There are several types of organizational structure in business, but one of the newer approaches is to define teams by taking advantage of synergies and a complementary set of skills. This enables businesses to take a more agile approach to business responsibilities and requirements. If you have served in the military then you're familiar with this approach and in the business world it is similar. Smaller groups of teams make up a "squad" and several squads make up a platoon. The platoon would be equivalent to a functional division of an organization.
While a team-based organizational structure is still a part of the business hierarchy, the division is more fluid and allows businesses to more quickly adapt to changing needs of the business and the external environment. For example, a team may be made up of a programmer that specializes in java, an accounts payable specialist, a business process analyst, and a financial analyst for the purposes of developing a new accounting application for the company. This type of team would also be considered a cross-functional team.
Rather than having longer lines of communication between the managers of each functional department, which not only delays progress, but can also facilitate mis-information, the team members work directly with one another to resolve problems/solutions seamlessly while working toward project completion. In short, the team maintains a broad set of skills with a very specific scope of responsibility.
Advantages of Team Organizational Structure
There are several advantages of structuring an organization with this approach. The primary benefit is flexibility (or the ability to be agile). Each member of the team has a particular skill-set and they are matched with other members to complete specific business objectives. In some cases these teams will be enduring, but in other cases they can be short lived for the sole purposes of completing a special project; and members can work with different teams on several projects at once. When a project is completed, members are "disbanded" and moved to new teams. Additionally, this type of structures facilitates, and fosters, stronger team cohesion where members build trust for one another.
It also facilitates a greater understanding of how business functions work together; it improves the members scope of understanding in how the different functions play a role in the larger picture of business operations. And, while team work is important, there are times when team members don't work well with one another. Because of the flexibility of a team-based structure, when there is conflict due to interpersonal issues, members can be more easily moved to different teams... and of course if it is a reocurring issue for a particular member, then HR may need to become involved. Finally, an additional advantage is these smaller groups can be grouped to participate in team-building and training activities specific to their objective. All of these benefits assist with employee engagement, morale, and productivity.
Additional Resources:
Rise of Team-Based Organizational Structure