Organizations can be structured in various ways, and the structure of an organization can determine the modes in which it operates and performs. The network structure is a newer type of organizational structure, often seen as less hierarchical (or more "flat"), more decentralized, and more flexible, in which managers coordinate and control relations, both internal and external to the firm (Figure 1). As with all organizational structures, the network structure has its advantages and its disadvantages.
The concept underlying the network structure is the social network, which is a social structure of interactions. At the organizational level, social networks can include intra-organizational or inter-organizational ties in terms of formal or informal relationships. At the industry level, complex networks can include technological and innovation networks that may span several geographic areas and organizations. The network structure from a management perspective is seen as distinct from other organizational structures that focus on the internal dynamics within the firm.
Proponents argue that the network structure is more agile in comparison to more solid groupings like functional areas, divisions, or even some teams. In this view, communication is seen as less "silo"-ed, flowing more freely, and possibly opening up more opportunities for innovation. As a decentralized structure, the network structure shows fewer tiers in the organizational structure, a wider span of control, and a bottom-to-top flow of decision making and ideas. A downside of the network structure may be that this more fluid structure leads to a more complex set of relations in the organization. For example, the accountability structure may be less clear.