Organization design seeks to optimize work environments. Historically, this was equated with efficiency, which resulted in common hierarchical structures. Hierarchies tend to be built around relatively narrow areas of expertise and attempt to maximize economies of scale. They offer a number of advantages and excel in conditions of stability and work repetition. However, in today's business environment, optimization also includes ideas such as agility, flexibility, and adaptability. These are not qualities of hierarchies. So, high-performing organizations must look beyond the models of the past.
There are a number of modern options available to the design process. These include increasingly common matrix structures, shared service centers, communities of practice (or expertise), ad hoc teams and dynamic and responsive central cores (an update to traditional leadership suites). A particularly exciting trend is the development of network models of organization. Internal network tructures are organizations comprised primarily of a flexible array of teams connected directly to a management core (another team). Teams are aligned and re-aligned based on the best resources available to complete the required work. Similarly, external network structures are comprised of connected nodes, but they alter the traditional boundary of the firm. Their defining characteristic is the transfer or outsourcing of one or more business functions to partner organizations, creating a network based on multiple external organizations. Extreme examples of this model are organizations consisting only of a central core and numerous external partners.
It's worth noting that most organization models are not deployed in their pure form. Generally, as organization size and complexity increase, structural hybrids become common and even necessary. A hybrid is a combination or blended structure. They merge features of multiple models with the hopes of realizing the advantages of each (while mitigating their respective disadvantages). Hybrid structures allow tremendous freedom in the organization design process.