Simple organizational structures are characterized by a low degree of differentiation of subtasks, and the leaders often have a very wide span of control. The authority is oftentimes heavily centralized in a single person, who will oftentimes be the owner of the company. Formalization will also be low, and work will oftentimes be structured through direct control and supervision. The simple structure is also often referred to as a "flat structure".
The simple organizational structure often only has 2-3 vertical levels, a rather low amount of highly flexible workers, who will be able to perform several different kinds of tasks.
This simple organizational structure is most widely practiced in smaller businesses, in which the coordination of work can be effectively structured around a narrow set of activities and decision makers, who are able to coordinate activities quickly and effectively.
The simplicity of a simple organizational structure makes it responsive to new challenges, and makes it easy to coordinate activities within the company. However, this structure becomes inadequate when the organisation grows in size, and when the surrounding environment of the company grows in complexity.
When the size of the company and the environmental complexity increases, the top of the simple structure may get overloaded with information. This information overload may compromise the effectiveness of the decision-making performed at the organizational top, and make the organization slower in its adaptation to new situations. Growing companies, in changing and dynamic environments, may therefore need to specialize and formalize its organizational structure, so that work must not be as heavily coordinated by the organizational top. Likewise, companies may need to differentiate activities into subtasks, and employ specialists responsible for a given subtask previously handled by e.g. the company owner. Finally, companies may need to decentralize some of the decision-making power to lower levels of the organization, so that decisions are made by people responsible for the subtask, and who controls specific knowledge and information about the handling of the given subtask.