Effective Business Organization Models and Structures

Item 4: Business Organization

Defining Business Organization

Business organization consists of a set of standards, methods, and principles used to coordinate available resources. The objective is to reach a specific goal with minimum effort and lower costs.

Types of Organizational Structures

Informal Organization

An informal organization comprises a group of employees who are related by shared concerns, interests, and common goals. For the proper functioning of the organization, it is important to pursue the joint satisfaction of both the company and the team. Spontaneously generated informal organizations should not be viewed as a threat, but rather as a means to achieve satisfaction.

Formal Organization

A formal organization is the structure that a company defines intentionally. This includes the identification and classification of tasks, the grouping of organizational units, the allocation of authority and responsibility, and the establishment of channels for communication and coordination. These can be classified as follows:

Classical Structures

• Hierarchical: This structure features a single line of authority exercised over all persons, regardless of the activity performed. It does not support specialization and is based on the principle of unity of command. Requirements: It is typically applied to firms with low staffing levels and fewer levels of command, where heads of large capacity must constantly coordinate all activities.
• Functional: This structure aims to increase efficiency and productivity at the lowest cost with the least personal effort. Features: Authority is exercised over specific activities, removing the principle of unity of command. It empowers middle managers and requires specialization, coordination of activities, and the implementation of systems, procedures, and communication channels, often involving consultants (staff). Requirements: It requires establishing and grouping various functions, appointing specialists for each department or area, and maintaining constant monitoring and communication.
• Mixed: This structure combines functional and hierarchical elements. Requirements: It is necessary to clearly differentiate between line functions (control) and staff functions (advice). The company must employ highly qualified consultants, ensure responsibilities are assigned appropriately, and keep staff from interfering directly with the implementation of plans.

Modern Structures

Modern organizational structures include those designed for projects, matrix systems, and networks.