Structure of a Corporation
Every corporation follows a standard setup procedure. Those who wish to start a small business mostly means the buck starts and stops with them. However, organizations strive to attract and keep qualified employees. This is where organizational hierarchy comes in. Communication is a key factor in the growth and development of a corporation. Those who don't have the right communication procedure find it very hard competing on any market. Defining the chain of command encourages the good process and encourages employees to advance their careers up the ladder.
In economic studies, one of the main areas of focus is corporate and corporate behavior. It is through firms and market activities that the real economy is defined. This means everyone involved has to understand what it takes to run a corporation and their decisions during certain situations. During the 2008/2009 Great Recession, many markets were faced with tough decisions, where some were forced to announce statuses to bankruptcy, leading to the failure of big corporations. This and many other situations become important in the study of markets and economic development. In this course, we are going to look at how corporates are structured and how they behave.
Many structures can define corporates. Under the traditional organizational structures, there are four main approaches, which include: functional, divisional, matrix, and flat. The rise of the digital market place has greatly changed things on the markets. These changes have been further implemented through decentralized, and team-based organizations, disrupting the traditional business models to great lengths. Understanding the management of an enterprise starts with the knowledge of the traditional modes. The same is required for economic study students. It helps them come with more innovative ways of handling business pressures and increasing modern generations' consumer needs.
This is an organizational structure where people who carry out similar or related duties are grouped together based on the specialty. For instance, all accounts are placed under the finance departments, whereas marketing, operations, senior management, and human resources departments are filled with workers with the right sets of skills.
Functional organization structure is one of the most popular types, even in the modern business setup. This structure's advantages include a faster decision-making process since members of the group work together, and it is easy for them to communicate. It is also easier for them to learn and understand each other, making effective communication achievable.
Divisional structure based on products
Many companies don't make just one type of product. There could be different production lines, which require the company to set up groups of workers based on these products or projects, helping to meet the group's needs. It makes it easier for the production processes to happen with many interruptions, and also ensures accountability.
Take and example of a bakery of catering operation. In this case, the workforce may be organized based on the workforce's structure, based on key clientele. The organization could have departments like the wedding department and the wholesale-retail departments. The division of labor in these corporations ensures workers producing similar products to achieve greater efficiency and more output.
We have seen a functional structure as one in which workers with particular skills are grouped together, and divisional models as one in which workers are grouped according to their products. A matrix structure is simply a combination of these structures. It takes both functional and divisional structures elements and makes them into one model, which makes it more complex. People are grouped into functional departments of specialization and then separated further into divisional projects or productions.
For efficiency and more output, team members are given more autonomy, which puts more responsibility expectations on them. Those who cannot perform are held directly responsible as long as the organization has given all the support they need. More productivity is expected within the team. The structure encourages greater innovations and creativity, allowing managers to work together in resolving decision-making problems. There is more group interaction, which makes it even easier.
Dues to the complexity of this structure, a lot of focus is needed in planning and implementation efforts. It is not a suitable approach for a small organization, but the more convenient for large companies that have the resources and teams to implement this framework's complexity. It all begins with understanding the structures mentioned above and picking out the best features for creating a perfect business environment.
Let's say a company is divided into two major departments based on different products: goods and services. Each of these departments will be expected to operate independently because they do not offer the same type of products. This makes it easier to raise questions when there is delay is the supply of certain goods, where the management will know who specifically to approach, without touching the other department.
Flat organization structure is another very important approach to organization. It is the product of technology and modern business environments, which is why it attempts to disrupt the classing top-down management system of most companies. It follows a decentralized management system, which means there is no 'boss.' Each employee is their own boss and is responsible for what happens in the organization individually. With this setup, there is no bureaucracy and red-tape. It also improved direction communication since bosses are able to approach each other directly. If an employee has a great idea that could take the company to the next level, they don't have to go through a three-level communication process with other managers. They just go direct to the key person making the decision. It also means they will be recognized directly for their efforts, as opposed to if someone else were to take the information up. All employees operate at a peer-based level, which gives them more access to other information, helping them share even faster.
The elements of an organization of a company
A company can adopt any of the major structures mentioned above. However, there still have to go through the normal organization procedure that defines the real business process. These are only general models that define markets. But when it comes to real operations, it takes the people to implements these processes. There is a need to understand the specification of a functional corporation.
In this case, we can talk about many structures that help in the business's organizational and functional aspects. There are four basic elements of a firm when approached from this perspective. They include the Board of directors, officers, employees, and shareholders/owners. On the extreme end of this setup, a simple party can be the sole shareholder, director, and employee. Or, a business may have as many people or as few as they wish to conduct business in the corporation.
Board of Directors and Officers
The Board of Directors is at the top of the firm structure. They are responsible for protecting the interests of shareholders and their investments. The Board has the mandate to make sure every shareholder has been served according to their needs, helping them feel happier in the process. When there are decisions to be made that affect a change in an organization's operations, it is the Board of directors who decide to implement it.
Note that the Board may be only one person – in a typical one shareholder corporation or as many as provided in the organization's by-laws. They are elected by shareholders, in most cases, through annual or quarterly meetings to serve for a specific period. There election or appointments is based on their affiliation with the organization, which mostly involves their activities. In some organizations, however, the board members are not members of the organization; they are just chosen based on their influence on society. I
The Board of directors' reports on the success of the business and the progress of shareholders. Through their annual or quarterly reports. They are not directly involved in the company's daily operations, but they set the mission and structure of the business. They are also responsible for drafting and amending the company by-laws and coming up with necessary committees whenever the need arises. They work with appointed officers to protect the company from issues of liabilities. Every company with a large organization must have a Board of directors, making it easy to run the organization.
The Board of directors appoints the officers. These come as the President or CEO (chief executive officer), one or more vice-presidents. They also include the treasurer and the secretary. The number of officers in an organization depends on how large the organization is. Large organizations may have hundreds of officers. They report to the Board of directors, which means they take part in the board meetings. They are responsible for running the everyday activities of the company. The main task is to act in the best interests of the organization they work for, which may or may not always align with the Board's wishes.
Officers are the first employees of a corporation. Employees are responsible for running the business, and there would be no organization without them. They are given various tasks based on the mission and vision of the companies. They report to specific officers of the company. As seen from the structures mentioned above, employees can be grouped differently according to the departments. And the heads of these departments are the officers in charge of ensuring everything goes according to the company expectations.
Shareholders are the owners of the corporations. This means they are individuals who have bought a certain part of the firm and benefit from the revenues the company generates. The ownership can be 100% in the hands of a single individual. It could also be divided within a family, or a few individuals, or spread among thousands and millions. They do not take part in the daily operations of the firm, they do not have any role in the daily management too, and don't have a direct say in decision-making, but a major shareholder can have a big influence on the decisions of the company.
Shareholders routinely vote on the election and removal of directors, amendment of by-laws, major changes on the corporation (like merges, sales, and dissolution), and the disposition of assets owned by the corporation. They also take part in the amendment of the Articles of Incorporation. Some shareholders take part in these activities, but on a lower level. When forming a corporation, it is crucial to factor in the level of influence of the shareholders.
Businesses need funds to survive and make progress. It is the amount of capital and investment a company has that determines how big it gets. Most of these funds come from selling shares of the company. This is why the position of shareholders is very crucial.
Corporations are created a sustained following a specific framework. Apart from the structural organization discussed above, there is more to this aspect you may need to consider too. For instance, what are the building blocks of structure – or rather, what exactly do you mean by organization structure? This question seeks to understand the elements of a company's structure that make a difference in how stakeholders behave and work coordination. There are four main elements or building blocks that make up a company structure:
- Centralization. This factor concerns the extent to which the decision-making body is concentrated at higher levels – which is the main characteristic of centralized companies.
- Formalization. This element concerns the degrees to which policies, procedures, job descriptions, and rules are written and explicitly articulated – formulated structured have many written rules and regulations.
- Hierarchical level. This is another crucial aspect of a company structure. Tall structures have several levels of management between first employees and top officials.
- Departmentalization. Firm structures may differ in terms of departmentalization—for instance, the functional structure groups workers based on their similarity.
Author: James Hamilton