Corporate structure

A normal corporate structure consists of various departments that contribute to the company's overall mission and goals. Common departments include Marketing, Finance, Accounting, 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.

Importance

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.

Models

Functional structure

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 structure

Divisional structures are also called product structures 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 structure

Geographic structures are used in multi-site organizations and are frequently used by networks across different geographic areas.

Matrix structure

The Matrix structure is probably the most complicated model of them all because it is organized around multiple dimensions (e.g. geography and product), typically with more than one supervisor. This structure is commonly used in very large organizations 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.

Classifications

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 compliments 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".

Technology

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

• Gareth Morgan's Images of Organization: 6 metaphors
• Frank Ostroff's "The Horizontal Organization"
• Henry Mintzberg
• Peter Senge and the Learning Organization
• Jay Galbraith's Star Model

See also

• Organizational Culture
• Organizational Design
• Corporate Governance
• Management
• Consulting Firms
• Non-profit Governing Boards
• Board of directors
• Dual-listed company
• Business model