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.”
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.
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.
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.
