Introduction
Imagine a company like Shell or Total without a CEO, no shareholders, no board of directors, no managers and the different departments aren't there. Such companies would be in chaos and disorganized. They might not even be the successful and popular companies we know. This shows the importance of corporate structure in a company.A corporate structure refers to the organizational design and hierarchy of a company, outlining the roles, responsibilities, and relationships among its various components.
Definition of Corporate Structure
Corporate structure refers to the organization of different departments or business units within a company. Depending on a company’s goals and the industry in which it operates, corporate structure can differ significantly between companies. Each of the departments usually performs a specialized function while constantly collaborating with each other to achieve corporate goals and values.
Types of Corporate Structure
1. Functional Structure
In this structure, employees are grouped into the same departments based on similarity in their skill sets, tasks, and accountabilities. This allows for effective communications between people within a department and thus leads to an efficient decision-making process. Companies with departments such as IT and Accounting are good examples of a functional structure.
2. Divisional Structure
This structure organizes business activities into specific market, product, service, or customer groups. The purpose of the divisional structure is to create work teams that can produce similar products matching the needs of individual groups. A common example of the divisional structure is geographical structure, where regional divisions are built to provide products or services to specific locations. Divisional structures are also called cstructures.
3. Matrix Structure
Matrix Structure is a combination of functional and divisional structures. This structure allows decentralized decision making, greater autonomy, more interdepartmental interactions, and thus greater productivity and innovation. Despite all the advantages, this structure incurs higher costs and may lead to conflicts between the vertical functions and horizontal product lines.
4. Hybrid Structure
Like the Matrix Structure, the Hybrid Structure combines both functional and divisional structure. Instead of grid organization, Hybrid Structure divides its activities into departments that can be either functional or divisional. This structure allows the utilization of resources and knowledge in each function, while maintaining product specialization in different divisions. Hybrid Structure is widely adopted by many large organizations.
5. Geographic structure
Geographic structures are used in multi-site organizations and are frequently used by networks across different geographic areas.
Importance of Corporate Structure in a Business/Company
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 conveniently business is conducted.A company without a company structure would likely be chaotic and disorganized, leading to inefficiencies and potential failures.
Characteristics of a company without structure:
1. There would be no clear roles and responsibilities and this leads to confusion and overlapping work.
2. Without a structure, communication channels may be unclear, leading to misinformation, this can also affect decision-making process, making it difficult to resolve issues or make decisions.
3. Wasted Resources, this occurs due to the absence of a clear plan or priorities.As a result, the company may struggle to grow or adapt to changes in the market or industry.
4. No accountability and Planning: Without clear roles and responsibilities, it may be challenging to hold individuals accountable for their actions or performance.This leads to a lack of direction and focus.
Such a company might resemble a flat organization, but without a clear structure, it would likely be more chaotic than collaborative. Establishing a clear company structure helps ensure efficient operations, effective communication, and successful growth.
Conclusion
Forming an official corporate structure can help businesses to run as efficiently as possible, help employees understand where they fit into the organisational hierarchy, and better develop employee relations and communication between employees and the different levels of management.
A well-designed corporate structure supports the company's goals, facilitates communication, and promotes efficiency.
Corporate Structure is like the life of a company. It makes it grow successfully.
Without it a company isn't a company.
References:
- Harvard Business Review
- McKinsey & Company
- Corporate Finance Institute
-Wikipedia
