Understanding Organizational Structures and Functional Areas in Business

Production

Processing raw materials to create products that are ready for consumption. Production also includes the assembly of goods. This department exists in companies that belong to the secondary sector. In general, the primary sector (agricultural and fishing) and the tertiary sector (services) do not have this functional area.

Purchasing

Obtaining and analyzing quotes/prices from suppliers, buying at the right time by coordinating with the warehouse supervisors.

Sales

Organizing sales promotions, looking for new customers, preparing the best quotes/prices.

Marketing & Advertising

Dissemination of information about the company's products. Persuading potential clients to buy the company's products through promotions, advertising, sales…

Commercial

Providing customer service and support needed. It is related to the marketing department.

Logistics

This department could be outsourced/subcontracted. Planning and management of shipping, transportation, and storage/warehousing.

Finances

Controlling the company's budget, supervising payments from clients (debt collection department), obtaining money for specific aims such as updating machinery, expanding the business…

Accounting

Preparing documents to pay taxes, auditing company's assets and liabilities, keeping records of financial transactions.

Human Resources

Preparing contracts, recruiting new employees, ensuring employees' training, development of motivation, satisfaction, work environment, equality programs, individual performance...

Management Control

Supervising and developing quality programs, supervising goals achieved by the company.

Tax Department

(If not done by HR or Management) Preparing documents and payment of taxes.

Freelance Workers

(Self-employed workers such as many taxi drivers, lawyers, etc.) belong to the category of individual private companies.

The Owner and the Manager

The owner of the company is not always its manager. In SMEs, both roles usually coincide in the same person, but in large companies, management is delegated to professionals on a fee.

Organizational Structure

The organizational structure is the distribution of the parts of an organization. Organizations use this means to achieve the goals they have set.

Organizational Chart

An organizational chart is a graphic representation that shows the formal structure of the company and its departments, functional areas, and its relationship of interdependence.

Types of Organizational Structures

According to the way tasks are assigned to employees and to the way they coordinate among themselves:

• Formal: Its structure is clearly defined and very stable.
• Informal: It arises from spontaneity; its members engage in relations that were not previously defined.

According to the role of the decision-making authority:

• Centralized: The decision-making authority occupies the top position in the corporate hierarchy.
• Decentralized: The authority assigns or delegates the decision-making to individuals in lower positions of the structure.

Depending on the degree of hierarchy:

• Highly Hierarchical: There is a large number of hierarchical levels and a big space between staff and managers.
• Flat: Virtual absence of intermediate levels of command between management and staff of the company.

Depending on the degree of specialization of job positions.