Functional Vs. Matrix Organizational Structure

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It’s important that every organisation establishes a formal structure that works for its goals and objectives. That way the organisation can count on improved communication, better product development, enhanced customer service and more.

What is Organizational Structure?

An organizational structure officially decides the hierarchy within a business, showing who reports to whom. There are many types of organizational structure and two of the most popular are functional and matrix.


The functional structure pools employees based on the functions of certain jobs within the organisation. For example, an organisation might have an accounting department (accounting function), and sales department (sales function), etc. The advantages of functional structures are "being simple to understand with clear lines of command, specified tasks and responsibilities," according to Human Resource Management Guide.


The matrix structure expands on the functional structure by assembling employees by both function and product offering. So an individual in a matrix structure may be working in product X sales department. The advantage of this structure is better communication between functional groups.

Small vs Big Companies

By their nature, small companies tend to have flatter hierarchies and more functional structures. Larger companies are more complex with multilayered matrixed hierarchies.

Bottom Line

Although organizational structures can evolve to meet changing business needs, it's imperative to have the right one for a given organisation so it can operate at peak performance.

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