The organization of different departments or business units within a company is called corporate or company structure. This structure can differ significantly between companies depending on the industry and the company’s specific goals.

Company structure

Departments within a company usually perform a distinct function, while they are also collaborating with each other. Some of the most important departments usually include Accounting and Finance, IT, Human Resource, Marketing, Research and Development, and Production.

There are four general types of traditional organizational structures: functional, divisional, matrix, and flat. Nowadays with the emergence of the digital marketplace, decentralized and team-based structures are also becoming more widespread and important.

A functional company structure means that people are grouped together based on their specialty (such as finance, marketing, operations, top management, HR etc.). The specialty in this regard is a certain similarity in their skill sets, tasks and accountabilities. In a structure like this, group members can easily communicate and learn from each other, hopefully leading to an efficient decision-making process.

In a divisional structure, workers are grouped in teams based on the projects they work on. A common example is geographical structure, where divisions in different regions are built to operate in a specific location. A division is an autonomous section of the company where each section has its own top executive and its own structure. Small businesses rarely use a divisional structure.

A matrix structure is a more complex system, it combines elements of the divisional and functional models.  It groups people into functional departments of specialization, but further separates them into divisional projects. Team members are given more autonomy and responsibility in this type of structure, which increases productivity and supports creativity and innovation. A matrix structure, though, may have its own problem areas, since it is a more complex system that can also prove to be less efficient. A company that operates in various geographical regions with various products may profit from the matrix structure, because development teams and geographical interaction specialists may need to work together more closely.

A flat company structure is the opposite of the traditional top-down management system of most companies. To put it briefly, there is no “boss”, management is decentralized. Each employee is the boss of themselves communicating directly with others. This structure allows a more straightforward working relationship and it eliminates bureaucracy aiming to make the company quicker in decisions and more efficient in communication.

Tall and flat companies

Besides these models, there are also other factors that define the structure of an organization. The key term is the chain of command, the system by which instructions are passed from one person to another within the company. Depending on the chain of command, the structure could be either vertical or horizontal, as well as centralized or decentralized. Vertical structures usually have a CEO at the top of the company who delegates authority to mid-level and lower-level managers. Horizontal (or flat) companies do not have middle-managers and everyone gets involved in daily tasks. Within a centralized organizational structure, the decisions and the directions of the company are decided by one person. In decentralized organizational structures, people working at the company have a certain autonomy at each level; they may also join the decision-making process.  

Future trends

The digital era has had a great impact on corporate structure as well. The successful organizations of the future will be those that can adapt more quickly and embrace dynamic career demands. The trend seems to be towards a flatter, decentralized organizational structure. These transformations are very much influenced by technological changes, since they improve efficiency, change the job landscape, restructure departments and modify the requirements that certain position have within the company.

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