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
-
When the quantum of business is expected to be moderate and the entrepreneur desires that the risk involved in the operation be shared, he or she may prefer a partnership. A partnership comes into existence when two or more persons agree to share the profits of a business, which they run together.
-
Legal Structures in Businesses
Businesses not only vary in size and industry but also in their ownership. Most businesses evolve from being owned by just one person to a small group of people and eventually being managed by a large numbers of shareholders. Different ownership structures overlap with different legal forms that a business can take. A business’s legal and ownership structure determines many of its legal responsibilities.
-
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.
-
For any company that has a large number of transactions, putting all the details in the general ledger is not feasible. Hence it needs to be supported by one or more subsidiary ledgers that provide details for accounts in the general ledger. Understand the concept of the subsidiary ledgers and control accounts.
-
An organizational design is the process by which a company defines and manages elements of structure so that an organization can control the activities necessary to achieve its goals. Good organizational structure and design helps improve communication, increase productivity, and inspire innovation. Organizational structure is the formal system of task and activity relationships to clearly define how people coordinate their actions and use resources to achieve organizational goals.
-
Prepayments and Prepaid Expenses
Prepayments are the payment of a bill, operating expense, or non-operating expense that settle an account before it becomes due. Learn the concept of prepaid expenses. Understand the accounting treatment for prepaid expenses. Understand the concept by looking at some practical examples and finally learn the adjusting entry for these expenses.
-
A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings.
-
Shared Services is the centralization of service offering at one part of an organization or group sharing funding and resourcing. The providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group.
-
Functional Organizational Structures
A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report.
-
Reversing Journals are special journals that are automatically reversed after a specified date. A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. See an example of reversing journal entry!
