What does company structure mean? Company structure is a system outlining how the activities are organized and directed to achieve goals.3 min read
What does company structure mean? Company structure is a system outlining how the activities are organized and directed to achieve goals. These activities will generally include the rules to be followed and the roles and responsibilities of those within the company.
An Overview of Company Structure
As noted, the organizational structure of a company is the basis or platform used to determine how information flows between the different levels of management based on how the information is coordinated and by whom. The structure defines the hierarchy within a company or organization. Businesses of all sizes rely on it to keep the company operating efficiently and headed in the right direction. A successful organizational structure clearly defines the job of each employee and the place their job holds in the system. The structure is usually illustrated in the form of a chart or diagram.
Without a formal organizational structure in place, it can prove difficult and confusing for an organization. An example would be when employees are not certain who their immediate supervisor is. It can also lead to confusion about who is responsible for each job in the organization.
An organizational structure within a company supports and promotes efficiency, inspires better production, and provides clarity for each employee at every level. In traditional organizations, the structure was a centralized leadership with an established chain of command. The military is a perfect example of a centralized structure within an organization.
There are also decentralized structures. The difference between the two is that in a centralized structure, the majority of the decision making and control of departments/divisions is through a top layer of management members. A decentralized structure promotes the distribution of power among the departments and division. This allows for different levels of independence.
Types of Organizational Structures
Several organizational structure types are the most common in real-world businesses.
- Functional/Bureaucratic
- Flatarchy
- Matrix
Functional/Bureaucratic
This is the most common organizational structure. It breaks up a company according to the specifics and specialization of its workforce. This means the enterprise is divided into departments, such as sales, operations, and marketing. A functional/bureaucratic organizational structure is used mostly with small and medium-sized businesses.
Flatarchy
A flatarchy is a new structure used in many startups. With this structure, the traditional chain of command is not in effect. Instead, the company allows its employees to have more autonomy. The Johnson & Johnson company is a good example of a flatarchy. Within the enterprise, there are thousands of projects and product lines.
Matrix
The matrix structure is the least used because it tends to be confusing since employees are "matrixed" across different departments, divisions, and superiors. Employees in a matrix structure may find themselves working and responsible for duties in different departments, such as customer service and sales.
Benefits of Organizational Structure
Several areas are affected by implementing an organizational structure:
- Job descriptions
- Recruitment
- Salary
- Expansion
Job Descriptions
Job descriptions in an organizational structure are designed to meet the goals of the company while promoting employee growth. The focus on internal equity and employee retention is one of the keys to success.
Recruitment
For organizations, recruitment is a major area for investment. By focusing on this area, employees have more opportunities and greater job security. This results in lower recruitment costs.
Salary
A fundamental step in an organizational structure is the creation of salaries. Once the structure is in place, each job description will have salary ranges applicable to each job in the company. For the most part, each job within the company is aligned to a salary grade. Each salary grade has a specified range. Following this structure enables a company to attain its financial goals and ensures that salaries are fairly distributed within a set budget.
Expansion
When a business using an organized structure expands, it can grow and move forward. Expanding an enterprise may include adding more layers of management, creating new divisions, and increasing key functional areas. When a company structure reorganizes for expansion, it provides the opportunity for the company to edit salaries and job descriptions. This means the company operates on its own under the leadership of an assigned president.
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Now, delving into the concepts presented in the article on company structure:
1. Definition of Company Structure:
- Company structure refers to the system that outlines how a company's activities are organized and directed to achieve its goals. It encompasses rules, roles, and responsibilities within the organization.
2. Overview of Company Structure:
- Organizational structure serves as the foundation for determining how information flows between different levels of management. It defines the hierarchy, ensuring efficient operation and a clear direction for the company. The structure is often visually represented through charts or diagrams.
3. Importance of Formal Organizational Structure:
- A formal organizational structure is crucial to avoid confusion and inefficiency within an organization. It ensures clarity about job roles and reporting lines, preventing issues such as uncertainty about immediate supervisors.
4. Centralized vs. Decentralized Structures:
- Centralized structures involve a top layer of management making most decisions, while decentralized structures distribute power among departments. The military exemplifies a centralized structure, while decentralized structures allow for greater independence.
5. Types of Organizational Structures:
- Functional/Bureaucratic: Commonly used, divides the company based on workforce specialization.
- Flatarchy: Promotes autonomy, eliminating traditional chains of command, often found in startups.
- Matrix: Involves employees working across different departments, potentially causing confusion.
6. Benefits of Organizational Structure:
- Job Descriptions: Designed to meet company goals and promote employee growth, focusing on internal equity and retention.
- Recruitment: A well-defined structure reduces recruitment costs by providing employees with opportunities and job security.
- Salary: Organized structures facilitate the creation of salary ranges and ensure fair distribution within a set budget.
- Expansion: When a structured business expands, it can grow efficiently by adding layers of management, creating new divisions, and adjusting job descriptions and salaries.
The article emphasizes that a well-designed organizational structure not only supports day-to-day operations but also impacts areas such as job descriptions, recruitment, salary, and expansion, ultimately contributing to the overall success of the company.
