A normal corporate structure consists of various departments that contribute to the company's overall mission and goals. Common departments include Marketing, Finance, Operations management, Human Resource, and IT. These five divisions represent the major departments within a publicly traded company, though there are often smaller departments within autonomous firms. There is typically a CEO, and Board of Directors composed of the directors of each department. There are also company presidents, vice presidents, and CFOs. There is a great diversity in corporate forms as enterprises may range from single company to multi-corporate conglomerate. The four main corporate structures are Functional, Divisional, Geographic, and the Matrix. Realistically, most corporations tend to have a “hybrid” structure, which is a combination of different models with one dominant strategy.
The kind of differentiation and diversity among corporations is of importance to corporate law (for example such difference in corporation type that has impact on corporate structure is the difference between public owned and proprietary companies). Choosing a structure for a company is an important decision and must be strategically thought out because it could either aid or harm the making of business. The structure must also be a good fit for the type of activities, goals, and vision of the company. The organizational structure is a reflection of how convenient business is conducted.
This model is commonly used in single-program organizations. It is basically the standard structure mentioned earlier, which is organized around departments. This structure is most appropriate for all small organizations.
Divisional structures are also called cstructures'' because they are based on a certain product or project. This structure is most common in multi-service organizations. Normally, it's based on the departments divided in the firm.
Geographic structures are used in multi-site organizations and are frequently used by networks across different geographic areas.
The Matrix structure is probably the most complicated model of them all because it is organised around multiple dimensions (e.g. geography and product), typically with more than one supervisor. This structure is commonly used in very large organisations because a greater volume requires greater co-ordination. However, this structure is very difficult to manage so it is usually better to reconsider its use and replace it with a different type of structure, then compensate for the tradeoffs.
In addition to those models, there are other factors that make up the structure of an organization. Depending on the chain of command, a company's structure could be classified as either vertical or horizontal, as well as centralized or decentralized. A vertically structured organization or a "tall" company describes a chain of management, usually with a CEO at the top delegating authority to lower-level managers through mid-level managers. Horizontal or "flat" companies, however, have almost no middle-managers, which implies that high-level managers get involved in daily tasks and interact with customers and front-line personnel. A centralized organizational structure describes how a company's direction and decisions are set by one individual only. Centralization complements companies with "tall" structures to create Bureaucratic organizations. Decentralized organizational structures allow individuals some autonomy at each level of the business, because they join the decision-making process. Evidently, classifying organizations as centralized or decentralized is linked to them being "tall" or "flat".
There is an emerging trend in the way companies shape their organizational structures. More businesses are moving towards a much flatter, decentralized organizational structure. Technological developments accelerate these organizational changes as they improve the efficiency of business, causing it to restructure departments, modify position requirements, or add and remove jobs.
Books / authors / theorists
- Roman Tomasic, Stephen Bottomley, Rob McQueen, Corporation Law in Australia, Federation Press, 2002, pp.167-173
- "Designing an Effective Organization Structure". Bain & Company organizational toolkit and Bridgespan analysis. Retrieved 1 April 2014.
- "Organizational Structure: An Overview". Community Tool Box. Retrieved 1 April 2014.
- Huebsch, Russell. "The Vertical Structure Vs. the Horizontal Structure in an Organization". Demand Media. Retrieved 1 April 2014.
- Vitez, Osmond. "Organizational Structure". Demand Media. Retrieved 1 April 2014.
- Archer, Clare. "Technology's Impact on Organizational Changes". Demand Media. Retrieved 1 April 2014.