and offers additional insights to what I’m providing here, which is one of the reasons I selected it.

I also listed an easy and quick read called “Organizational structure for companies with examples and benefits” from Investopedia, published in May 2025 and written by Will Kenton. What I like about Investopedia is they have reviewers and fact-checkers read through articles before they are published. This article goes through a few more organizational structures than I list, but it’s a good read and again, fairly brief.

I included two other articles, one by Clarity Consultants called, “The significance of flexibility in organizational structure,” published in November 2023. It goes through the advantages and disadvantages of different structures—also very readable. 

I do not have experience with Clarity Consultants, but I DO have experience with a company called Insperity—they are a Professional Employer Organization, or a PEO, and provides HR solutions for small and mid-sized companies. I’ve used them before, and although I do not currently have any connection with them, I’d certainly use them again in the future. I’ve included an article from Lisa Jasper at Insperity called, “Multiple layers of management: Pros and cons of organizational structure.” It was published March 2023, and offers another perspective of the pros and cons of various structures.

Well, there’s your bonus Episode 19! I hope I provided some insights into some of what should happen in the background as part of keeping businesses running smoothly and organizations in the best place for the best performance. This of course includes how your employees fit within the organizational also.

Remember, you can submit your questions to my show’s website, AskChrista.com, that's Christa with a CH, and while you’re there, click on the FOLLOW button and join my mailing list to receive my weekly newsletter that I issue every Sunday Night called “More Answers.” 

Thank you as always for your support—and remember, if you have a business challenge or workplace issue, Ask Christa!