Unit 3 Company structure

Discussion
 Which department - production, finance, accounting, marketing, sales, human resources, etc. - of an
organization do you think is the most interesting to work in?
 What reasons can you think of for why departments get into conflict with each other?
 Is it better to have one immediate boss or to work for more than one manager?
 Do you prefer to work alone or in a team?
 is it more motivating to be responsible to someone for your work, or responsible for people who report to
you?

1. 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.
Departments in a company include Human Resources, IT, Accounting and Finance, Marketing, Research and
Development (R&D), and Production. Some product-based or project-based companies may divide up business units
by addressing a single product or project as a department.
2. Types of Organizational Structure
There are five general types of organizational structure that are widely used by businesses all around the world:
2.1 Hierarchical Organization
A hierarchical organizational structure has a direct chain of command from the top of the company to the bottom.
Senior management makes all essential decisions, which are handed down to the lower levels of management.
Suppose someone at the bottom of the organizational pyramid needs to make a choice. In that case, they must first
convey the request up the chain of command for permission, after which they get to decide.

Advantages
- Clearly defined career path and promotion path: When a business has a hierarchical structure, its employees can
more easily ascertain the various chain of command. Having clear advancement opportunities can help attract and
retain talented professionals. Promotions also help employees experience increased morale, motivation and
productivity.
- Department loyalty: Companies with hierarchical structures divide employees into teams and departments. When
employees are part of a department, they tend to grow a sense of team spirit and loyalty. These sentiments can help
retain employees and encourage team members to work together to achieve the organization's goals.

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- Efficient leadership and communication: Having a hierarchical structure helps employees understand the various
levels of leadership. Employees tend to know who to talk to when providing progress updates or reporting issues.
Management also benefits, as they can use their authority to effectively delegate tasks and ensure operational
efficiency. Overall, hierarchical structures can lead to better communication and collaboration across teams.
- Delegation of authority: Instead of having one entity hold all the authority, a hierarchical structure delegates
power to different employees. This distribution benefits the chief executive officer, as they can focus on making
decisions that affect the entire organization. Supervisors at the department level have the necessary authority to
manage the daily performance of general employees.
- Encourages specialization: The various departments within a hierarchical structure allow employees to become
specialized in a particular field. Specialization ensures an organization can offer high-quality products and services
that stand out from competitors.
Disadvantages
- It can be costly: Because a hierarchical structure requires multiple departments, companies employing this
organizational technique employ several managers and supervisors. Employees in these roles have higher education
levels and experience, requiring higher salaries. Companies can prevent these higher salaries from affecting their
profits by managing their budgets and hiring only the management staff necessary for efficient operations.
- Slower decision-making: Hierarchical companies tend to involve their managers and supervisors in decision-
making. While this amount of expertise can seem beneficial, it can also result in slower actions. This effect is
especially prevalent when a fast decision is necessary to respond to urgent business decisions. - Poor
communication: Dividing employees into different departments and levels can lead to a lack of communication.
Professionals might deem it unnecessary to communicate with other teams or lack the necessary resources. An
organization with a hierarchical structure might prevent this issue by hosting regular cross-department meetings.
- Department rivalry: The division into teams might also cause department rivalry within a hierarchical
organization. Employees might feel like competing with their peers instead of working together toward the
company's objectives.
2.2 Functional Structure
Under 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.

The advantages of this type of structure are:

- specialisation - departments focus on one area of work
- productivity - specialism means that staff are skilled in the tasks they do
- accountability - there are clear lines of management
- clarity - employees understand their own and others' roles
Disadvantages of a functional structure
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- Employees may get bored because they have the same daily works.
- Competition may arise between employees.
- Poor cooperation and communication between departments and units may be poor. Lack of teamwork and reduced
flexibility may cause conflicts between departments and units.
- Because of the strong hierarchy and bureaucracy, delays may occur in decision-making.
- Inside a department, employees know all the things but outside their department, they have limited knowledge
which may cause problems.
2.3. Matrix Structure
Matrix Structure is a combination of functional and divisional structures. This structure allows decentralized decision
making, greater autonomy, more inter-departmental 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.

Advantages
- Collaboration between different departments
- Combines project and functional management structures
- Allows interdepartmental communication
- Employees can develop new skill sets
- Team members and managers keep their functional roles
Disadvantages
- Managerial roles may not be clearly defined
- Team roles may not be clearly defined
- The decision-making process can be slowed down
- Too much work can cause overload.
- Measuring employee performance might become difficult.
2.4 Flat structure
A flat organizational structure is a management system with few managerial positions, and workers can move up or
down throughout the company as needed. In more flat organizational structures, there are several common traits, such
as faster decision-making and responses and improved communication.

Advantages
 better communication and relationships between different roles
 better team spirit as there is less hierarchy
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  simple, faster decision making as the chain of command is shorter
 better ability for the business to change and adapt
 greater job satisfaction when employees are given more autonomy
 more self-direction can lead to more innovation and efficiencies
 ability to lower operational costs
Disadvantages
 risk of generalisation and confusion if it's not clear who to report to
 lower sense of accountability as employees may have more than one boss
 risk of power struggles arising in absence of a formal system
 lack of employee specialism and specific job functions
 lack of long-term growth or opportunity for promotion
 difficulties in scaling up and growing the company
2.5. Holacratic organizational structure Quản lý phi tập trung

Holacracy is an organizational structure designed to give everyone within the company greater power, freedom, and
opportunity. It is not a particular place or a division in the traditional sense. In traditional companies, a worker has a
designated job title and fills one role, with his or her responsibilities rarely changing. With holacracy, one team
member can fill multiple roles, with responsibilities changing as work shifts or new projects come in. Authority is
distributed to self-organizing teams (called "circles") instead of relegated to individual managers.
Advantages
Purpose-driven. With the hierarchical management style removed, individual employees work toward the same goal
which is soon reflected more broadly across the business.
Agile customer service. As the company grew, they were unable to efficiently respond to customer queries because
of a convoluted management structure. A holacracy allowed every employee to deliver exceptional customer service
without the need to refer enquiries to more senior colleagues.
Sets clear expectations. Holacracies by their very nature set clear and transparent objectives, so every employee
knows what is expected of them. This negates inefficiencies and the often hidden power struggles that exist in
hierarchical organizations.
Disadvantages
Difficult to implement in large organizations. In some cases, vast amounts of resources must be devoted to re-
training. Some managerial styles also become entrenched in company culture and are hard to remove.
Lack of accountability. Loosely defined roles in a holacracy without distinct performance standards make it more
difficult for HR departments to measure employee capability.
Lack of focus. The focus on teamwork can lead to confusion and a lack of focus. Decisions may be debated ad-
nauseam, leading to inefficient work practices and the wrong decision being made. Furthermore, some employees
have skillsets or personalities that are better suited to solo work.