An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. It defines how work flows through an organization and allows groups to work together within their individual functions to achieve the organizations aims. Organizational structure affects organizational action and provides the foundation on which standard operating procedures and routines rest. It determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organizations actions.

Organizational structures can be centralized or decentralized, hierarchical or circular, flat or vertical. There are four types of common organizational structures implemented in the real world: functional, divisional, matrix, and flatarchy. The functional structure is the most common and breaks up a company based on the specialization of its workforce. It divides the firm into departments consisting of marketing, sales, and operations.

Having an organizational structure that aligns with a companys goals and objectives is crucial. When deciding which structure will work best for a company, it is important to consider the current roles and teams within the company, the strategic plan, and the companys goals for the short-term and long-term.