Organizational Structures Traditional Vs Modern

Organizational Structures: Traditional vs.
Modern
indeed.com/career-advice/career-development/traditional-organization-structure
Indeed Editorial Team
1. Career development
2. Organizational Structures: Traditional vs. Modern
Employing a traditional organizational structure can ensure operations run efficiently. This
system values top-down authority, along with specified roles and responsibilities for each
employee. However, some businesses today are employing a more modern
organizational structure that reduces centralized power and enables more employee
flexibility.
In this article, we define the traditional organizational structure and compare its
differences from the modern structure to help you determine the best option for your
situation.
What is a traditional organizational structure?

An organizational structure defines how work gets delegated throughout an organization.
A traditional organizational structure follows a system in which power flows upward
through the organization, and all employees follow a chain of command.
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The traditional organizational chart may look like a pyramid. The chief executive officer
would sit at the top, and the layer underneath would consist of department managers who
report to the CEO and oversee the overall operations of their department. Next would be
first-line managers, or supervisors, who manage the daily operations of their department
or teams and below are the non-management employees who report to them.
Examples of traditional organizational structures include:
Functional organizational structure: The organization divides its employees into

groups based on their roles or specialties. For example, an organization using this
structure may have a finance, a marketing and a research-and-development
department, with each department having specialty groups within them who report
to the department manager.
Divisional organizational structure: Larger organizations benefit from this type of

structure, which divides employees into teams based on specific products, projects
or locations. For example, a bank might have a retail banking division, an
investment banking division and a private banking division.
Related: Functional Structure: Advantages and Disadvantages
What is a modern organizational structure?

A modern organizational structure does not have a hierarchical, top-down power
arrangement. Also referred to as a contemporary organizational structure, it removes the
departmental boundaries between employees and has them work on projects together in
pursuit of the business's goals .
Employees working on projects receive requirements and productivity goals but have the
power to determine for themselves the best way to complete the project. Typically, this
structure promotes sharing skills and resources across the organization to reach its goals.
Examples of modern organizational structures include:
Matrix organizational structure: When following this structure, the organization still
has departments but creates project groups that include employees from different
departments. Employees working in this structure may have two supervisors—a
project manager and a functional or department manager.
Flat organizational structure: The organization removes the layers of middle

management between employees and executives, so this structure suits smaller
companies or early-stage start-ups. Here, employees receive little supervision and
have the power to form teams and choose which projects to work on.
Related: 10 Different Types of Organizational Structures
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Differences between traditional and modern organization
structures
The following list demonstrates how traditional and modern organizational structures differ
from one another:
Decision-making
In a traditional organizational structure, the decision-making power is highest at the top

and reduces as it moves down the chart. The CEO has the most decision-making power
and may delegate some decisions to their department heads, who may then turn some
decisions over to their team supervisors.
In this structure, employees have little decision-making power and instead receive
instructions from their supervisors. Having power centralized amongst a few members of
the organization can be beneficial because it provides clear organization-wide messages
about goals and expectations, eliminating the potential for confusion.
A modern organizational structure, however, does not use that system of centralized
power. Instead, non-management employees often can determine what projects they
want to work on and the methods they use to complete them.
In some situations, managerial staff may even collaborate with employees or take their
feedback on decisions made at the company. Because employees have more decision-
making power in a modern organizational structure, they can also proactively determine
when and how to help other teams on projects rather than waiting for instructions from
their supervisor to do so.
Related: Hierarchical Structure: Definition and Examples
Communication
Due to the hierarchical nature of a traditional organization structure, the individuals at the
highest level of management may have little communication with employees who are not
their direct subordinates. For example, information from upper management may get
disseminated through emails, newsletters or department heads.
A modern organizational structure has fewer departmental boundaries, which enables

faster and easier communication methods. They may employ the use of instant
messaging apps or software that allows everyone in the organization to communicate
with one another. And in a flat organizational structure, for example, there's no middle
management, so employees have more opportunities to communicate directly with
higher-level managers.
Related: Top 10 Communication Skills for Career Success
Teamwork
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Businesses that follow the traditional organizational structure divide their employees into
departments or divisions depending on their roles. As a result, employees from different
departments may have few chances to work with one another.
The focus on their specific role also enables them to gain significant knowledge and
experience, potentially making them experts in their field. However, because they only
perform their particular job and work with colleagues performing similar tasks, it may limit
their opportunities to stretch their abilities and learn more about other aspects of the
business.
Businesses with modern organizational structures promote the ideas of teamwork and
collaboration, enabling employees from different areas to work together. Pulling in
resources can help solve problems or reach goals more quickly.
These teams often have more autonomy than those in traditional structures, who must
wait for instructions from their supervisor on how to complete tasks or projects. This
system can help build relationships throughout the company, as employees realize they
need to rely on one another, no matter what line of business they are in, to reach
company goals.
Related: Teamwork vs. Individual Work: Definitions and 8 Key Differences
Flexibility
Employees in traditional organizational structures have set roles and responsibilities that
they fulfill. Organizations in stable business environments benefit from this structure
because employees know how to complete their job and meet the typical challenges
associated with it.
If the nature of the organization's business rarely changes, then these set roles can make
work more productive and efficient. Due to the more rigid nature of these organizations, it
may be difficult for them to adapt to dynamic environments, or they may be slower to
meet unexpected challenges.
Employees in modern organizational structures have more flexibility in their

responsibilities, which benefits organizations in more dynamic environments. Having that
flexibility enables employees to easily collaborate across departments to solve
challenges. These employees also gain the opportunity to learn new things by working on
projects or teams of their choosing.
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Organizational Structures: Traditional vs.

Indeed Editorial Team

What is a traditional organizational structure?

Examples of traditional organizational structures include:

Functional organizational structure: The organization divides its employees into

Divisional organizational structure: Larger organizations benefit from this type of

Related: Functional Structure: Advantages and Disadvantages

What is a modern organizational structure?

Examples of modern organizational structures include:

Flat organizational structure: The organization removes the layers of middle

Related: 10 Different Types of Organizational Structures

See how your salary compares

In a traditional organizational structure, the decision-making power is highest at the top

Related: Hierarchical Structure: Definition and Examples

A modern organizational structure has fewer departmental boundaries, which enables

Related: Top 10 Communication Skills for Career Success

Related: Teamwork vs. Individual Work: Definitions and 8 Key Differences

Employees in modern organizational structures have more flexibility in their

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