WHAT IS A CORPORATE STRUCTURE?
This shows how a business, in most cases a corporation is structured. The corporate structure of an organization is simply composed of the different departments and offices that make up the organization. The IT department, the Legal department and others who work toward a shared goal that is the success of the company are what make up a corporate structure. This corporate structure shows the way in which the corporation or business is run in the day-to-day sense. The corporate structure lays out the hierarchy of roles and also the communication channels between those different hierarchy’s There are many factors that can determine the choice of corporate structure to be used by a company and they include the following:
1. The size of the organization
The amount of people that constitute and make up a business/corporation will serve as a determinant for the kind of corporate structure that will be used. An organization of a small size will require less middlemen in the structure and will also constitute of lesser departments.
2. The nature of the organization
The type of organization determines the type of corporate structure to be applied by an organization.
3. The industry they work in
The sector of the economy an organization is under also serves as a determinant for the type of corporate structure to be used by such an organization, the type of corporate structure to be used in an organization in the health industry will not be the same to be used in the finance or the banking structure.
4. The goals to be achieved by the organization.
The goals of the organization also determine the type of corporate structure to be used. An organization with no goals of expansion will need a different type of corporate structure from an organization with a reach in different countries.
5. How the company wants to choose its chain of command
A company who believes in the employees reporting to only one person or in a particular way will choose a corporate structure that will suit such needs.
WHY CORPORATE STRUCTURES MATTER 1. Efficiency
Having a good structure will aid and promote efficiency in the workplace as some staff act as watchdogs of others. Lower staff who know they have to report to other people are more inclined to perform their duties to the best of their abilities. A good corporate on its own will make the workplace more efficient in line of output also.
2. Easy understanding of employees
Employees being aware of their position in the organization and the way the company is structured is done by having a good corporate structure. It allows the employees easy understanding.
3. Communication
Having a good corporate structure fosters good communication among departments and also among the employees and other upper officers like the CEO and the shareholders. The corporate structure acts as a line of communication among the members of such an organization.
4. Improved reporting
When making reports on activities or results, having a corporate structure makes the passage of such reports to be carried out effectively and to reach the appropriate party.
5. Improved decision making
Having a corporate structure helps in the making of decisions. This is especially in the traditional corporate structure.
6. Improve employee performance and relations.
7. Efficient task completion
TYPES OF CORPORATE STRUCTURES 1) HIERACHICAL CORPORATE STRUCTURE
This is the traditional form of corporate structure and mainly the most used. In this form of corporate structure, the staff are akin to levels with each lower level reporting to somebody directly above them. This structure follows a chain of command that leads from the higher levels of employment to the lower level of employment.
For example, in a school the students report to the class teachers who in turn report to the H.O.D and the H.O.D reports to the Dean and so it goes until it reaches the person with the most authority. There are normally five levels in the hierarchical structure and they include.
• Shareholders/investors
• Board of Directors
• Senior management
• Middle management
• Entry level employees
It is normally in form of a pyramid. Large companies typically adopt this kind of structure that accommodates their size and sets out a clear reporting structure.
ADVANTAGES
1. Clear chain of command
2. Well defined roles and responsibilities
3. Efficient communication
4. Clarity of reporting structure and authority
5. Gives employees an opportunity for growth
6. Provides a clear career path for employees.
7. Scalable
DISADVANTAGES
1. Slow decision making
2. Limited flexibility
3. Bureaucracy
4. May stifle innovation.
5. Can stifle collaboration cross departments.
6. Lack of innovation
7. Communication silos
2) MATRIX STRUCTURE
This structure adopts two or more different types of corporate structures. In this structure, employees report to more than one person. An employee may have to report to different managers in charge of different departments or areas. This structure offers a lot of supervision but can cause conflict between the managers. In this structure, employees report to multiple leaders and this design keeps open communication between the employees.
ADVANTAGES
1. Collaboration between departments
2. Combines project and functional management structures.
3. It allows interdepartmental communication.
4. Employees can develop new skill sets.
DISADVANTAGES
1. Managerial roles may not be clearly defined.
2. Team roles may not be clearly defined.
3. Slow decision making
4. Too much work can cause overload.
5. Measuring employee performance might become difficult.
3) FLAT STRUCTURE
This structure has fewer management levels. The flat structure encourages autonomy instead of enforcing the chain of command this approach consists of many employees and a single boss or a single supervising manager. This approach is more popular in small businesses. Many organizations especially startups are now opting for the flat structure as it allows for a more collaborative and interconnected team.
This structure has a decentralized approach with fewer layers of management and increased employee empowerment.
ADVANTAGES
1. Provides more opportunities to excel to employees.
2. It encourages sharing of research and information.
3. Flexibility
4. Easy Adaptability to change.
5. Faster communication
6. Democratic nature
7. Employees have more responsibility.
8. Employees are more involved in important decisions and conversations.
9. Fosters transparency.
10. Enables fast decision-making.
DISADVANTAGES
1. Heavy managerial workload
2. Confusion over roles
3. Makes it difficult for employees to specialize in specific roles.
4. Can lead to poor oversight.
5. Distrusting of higher authority by employees
4) TEAM BASED STRUCTURE
This structure divided employees into groups with each group working on a certain project. Contained in this group is a team leader who in return reports to the management. In a team-based structure, the team may report to another team. This team leader can be appointed by the management or voted into position by other members of that team. These teams work towards a common goal while still performing their specialized tasks and this structure allows more flexibility from their professionals.
ADVANTAGES
1. Encourages collaboration and teamwork.
2. Flexible and adaptable
3. Develops employees’ skills and knowledge.
4. Suitable for complex projects and innovative environments
5. Improves communication and problem solving.
DISADVANTAGES
1. It can be challenging to manage and coordinate.
2. Mahy lead to conflicts and overlapping responsibilities
3. It requires strong communication and collaboration skills.
4. It can be difficult to maintain accountability and productivity.
5. May lead to burnout and exhaustion.
5) FUNCTIONAL/DIVISIONAL STRUCTURE
This structure is based on the functions of the employees in question. A company may be organized into the functions of customer care, social media, legal, and human resources. This sort of structure is suitable for organizations with stable, routine operations and a focus on efficiency.
ADVANTAGES
1. Specialization
2. Clear roles and responsibilities
3. Efficient use of resources
4. Career progression
5. Economies of scale
DISADVANTAGES
1. Limited flexibility
2. Slow response to change.
3. Lack of innovation
4. Poor communication
5. Inefficient adaptation
6. Limited cross-functional collaboration
7. Top-heavy management
CONCLUSION
It is important while choosing a corporate structure to decide one that suits the need of all members of the corporation while still fostering efficiency in the organization.
SOURCES
1. www.indeed.com
2. http://www.pmi.org
3. http://asana.com
4. http://boardmix.com
5. http://www.investopedia.com
6. www.pingboard.com/blog
7. allbusiness.chron.com
8. http://uk.indeed.com
9. http://peakframeworls.com
10. http://study.com
11. http://corporatefinancefinanceinstitute.com
