Typical corporate structure has an upper management team and a board of directors. Understanding the nuances of a corporate organizational chart can help guide a business to success.
Corporate organizational structure is the scaffolding of your business, providing the framework to build and grow strategically. The organizational structure of a corporation can help guide how your company will grow in the future and manage the business challenges.
Deciding on an organizational chart is the first step, and there are many options. Have you ever wondered why specific organizations have CEOs and others elect presidents? These are important decisions that come with creating your corporate organizational structure. Mapping out the current state and the ideal future structure can guide an organization into growth stages.
What Are the Basics of Corporate Structure?
First, we must address what is corporate structure? A corporate structure is the organization of different business units and their members to support the corporation’s functionality. At the highest rung is upper management in the C-suite level. It is essential to understand the different roles CEOs, CFOs, and presidents play at this leadership level to map out a corporate structure.
Corporate governance is the reason for the distinctions among corporate leadership. Corporate governance is the process of managing the alignment between leadership and an organization’s goals. The connection between corporate structure and governance has two branches — the board of directors and upper management.
The first branch is a board of directors elected by shareholders. In contrast, the board of directors hires upper management. Their cohesive work together creates corporate governance, and their organization is the skeleton of corporate structure.
Corporate Organizational Structure
A typical corporate structure has roles and subtasks that are clearly defined. Corporate structure is essential to ensure the greatest efficiency possible. When each position in a corporate structure is well-defined, communicates appropriately, and knows their roles, the organization can work together seamlessly.
Board of Directors
A board of directors bridges the gap between the day-to-day work of an organization and the high-level strategic planning for the future. A board can be as large or as small as deemed necessary. The shareholders usually elect the board members; then members vote to fill the various seats — chair, inside directors, and outside directors.
Typical tasks for a board of directors includes:
- Safeguarding shareholders
- Creating and executing bylaws
- Corporate compliance
- Budget and goal review
- Checks and balances for C-suite leadership and upper management
- Hold annual meetings
- Functionality of committees
Corporate Officers / Management Team
Corporate officers have a stronger voice in the day-to-day activities of an organization. They are selected by the board and occupy a vital leadership among the upper management team. Corporate officers can have many titles, but some of the common ones are:
- President or CEO — An executive at this level will take responsibility for governance, guide an organization’s business decisions, sign documents for the board, and more.
- VP or COO — A Vice President or Chief Operating Officer is the senior ranking executive for an organization outside of the CEO. They help supplement the work of a CEO and act on their behalf when needed.
- CFO — A Chief Financial Officer is in charge of an organization’s finances and reports to the board of directors and shareholders.
- Secretary — A Secretary is the corporate officer who oversees documentation.
The shareholders of an organization are typically the most removed from daily activity but are financially affected the most by its operation. The business entity structure determines the number of shareholders. A shareholder owns a small portion of the company, usually in common stock shares. While a shareholder isn’t responsible for the activity of an organization, they do hold responsibility for taking collective action regarding the future of an organization. Shareholders can vote on:
- How assets should be disposed of if needed
- Election of new board members
- Mergers or acquisitions
- Altering bylaws
Corporate Organizational Chart Examples
A corporate org chart in the U.S. is typically is composed of a board of directors and a management team. There are many other types of organizational structures, but this is the most common.
Other styles, like the flatarchy, are intended to even out the structural hierarchy for a more collaborative approach to leadership and business direction. An uncommonly used structure is a matrix. A matrix organizational structure can be complicated. In this structure, the same team member might work in sales and customer satisfaction. Another organizational example is the divisional structure, which is typical for large companies with different business units, each with its own president. Weigh your organization’s goals before deciding on the right structure for you.
Why Is Corporate Structure Important?
Each position in a corporate structure is essential and must be filled for a company to function smoothly. A corporate structure is what divides the management and ownership of a company, which is important to some industries. A clearly defined organizational structure helps each entity understand the goals, responsibilities, and specific roles tasked to each.
Like a well-drawn blueprint, a corporate organizational structure is a fully built and functioning business map. A few of the benefits of a corporate organizational structure are:
- Clear communication — Having clear boundaries in a corporate organizational structure allow each party to be the captain of their own ship. Each one can communicate with authority and effectively about their area of expertise.
- Task management — To complete projects effectively, there needs to be effective project management and leadership overseeing each goal.
- Scalable growth — A corporate organizational structure prevents weaknesses from arising in the leadership or board of directors because each one is clearly defined and managed.
- Clear reporting — Like clear communication, reporting is the specific ownership of an area. A corporate organizational structure ensures that this ownership is defined.
The Bottom Line about Corporate Structure
A corporate structure can become complicated, but hopefully, this outline of the basic divisions of labor can offer a starting line. The responsibilities of the three typical branches (a board of directors, corporate officers, and shareholders) allow each one to support the other, creating a cohesive business entity.
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