Business organization systems

economic-dictionary

Business organization systems allow knowing the structure of a company, how decision-making is configured or the channels used for communication.

We are going to carry out three types of classifications based on these premises. The degree of formality (structure), the degree of centralization (decisions), and the way of making themselves known inside and outside (communication).

Business organization systems due to their formality

In this case, organizations are classified based on their structure. That is, if the hierarchies or levels are clearly shown in it. We can speak of two types:

  • Formal organizations: In them the formal hierarchy is clear and concise. There are different levels of command and each one knows what their powers are. They can be linear, functional, staff, or a mixture of the three. In this case, the structure is usually represented by means of vertical, linear or similar organization charts.
  • Informal organizations: In them, greater importance is given to the informal structure of the company. That is, groups that are created spontaneously. The types of organization charts that are usually used are horizontal, circular or similar.

Business organization systems due to their degree of centralization

The degree of centralization is another way of classifying the types of organization. In this case, the analysis focuses on the concentration of decision-making.

  • Centralized organization: The hierarchy is at the top level and is the one that makes most of the decisions. In turn, there is little delegation at lower levels. They are usually organizations that need quick decisions and little discussed.
  • Decentralized organization: In this case the hierarchy is distributed among the different levels. Decisions are made delegated and by consensus. This type of structure usually occurs in companies that face very competitive markets.

Business organization and communication systems

Finally, let's look at the communication aspect. It does not have a direct relationship with the classification of business organization systems, but it does have an indirect relationship. The way of communicating is closely related to the way of organizing.

  • Descending internal communication: In this case we find a way of communicating that starts from the higher levels. Workers receive the information and apply it. It is common in formal and centralized organizations.
  • Upward internal communication: It is the inverse of the previous one. In this case it goes from the workers to the directors. It is prevalent in formal and decentralized organizations and allows for clear feedback.
  • Horizontal communication: In this case it occurs between people of the same rank. It can also be found in companies that have a structure based on horizontal organization charts. The goal is cohesion and teamwork. It is the most used in informal and decentralized organizations.
  • External communication: This would be the company's way of making itself known abroad. It would be composed of advertising, propaganda, public relations or social networks, among others.

Examples of business organization systems

Finally, let's look at some concrete examples of business organizations and how they would fit according to the previous classifications. We are going to use fictitious examples.

  • Telecommunications company based on a franchised store system. Thus, we would be facing a clearly decentralized organization, the franchisees have a lot of autonomy. It would also be formal, since the hierarchy is clear with linear organization charts and franchisees usually depend on area managers.
  • Oil company with territorial delegations. In this case we are facing a formal structure, since the hierarchy is perfectly established, with vertical or hierarchical organization charts. On the other hand, it would be centralized, since the decisions go from the general direction to the territorial delegations.
  • Finally, we can take the example of a small software company whose owner and CEO is also an engineer. In this case we are dealing with informal business organization systems, of a circular type. In addition, it is very decentralized, making decisions among all, even if the director has the last word.
Business structure

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