How team structure impacts performance

Why your team structure matters

The success of your organization is directly tied to the strength of your teamwork.

Projects, daily tasks, and administrative work require team-based work and decision-making, so your team structure must be impeccable.

Research shows that organizations that feature and encourage strong collaboration are five times more likely to achieve their goals.

Conversely, 33% of HR professionals agree that poor team building directly contributes to low employee morale, which can negatively impact your organization (like higher turnover and reduced productivity).

That’s why it’s crucial to choose a team structure that will make it easier to achieve your specific goals. There are many different types.

If you’ve been having trouble achieving the team performance you want, it may be because you aren’t using the proper organizational structure.

As a quick example, if your business needs to respond to rapidly changing environments while ensuring everyone gets heard, you’ll benefit the most from a circular structure for your team – where the CEO is in the middle with layers of management and other positions surrounding them.

This team structure encourages open communication, flexible roles, and higher motivation levels.

If you try to use a functional organizational structure instead (where approval from multiple departments is necessary), you’ll likely waste time trying to obtain buy-in from different departments and stakeholders.

This scenario exemplifies why selecting a team structure that works for your specific needs is imperative.

In this guide, I’ll break down the different types of team structures so that you can determine which will work best for your organization.

Understanding the importance of team structure

Team structure refers to the underlying framework used to define a team’s chain of command, individual roles for team members (like supervisors and team leaders), task allocation, reporting relationships, and collaboration style.

The point of implementing different types of team structures is to make it easier to achieve business objectives and common goals.

Well-designed team structures capitalize on each member’s strengths and provide benefits such as improved problem-solving, a better decision-making process, more effective communication, and a positive work environment.

There are many types of team structures, each with advantages and disadvantages.

An in-depth knowledge of different team structures will help you determine the best structure for each team in your organization. As stated in the intro, selecting an appropriate team structure is integral for achieving a strong team performance.

If your team members struggle to meet deadlines and optimize workflows, the underlying structure may be the culprit.

Common types of team structures include:

• Hierarchical structures that take a top-down approach to leadership roles and reporting lines.
  
  
• Functional structures are based on each team’s shared expertise (i.e., having an engineering team, a Human Resources team, etc.).
  
  
• Cross-functional teams where individuals from different departments (with highly individualized skill sets) form a diverse team of specialists (such as someone from your marketing team, someone from your sales team, and someone from your IT team all working together).

We’ll explore these team structures in greater detail in a moment (along with others).

For now, it’s important to know that each team’s organizational structure will directly impact their performance. If specific teams in your organization are underperforming, changing the team structure may help.

However, you shouldn’t change a team’s structure on a whim. Instead, ensure that you only switch structures when you can pinpoint the team’s underlying problem (like a lack of effective communication).

From there, you can determine which structure would best solve that problem, like moving from a functional structure to a circular one.

How will a strong team structure impact your business?

Before we learn more about the different types of team structures, let’s examine why they’re worth it.

In other words, what will changing your team’s structure do for you?

Here’s a look at the main benefits:

• More efficient communication. With a clearly defined team structure, each team member will know who they report to. Also, certain types of team structures, like circular structures, are entirely based on effective communication via a seamless flow of information. Other types of team structures are more limited in communication, so it’s essential to choose wisely.
  
  
• Improved productivity. It’s nearly impossible for a team to be productive if nobody knows what they should do. Team and organization structures define clear roles and procedures for task allocation and completion. With a strong structure, your team will always know A) what they’re supposed to be doing and B) when it’s supposed to be done by (and who to report to).
  
  
• Fewer complaints and conflicts around the office. Conflicts often arise due to miscommunications, misunderstandings, and disagreements over deadlines, task allocation, and individual roles (like if someone is acting like the boss). The great thing about team structures is that they significantly reduce these misunderstandings. Everyone will know their role, what they must do, and when it has to get done, making it far easier to get along.
  
  
• Better collaboration and innovation. Speaking of getting along better, this cohesion will make collaborating easier for your teams. Also, since everyone will feel comfortable with their roles and responsibilities, they’ll be more likely to share innovative and creative ideas without fear of pushback or judgment.
  
  
• Stronger decision-making. Lastly, a strong team structure will improve your decision-making process. Since you’ll have clear authority figures and reporting structures, you can make decisions swiftly and effectively, improving your organization.

The six most common types of organizational structures for teams

Okay, now it’s time to explore the nitty gritty details of 8 different types of team structures to determine which is best for your needs.

#1: Hierarchical structure

First, the most common type of team structure is hierarchical, with a pyramid-shaped top-down approach to leadership.

It’s how most companies structure their teams and their entire organization.

In this org structure, executive and senior leaders reside at the top of the pyramid (and reporting lines). From there, each subsequent level of the pyramid involves different degrees of subordination.

In a typical hierarchical structure, the CEO would sit at the top level, with the C-suite members beneath them (CFO, CMO, etc.). Under that, you would reach middle management, like team leaders, project managers, and HR managers.

Near the bottom, there are individual contributors and base-level employees.

Hierarchical structures work best for large organizations with strong, clearly defined leadership roles.

The benefits of this structure include well-defined workflows and task management. Potential drawbacks include a long chain of command and difficulty dealing with changing markets.

#2: Functional structure

A functional structure is where an organization’s teams are based on each employee’s job function.

As a result, teams are formed based on different departments, like HR, sales, and marketing. Your HR team would consist of all your HR professionals, and so on.

As the name implies, this structure is about aligning employees who perform the same functions.

In this structure, each department works on individual projects and tasks, contributing to the organization’s primary goals and objectives.

A functional structure works best for organizations where each department handles different functions. It’s also an excellent option for companies that need employees with precise specialties and career paths, like a field expert in data entry for an accounting team.

However, a potential drawback is how long it can take to receive approval from numerous departments.

If clear and open communication is your ultimate goal, a functional structure might not be your best option.

#3: Flat structure

Sometimes, startups and small businesses lack the time or capacity to establish leadership roles, so they use a flat team structure.

This is where everyone in an organization has the same level of decision-making power, effectively eliminating management and authority figures.

It’s an extremely common team structure for brand-new companies focusing more on speed, empowerment, and innovation than traditional hierarchical structures.

As a result, employee autonomy is at an all-time high, which boosts morale, innovation, and collaboration. If your organization remains aligned on common goals, this structure can significantly increase productivity, creating a highly effective team.

This structure works best for smaller organizations eager to get their ideas off the ground. It isn’t recommended for larger companies because tasks like task assignment and accountability become increasingly difficult. Achieving your organization’s goals can also be challenging without clearly defined leadership roles.

#4: Circular structure

As mentioned, this structure places the CEO at the center of a circle, with other management roles and employees branching out from there.

Circular team structure presents a dynamic template for completely open lines of communication.

This means every team member has an equal say in what drives the organization forward, whether good or bad, depending on your goals.

If you desperately need an open flow of information, implementing a circular structure is a recipe for a successful team.

However, if you need efficient workflows and a strong chain of command, this structure won’t deliver what you want.

Also, a circular structure can slow decision-making since you must reach a consensus among so many employees. This can also lead to competing priorities, which will be counterproductive.

#5: Matrix structure

A matrix team structure could benefit your organization if it requires diverse perspectives (for example, for complex product development).

This is where each employee reports to multiple authority figures instead of just one. The most common scenario is to assign two bosses to each team member. They’ll have a primary reporting line for one boss and a secondary one for another.

While this may seem convoluted, the goal is to balance your organizational structure.

For example, suppose an employee has a boss in their primary department and another in a different department. In that case, it can improve productivity and efficiency (since different perspectives are considered when assigning tasks).

However, this advantage can also backfire if a team member’s bosses disagree on what needs to happen. This can cause friction and stress among team members, which may cause further conflict (like causing some team members to quit).

The matrix structure works best for organizations on highly complex projects requiring diverse perspectives and skill sets.

#6: Market-based structure

This approach is market-focused, meaning each team focuses on an individual market your organization caters to.

As a result, each team member should be an expert in their respective market, intimately understanding customer’s preferences and needs.

This is an ideal team structure for sales-driven organizations that offer various products that appeal to different markets and target audiences. Its customer-driven focus fosters brand loyalty and higher satisfaction with your products and services.

However, providing the resources necessary to cater to numerous target markets can be financially challenging. It’s also difficult for market-focused teams to cross-collaborate, so bear that in mind.

Final thoughts: The different types of team structures

To summarize, the type of team structure you choose should directly relate to your organizational needs.

A flat structure is the best option for a startup eager to establish itself.

Conversely, a market-based team structure will yield impressive results if your ultimate goal is to generate more revenue across several target audiences.

Once you know A) your goals and B) the different types of team structures available, it’ll become effortless to select the appropriate structure for any given team.

More resources:
Getting teams to collaborate successfully
Hybrid team success: Mastering the key strategies
Talent shortage solutions: A forward-thinking strategy for business growth