Organisational Structures - Where do you fit?

How your org structure can impact employee engagement

Alec Middleton June 21, 2021
Reading time: 9 minutes

There are now as many as 7 popular kinds of organisational structures, each offering their own unique advantages and disadvantages. Many companies are now choosing to break away from conventional hierarchies, in order to create a more diverse workplace for employees. 

In this blog, we’re going to investigate three of the main kinds of organisational structures - Hierarchical, Holacracy and Matrix, and understand their pros and cons when it comes to employee engagement.


Hierarchical Structure

Hierarchical structure is one of the most popular management structures amongst larger corporations and organisations. It involves different levels of authority within a company, starting with the CEO, then working down through directors, then managers, then assistants, and so on. 

Typically, the wider the company expands, the taller the hierarchy structure grows, but it will generally always maintain a pyramid shape. Employee roles in this kind of organisational structure are usually very clearly defined, and decision-making usually starts at the top before working it’s way down. 

Amazon is a prime example of a company that adopts the hierarchical structure employing more than 55,000 people in the UK, and around 1.3 million globally. Whilst there are pockets of other structures, broadly all employees technically report back to CEO, Jeff Bezos up through the chain of command.


Advantages of Hierarchical Structure

There are many advantages to the hierarchical organisational structure, hence why it’s the preferred choice for businesses small and large. Here are some of the biggest pros: 

  • They typically present employees with an opportunity to ‘climb the ladder’ and follow a clear, upwards career path. 
  • Separate departments within a hierarchical structure give employees the chance to become specialists in their field, and adopt niche positions that bring on their own opportunities. 
  • Hierarchical structures allow a clear line of communication and their operations are typically well-organised with exceptional managerial control. It’s clear who can shape and influence the team.   


Disadvantages of Hierarchical Structure

Though the hierarchical structure is typically very organised, such rigidity can actually be detrimental to larger companies. Here are some of the disadvantages of this structure: 

  • The solid and lengthy chain of command can often be detrimental to collaboration across various departments, and can cause delays in communication and drain employee engagement. 
  • Hierarchical structures are highly susceptible to bureaucracy, with a clear dis-connect between employees and their leaders. 
  • Employee-management relationships often come under strain due to a lack of autonomy
  • Hierarchical structures often come with large overheads due to an extensive chain of command, this can lead to regular restructuring, as the business evolves to keep control of costs. 


Holacracy Structure

The holacracy structure may seem a little complicated on the outside, but it’s actually relatively simple. The structure is a decentralised model, where there are no job titles, no managerial roles, and no hierarchy whatsoever. 

Holacracy borrows its name from the Greek term ‘holons’, which means ‘whole’. A holacratic workplace is made up of a ‘ring’ of employees (rather than a pyramid), where each worker is given the flexibility to choose tasks at their preference. Employees are even given the freedom to move between teams, as long as they assume responsibility and lead the company towards a common goal. 

One of the most notable examples of a holacratic company is Zappos, who began adopting the model in 2013. And although they noted that almost 18% of their employees had decided to quit after the switch, the company has been continuously celebrated for its high employee engagement rates and thriving culture. 


Advantages of Holacratic Structure

The advantages of the holacratic structure are quite profound, largely due to their seemingly radical ways of working. Here are just some of the advantages:

  • Without a traditional hierarchy, employees feel a greater sense of belonging, and often work harder towards the common goal of the company. 
  • Due to the flexibility of roles, employees are often highly skilled in various areas, and can remove the need for recruitment of expensive specialists. 
  • Without a chain of command, employees are invited to solve problems on their own, or collaborate with other team members. This fosters greater innovation and employs efficiency and productivity within the company. 
  • Thanks to the fluidity of this structure, it’s easy to implement profound changes quickly, allowing the company to evolve at an accelerated rate. 
  • Holacratic companies often report higher levels of employee satisfaction, thanks to their all-inclusive approach to meetings and strategy. Everyone feels like they’re being heard, has a voice and is making a clear contribution. 


Disadvantages of Holacratic Structure

Holacracy has faced immense amounts of criticism, largely due to the lack of a ‘big picture’. Here are some of the biggest disadvantages of the model:

  • It’s extremely hard for a large company to adopt a holacratic model. It took Zappos two years to fully implement the structure throughout its organisation. 
  • The reliance on your workforce to be ‘all singing all dancing’ can result in higher training and onboarding costs. 
  • The structure isn’t something people can easily get used to, and often involves changing people’s entire habits e.g. those who feel like they must report to someone about a problem, or when a task is complete.
  • With most of the concentration flooding into the everyday processes and smaller tasks of the company, the ‘bigger picture’ is often lost, and the company can stagnate. 
  • Some people like to have job titles - it gives them a sense of purpose. Without them, they may feel lost and end up leaving the company, driving up recruitment costs once more. 


Matrix Structure

A matrix structure is a blend of two or more kinds of organisational structures, offering the ‘best of both (or multiple) worlds’. The matrix structure typically functions like a grid that’s split into various projects, such as finance, HR, operations and marketing. Employees within these projects may find themselves with two or more managers - their regular manager, and a team leader who spearheads the project. 

Google is a perfect example of a large corporation who uses matrix structure to manage their global workforce. The company has been commended in the past for their ability to nurture a great workplace culture by incorporating a high percentage of flatness in their management. This flatness enables employees to skip the middle man(ager), and communicate across teams with ease. This structure offers the perfect grounds for team building and nurtures employee engagement.


Advantages of a Matrix Structure

Matrix structures naturally offer organisations a high degree of flexibility within management - this brings with it a whole host of unique benefits: 

  • Employee engagement is likely to be higher in matrix structure organisations, thanks to their ease of communication and collaboration across departments. 
  • Teams are likely to feel more motivated, with greater autonomy and scope for a wider variety of work.
  • Costs are often lower for matrix organisations, due to the reduced need for separate departments to communicate regularly. 


Disadvantages of a Matrix Structure

Naturally, such a varied and flexible structure can bring its own difficulties. Here are the disadvantages of the matrix structure:

  • Without a clear chain of command, some companies find it difficult to coordinate their teams. 
  • Team members are likely to have varying degrees of loyalty toward each of their project managers, which can result in tension and/or miscommunication.
  • Accountability can be tricky due to the complexity of the structure. 
  • It often takes team members longer to get used to working in matrix structures, which can lead to added recruitment and training costs. 
  • Due to the shared nature of the projects, it can be easy for some team members to neglect their typical responsibilities, which can quickly erode trust if not managed effectively. . 


Understanding engagement in flexible businesses

Assessing engagement and gaining valuable employee insight in flexible organisational structures requires a flexible approach with fresh technology. 

Take a Holacratic structure for example - 

  • How do you start to add an organisational structure into a platform (before you send surveys out) when there is no formal structure?
  • Where do you start when you want to slice and dice your data for interpretation?
  • Who gets to understand what about which employees? 

If you want your Scrum Masters to understand how engaged their scrums are, so they can maximise performance, but they aren’t their direct line manager - the valuable feedback your teams will be giving, might not be seen by the person who can make a difference. 


Most platforms aren’t really built to cope with flexible organisational structures. Their reliance on structure to offer a hierarchical position to each individual before a survey goes out, often prohibits their ability to present results.

The Space HR platform is different. Our tagging system allows every individual in your business to be given a unique set of tags. These could include simple tags such as gender, location and role, but can extend much further and much deeper. Importantly, where there is a lack of structure, we can still provide many attributes for each person that the hierarchical approach wouldn’t allow. 

Once the survey is complete, these tags really come into their own. If you want to look at the specific performance of a team, cross referenced with, for example, location, gender and longevity of service, this is not a problem. 

Also hierarchy doesn’t need to govern who gets to see the results of the survey. Permissions in a platform are usually based on hierarchy too.  With the Space HR platform you’ll only be served the data that you should see based on the tags you’ve been tagged with.

You can’t fix employee engagement through structure alone. But whatever structure you’ve chosen, we can help you to work out the best way to develop your questions, your survey and your tags to guarantee a data set and feedback that is right for your organisation - putting the valuable insight in front of the people that can make a difference. 


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