Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down. This creates a tall organizational structure where each level of management has clear lines of responsibility and control. As the organization grows, the number of levels increases and the structure grows taller.
Often, the number of managers in each level gives the organization the resemblance of a pyramid. This structure gets wider as you move down - usually with one chief executive at the top, followed by senior management, middle managers and finally workers. Employees' roles are clearly defined within the organization, as is the nature of their relationship with other employees.
Two popular types of hierarchical organizational designs are Functional Structures and Divisional Structures.
1. Functional Structure
In a Functional Structure, functions (accounting, marketing, H.R., and so on) are separate, each led by a senior executive who reports to the CEO. This can be a very efficient way of working, allowing for economies of scale as specialists work for the whole organization. There should be clear lines of communication and accountability. However, there's a danger that functional goals can end up overshadowing the overall aims of the organization. And there may be little scope for creative interplay between people in different teams.
2. Divisional Structure
In a Divisional Structure, the company is organized by office or customer location. Each division is autonomous and has a manager who reports to the CEO. A key advantage is that each division is free to concentrate on its own performance, and its people can build up strong local links. However, there may be some duplication of duties. People may also feel disconnected from the company as a whole, and enjoy fewer opportunities to gain training across the business.
The Simple/Flat Structure is common in small businesses. It may have only two or three levels, and people tend to work as a large team, with everyone reporting to one person. It can be a very efficient way of working, with clear responsibilities – as well as a useful level of flexibility.
A potential disadvantage, however, is that this structure can hold back progress when the company grows to a point where the founder or CEO can no longer make all the decisions.
Related Links
You May Also Like
-
GL - Accrued / Unbilled Revenue
Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. Understand what we mean by the terms accrued revenue, accrued assets, and unbilled revenue. Explore the business conditions that require recognition of accrued revenue in the books of accounts and some industries where this practice is prevalent.
-
What is a Business Eco System?
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service.
-
GL - Different Accounting Methods
The accounting method refers to the rules a company follows in reporting revenues and expenses. Understand the two common systems of bookkeeping, single, and double-entry accounting systems. Learners will also understand the two most common accounting methods; cash and accrual methods of accounting and the advantages and disadvantages of using them.
-
Concept of Representative Office
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.
-
McKinsey 7S Framework is most often used as an organizational analysis tool to assess and monitor changes in the internal situation of an organization. The model is based on the theory that, for an organization to perform well, seven elements need to be aligned and mutually reinforcing.
-
Introduction to Legal Entities Concept
Modern business organizations operate globally and leverage a large number of registered legal entities, and operate through complex matrix relationships. To stay competitive in the current global business environment, they must often develop highly diverse and complex organizational structures that cross international borders. Learn more about Legal Entities and their importance for businesses.
-
Network Organizational Structures
The newest, and most divergent, team structure is commonly known as a Network Structure (also called "lean" structure) has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions. When an organization needs to control other organizations or agencies whose participation is essential to the success, a network structure is organized.
-
In most of the automated financial systems, you can define more than 12 accounting periods in a financial year. This article will explain the concept of the adjustment period and the benefits of having adjustment periods. Adjustment periods have their inherent challenges for the users of financial statements and there is a workaround for those who don’t want to use adjustment periods.
-
GL - Review & Approve Journals
Review and Approval mechanisms ensure that the accounting transaction is reasonable, necessary, and comply with applicable policies. Understand why we need review and approval processes, what are they, and how they are performed in automated general ledger systems. Learn the benefits of having journal approval mechanisms in place.
-
General Ledger - Advanced Features
Modern automated general ledger systems provide detailed and powerful support for financial reporting and budgeting and can report against multiple legal entities from the single system. These systems offer many advanced functionalities right from journal capture to advanced reporting. This article will provide an overview of some advanced features available in today's General Ledgers.
