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Table of Contents
What Is Company Structure
A company structure refers to how a business is organized and has structured its activities to achieve its overall mission.
In other words, a company’s structure represents the way company employees, managers, and leaders are organized allowing the company to effectively manage its human resources.
Companies need to define their structure so everyone within the organization is aware of how things work, how to get things coordinated, and who reports to who.
Companies that are able to implement the right structure can achieve greater efficiency in their operations, increase their employee satisfaction, and better achieve their corporate goals.
On the other hand, a company structure that is confusing and complex can lead to employee dissatisfaction and a lack of accountability.
When a company structure is “centralized”, the company’s decision-making is made on the higher levels of the organization.
A company that is “decentralized” allows employees, departments, or divisions to make important corporate decisions.
Keep reading as I will further break down the different types of company structures and why it’s important to have one.
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Why Determine The Right Company Structure
Determining the right company structure is key to an organization’s success and long-term survival.
There are many reasons why companies should focus on establishing the right structure within their business to ensure that employees are given the proper platform to succeed.
Employee Roles:
The most important reason a company structure is important is that it allows companies better define job descriptions within their organization.
Having clear job descriptions allows employees to assess the requirements of a position and decide whether or not it is something that they are capable of doing or may enjoy.
Job descriptions also provide employees with the opportunity to move from one job to another either laterally or vertically through promotions.
Hiring Talent:
With the proper company structure in place, it can better identify the talent it needs for the job in question.
With a better understanding of your needs, you can find the right people having the right skill set to get the job done.
Also, by knowing who you are looking for, companies can spend their recruiting dollars in the most efficient manner.
Employee Compensation:
Another important benefit of having the right company structure in place is that companies can better define their employee compensation.
It’s important that employees are compensated fairly, uniformly, and in light of their competencies.
With the proper company structure, a company will be able to better assess how much is fair compensation to offer for certain types of jobs.
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Types of Company Structures
There are different types of company structures out there, such as functional structure, product-based, market-based, geographical division, process-based, matrix structure, circular structure, flat structure, and network structure.
A functional organization structure is a common type of structure where the company organizes itself based on departments having a similar function such as sales, marketing, product, IT, or others.
A product-based divisional structure is a type of structure where the teams are created based on the team’s dedication to working on a particular product.
A market-based divisional structure is a type of company structure that organizes its teams based on specific markets or industries.
A geographical divisional structure is when a company organizes its employees based on geographical regions or territories.
A process-based structure is a type of company structure where the employees are organized based on business processes, such as lead acquisition, customer support, procurement, etc.
A matrix structure is when company employees may have multiple reporting lines based on different company activities, processes, products, or regions.
A circular structure is when a company the company managers are at the center of the ring and the different departments and the lower-level employees are in the outer ring.
A flat structure is when a company has few levels of managers and most employees have a close reporting relationship to the top-level managers.
A network structure is when a company has different business segments that share resources with one another or a company that relies on external companies to outsource some of its operations.
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Company Structure vs Business Structure
What is the difference between a company structure and business structure?
Although both terms may appear to refer to the same thing, they are in fact very different.
A company structure refers to how a company’s internal operations, departments, employees, and management levels are organized.
For instance, a hierarchical company structure is when there are many management layers where lower-level employees tend to be far from the upper-level managers.
Banks, financial institutions, insurance companies, and many large organizations tend to be very hierarchical in structure.
On the other hand, business structure refers to how businesses are legally structured.
Business structures include partnerships, sole proprietorships, corporations, nonprofit corporations, limited liability companies, cooperatives, and others.
Depending on the nature of your business, you may opt for one business structure versus another.
In many cases, larger organizations tend to be structured as corporations as they offer limited personal liability to their shareholders, have flexible ownership structures, and may have better financing options.
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Company Structure FAQ
What is a company structure example?
A centralized company is an example of a company structure.
In essence, a centralized company is a type of company where most of the important decisions are made by higher-level managers.
Then, the decisions trickle down to middle managers and eventually to employees.
Another example is a matrix structure where employees may have more than one reporting line.
How company structures are defined?
Every company will define the company structure that is best suited for its business.
In many cases, company structures may be centered around employee roles, business activities, or based on company rules.
For example, a company may be structured by employee roles, such as “customer acquisition”, “inside sales”, “customer success”, and so on.
What is the best company structure?
There is no cookie-cutter answer here.
A company structure is something that depends on the company, its management, industry, and nature of operations.
Also, company structures can evolve over time.
For example, a startup may start out as a flat organization and eventually evolve into a centralized company structure as the company grows.
Businesses need to find the right company structure that allows them to achieve their goals and remain efficient.
Takeaways
So there you have it folks!
What does company structure mean?
In a nutshell, a company structure refers to how companies organize their employees, departments, operations, and activities to achieve their goals and objectives.
Every company’s structure is unique as it is shaped by its business needs, industry, and nature of operations.
A company’s structure determines how company managers direct different activities within the company, how information flows between different company levels of management, and how decisions are made.
Companies in different industries and sectors may have very different company structures as they have different
In essence, the company structure defines how it is shaped, how individuals interact with one another, and how everyone collaborates with one another to achieve their goals.
Now that you know what a company structure is and how it works, good luck with your research!
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