In his 1978 book entitled The Structuring of Organizations, author and management expert Harry Mintzberg explained that the “structure of an organization can be defined simply as the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them.”
Elements
Description
Example
Simple Structure
Characterized by a small, centralized top management team with decision-making authority, typically found in small businesses or startups.
Zuckerberg Media, a small media company founded by Randi Zuckerberg, operates with a simple structure with a small team directly reporting to her.
Machine Bureaucracy
Highly formalized and centralized structure with standardized processes and rules, commonly seen in large-scale manufacturing organizations.
Ford Motor Company employs a machine bureaucracy structure in its manufacturing division, with standardized production processes.
Professional Bureaucracy
Centers around highly skilled professionals who have autonomy in their roles, often found in organizations like law firms, universities, or healthcare institutions.
Harvard University operates with a professional bureaucracy, where professors have autonomy in research and teaching.
Divisionalized Form
Organized into semi-autonomous divisions, each responsible for its own functions, often seen in large corporations with diverse product lines.
General Electric (GE) uses a divisionalized structure with divisions for aviation, healthcare, and renewable energy.
Adhocracy
Emphasizes flexibility and innovation, often found in technology companies, startups, or creative agencies where roles are fluid, and employees have freedom to innovate.
Google’s parent company, Alphabet Inc., embodies an adhocracy with a focus on innovation and various subsidiaries working on diverse projects.
Hybrid Structure
Combines multiple structural elements from the above configurations, allowing organizations to adapt to complex environments or multiple business lines.
Amazon has a hybrid structure, incorporating elements of machine bureaucracy for its e-commerce operations and adhocracy for its Amazon Web Services (AWS) division.
Matrix Structure
Combines functional and divisional structures, often used in project-based organizations or those with multiple reporting lines.
IBM employs a matrix structure for project-based work, with employees reporting to both project managers and functional managers.
Network Structure
Organizations collaborate with external partners and entities to perform various functions and deliver value, often seen in industries like IT or consulting.
Accenture, a global consulting and professional services firm, operates using a network structure by collaborating with clients and partners on various projects.
Virtual Organization
Primarily exists online with a flexible and virtual workforce, commonly seen in tech startups, online marketplaces, or remote work-based companies.
Upwork, an online freelance marketplace, operates as a virtual organization, connecting freelancers and clients worldwide.
Boundaryless Organization
Breaks down traditional organizational boundaries, both internally and externally, promoting collaboration and agility, often found in tech-driven and innovative companies.
Spotify embraces a boundaryless organization, promoting a culture of openness and collaboration across teams, even as it grows.
Understanding Mintzberg’s model of organizational structure
Mintzberg’s model of organizational structure posits that the structure of a company emerges from the interaction of three core dimensions and their various sub-factors.
While earlier organizational structure models were based on function, product, or strategy, Mintzberg posited that structure could be differentiated along three basic dimensions:
The key part of the organization – the part of the organization with the most critical role in determining its success or failure.
The prime coordinating mechanism – the predominant method that the organization utilizes to coordinate activities. This encompasses factors such as direct supervision and standardization of skills, outputs, and work processes.
The type of decentralization – to what extent does the organization involve subordinates in decisions? Decentralization may be vertical (chain of command), horizontal (the extent to which non-administrators make decisions), or selective (the extent to which decision-making responsibility is delegated to other units).
The first dimension and its relationship to Mintzberg’s organizational configurations is worth explaining in more detail in the next sections.
The key parts of an organization according to Mintzberg
The five key parts of an organization are:
The strategic apex – directors and senior executives who define and interpret the organizational mission and ensure it is aligned with strategic objectives.
Middle line – the managers who translate strategic objectives into feasible plans. This may require them to set budgets, monitor performance, take corrective action, or purchase equipment.
Operating core – who carry out day-to-day activities that deliver outputs. Working under senior managers, the operating core deals with external stakeholders and is responsible for the maintenance of quality and efficiency standards.
Technostructure – a cohort comprised of individuals and teams working in key functions such as HR, training, and finance.
Support staff – these are individuals who work in support functions such as research and development, legal, and public relations. Support staff output does not contribute directly to the organization’s key objectives, but they do increase the effectiveness and efficiency of the middle line, operating core, and strategic apex.
Mintzberg’s five configurations of organizational structure
Based on the strategy an organization adopts and the extent to which it is practiced, Mintzberg identified five organizational configurations. Each configuration reflects different factors (and indeed varying degrees of these factors) from the three dimensions outlined above.
1 – The entrepreneurial organization (simple structure)
These organizations have a simple, flat, and centralized structure with sometimes autocratic power. This power emanates from the strategic apex and control is exerted by a small but influential team headed by a CEO.
Most companies start this way, but find that this fast, flexible, lean, and relatively informal model is difficult to maintain as they expand.
2 – The machine organization (machine bureaucracy)
In a machine organization, work is formal and standardized with numerous routines and procedures. Decision-making is centralized, jobs are clearly defined, and procedures are routinely analyzed to improve efficiency.
Machine bureaucracies are also characterized by tight vertical structures where functional lines extend to the top.
3 – The professional organization
Professional organizations rely on skills standardization rather than work processes or outputs to drive coordination. As a result, this structure is common in universities, hospitals, accounting firms, consultancy firms, and some tech companies.
Organizations under this configuration must relinquish considerable control – not only to the trained professionals but the institutions that trained them in the first place.
This causes a democratic and highly decentralized structure.
4 – The divisional (diversified) organization
In what Mintzberg called a “divisionalized” structure, a small central team guides highly autonomous business units. This structure is common in multinational companies with numerous divisions or brands.
While decision-making is decentralized at the divisional level, note that there is little coordination between the divisions themselves. This means that in some cases, each division may more closely resemble a machine bureaucracy if viewed in isolation.
5 – The innovative organization (adhocracy)
Adhocracies utilize mutual adjustment as a means of coordination and maintain selective patterns of decentralization. Think of mutual adjustment as peers who are able to coordinate their own work and communicate with others.
This structure tends to be informal and with a small technostructure because specialists are also involved in core operations. Since the primary goal of an adhocracy is innovation and adaptation, tasks are non-routine and tend to be reliant on technology.
Examples of Companies Falling Under One of Mintzberg’s framework
Entrepreneurial Organization (Simple Structure):
Example: Airbnb
Key Features: Airbnb started as a small startup and maintains a relatively flat and centralized structure. The founders had significant control over decision-making.
Alignment with Mintzberg’s Framework: Airbnb aligns with the entrepreneurial organization configuration. Key parts include the founders, and decision-making is initially highly centralized. The company’s agility and innovation were essential in its early growth.
Machine Organization (Machine Bureaucracy):
Example: McDonald’s Corporation
Key Features: McDonald’s is known for its standardized processes, procedures, and routines across its global chain of restaurants. Decision-making is centralized at the corporate level.
Alignment with Mintzberg’s Framework: McDonald’s aligns with the machine organization or machine bureaucracy configuration. Key parts include corporate management, and coordination is achieved through strict standardization of processes and procedures.
Professional Organization:
Example: McKinsey & Company (Management Consulting Firm)
Key Features: McKinsey relies on highly skilled consultants who offer specialized services to clients. Decision-making is decentralized, with consultants playing a significant role.
Alignment with Mintzberg’s Framework: McKinsey aligns with the professional organization configuration. Key parts include consultants with specialized skills. Coordination is achieved through skills standardization, and decision-making is decentralized among consultants.
Divisional (Diversified) Organization:
Example: General Electric (GE)
Key Features: GE operates diverse business units, including aviation, healthcare, and renewable energy, each with its own leadership and autonomy. Decision-making is decentralized within these units.
Alignment with Mintzberg’s Framework: GE aligns with the divisional organization or diversified configuration. Key parts include divisional leaders who have considerable autonomy. Coordination may vary between divisions, but each functions somewhat independently.
Innovative Organization (Adhocracy):
Example: Spotify
Key Features: Spotify fosters innovation and adaptation in the fast-evolving music streaming industry. It promotes collaboration and experimentation among cross-functional teams.
Alignment with Mintzberg’s Framework: Spotify aligns with the innovative organization or adhocracy configuration. Key parts include cross-functional teams of engineers, designers, and content curators. Coordination is achieved through mutual adjustment, and decision-making is often decentralized within teams.
Case Studies
Google (Alphabet Inc.):
Key Features: Google operates with a highly innovative and adaptive structure. It encourages employees to spend 20% of their time on personal projects, fostering creativity.
Alignment with Mintzberg’s Framework: Google aligns with the “innovative organization” or adhocracy configuration. Key parts include teams of engineers and developers. Coordination is achieved through peer collaboration and experimentation. Decision-making is decentralized to encourage innovation.
Apple Inc.:
Key Features: Apple maintains a highly centralized and secretive structure. Decision-making authority is concentrated at the top, particularly with its late CEO, Steve Jobs, and later Tim Cook.
Alignment with Mintzberg’s Framework: Apple aligns with a variation of the “entrepreneurial organization” configuration. The strategic apex, led by top executives like Tim Cook, holds significant power. Coordination is achieved through a tightly controlled process, and decisions are centralized at the executive level.
Amazon:
Key Features: Amazon combines a machine-like focus on efficiency in its fulfillment centers with an innovative and decentralized structure in its Amazon Web Services (AWS) division.
Alignment with Mintzberg’s Framework: Amazon operates with a blend of “machine organization” in its logistics and fulfillment centers and “innovative organization” in AWS. Key parts vary, with centralized control in logistics and more decentralized innovation in AWS.
Microsoft:
Key Features: Microsoft has evolved its structure over the years. Under CEO Satya Nadella, it has embraced more of an innovative and adaptive culture.
Alignment with Mintzberg’s Framework: Microsoft has transitioned toward the “innovative organization” or adhocracy configuration. Key parts include development teams and engineers. Coordination is achieved through cross-functional collaboration, and decision-making is more decentralized under Nadella’s leadership.
Facebook (Meta Platforms, Inc.):
Key Features: Facebook, now Meta Platforms, Inc., has a highly centralized structure under the leadership of Mark Zuckerberg. However, it also fosters innovation through acquisitions like Oculus VR.
Alignment with Mintzberg’s Framework: Meta aligns with a blend of “entrepreneurial organization” under Zuckerberg’s leadership and “innovative organization” through its innovative ventures. Key parts include Zuckerberg and the executive team, while acquisitions like Oculus VR operate with more autonomy.
Tesla, Inc.:
Key Features: Tesla combines a highly innovative approach to electric vehicle technology with centralized decision-making by CEO Elon Musk.
Alignment with Mintzberg’s Framework: Tesla aligns with a combination of “entrepreneurial organization” under Musk’s leadership and “innovative organization” in its technological advancements. Key parts include Musk and engineering teams. Coordination is achieved through Musk’s direct involvement, and decisions are often centralized.
Netflix:
Key Features: Netflix maintains an innovative and adaptive structure focused on content creation and streaming technology.
Alignment with Mintzberg’s Framework: Netflix aligns with the “innovative organization” or adhocracy configuration. Key parts include content creators and technology teams. Coordination is achieved through creative collaboration, and decision-making is often decentralized within content creation teams.
Key takeaways:
Mintzberg’s model of organizational structure posits that the structure of a company emerges from the interaction of three core dimensions and their various sub-factors.
Mintzberg posited that structure could be differentiated along three basic dimensions: the key parts of the organization, the prime coordinating mechanism, and the type of decentralization.
Mintzberg’s five configurations of an organization include the simple structure, machine bureaucracy, professional bureaucracy, divisionalized, and adhocracy.
Key Highlights
Mintzberg’s Organizational Structure Model Defined:
Organizational structure is the result of interactions between three core dimensions and their sub-factors.
Three dimensions: Key Parts of the Organization, Prime Coordinating Mechanism, and Type of Decentralization.
Five Key Parts of an Organization According to Mintzberg:
Strategic Apex: Directors and senior executives who align mission with strategic objectives.
Middle Line: Managers translating objectives into plans, budgeting, monitoring, etc.
Operating Core: Day-to-day activities delivering outputs, ensuring quality and efficiency.
Technostructure: Teams in HR, finance, training, etc.
Support Staff: Roles in R&D, legal, PR, enhancing effectiveness.
Five Organizational Configurations by Mintzberg:
Entrepreneurial Organization (Simple Structure): Flat, centralized, fast, informal, challenging to maintain as expansion occurs.
Machine Organization (Machine Bureaucracy): Formal, standardized work with routines and procedures. Centralized decision-making.
Professional Organization: Relies on skills standardization, decentralized and democratic. Common in professions like accounting, consulting, tech.
Divisional (Diversified) Organization: Central team guides autonomous divisions. Decentralized at divisional level, less coordination between divisions.
Innovative Organization (Adhocracy): Utilizes mutual adjustment, informal and selective decentralization. Primarily aims at innovation and adaptation.
Factors Influencing Organizational Structure:
Strategy adopted by the organization influences its structure.
Different configurations arise from the interplay of the three dimensions based on the organization’s approach.
Coordination Mechanisms and Decentralization:
Different configurations emphasize varied coordination mechanisms and degrees of decentralization.
Diverse Structures for Various Organizations:
Mintzberg’s model recognizes that organizations can adopt different configurations based on their specific needs and contexts.
Alignment with Strategy:
Each configuration aligns with the strategic approach of the organization, influencing its structure and coordination methods.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
Discover more from FourWeekMBA
Subscribe now to keep reading and get access to the full archive.
