Organisation pyramid structure

Written by colin campbell
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Organisation pyramid structure
Organisational structures often resemble pyramids (Getty Thinkstock)

The so-called pyramid structure of an organisation refers to the tendency of an organisation to have a greater number of base level employees (engineers, workers, technicians, etc) than top strategic decision makers (CEO, Vice Presidents, managers).

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Levels of hierarchy

Levels of hierarchy are what make up the "height" of the organisational pyramid. The greater the number of levels of hierarchy, the more levels between the lowest worker and the highest executives in the company, and the greater the distance that information and decisions have to travel from top to bottom. Levels of hierarchy can be reduced by increasing the span of control, or the number of people the average manager has reporting to him. This is also a way to increase the "width" of the pyramid.

Departmentalisation

Departmentalisation is the other major determinant of the "width" of the organisational pyramid. Departments are usually split up by function or by product. Functional departments do the same thing for a large number of products, and product-based departments do everything required to work on one specific product.

Centralisation and formalisation

Centralisation is the degree to which the tip of the organisational pyramid is top-weighted. In highly centralised organisations, decision making tends to be highly concentrated at the top of the structure, leaving less autonomy for individual workers to make decisions. This often works hand-in-hand with formalisation, which is the degree to which the rules about communication and decision making must be followed, and how complicated they are. Highly centralised and formalised organisations tend to have very rigid structures.

Boundaryless organisation

Boundaryless organisations tend to have smaller organisational pyramids because they have removed as many barriers as possible, both horizontal (departmental) and vertical (hierarchical). Some do this by simply being as free-form as possible, but others outsource all non-value generating portions of the business, leaving only the core. This core is usually a much smaller and more easily managed and changed organisation.

Matrix management

The primary type of organisation that breaks the pyramid-style structure is a matrix-managed organisation. In this type of organisation, groups will report both to their functional leader and their product leader, leading to a somewhat looping, circular shape.

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