When a company gets registered into a corporate entity by issuing its shares to the public, there comes a need to systematically categorize the various departments and sections within the company. Hence, the need for a corporate organizational structure is felt.
In any organization, it is the labor force that forms the major portion of the employees. It is the labor that goes out into the field and does the actual work.
By labor, we do not necessarily mean the physical labor that is generally associated with the term. We mean the end of the chain, the workforce that is in direct contact with the clients or the consumers of the company. This is the least paid, yet most important component of a corporate structure.
The labor force is answerable to a string of people who are at a position that is one step higher than themselves. They are their immediate supervisors.
For instance, if A is a reporter with a newspaper, he must report to duty to his immediate superior, who in this case is B, the reporting head. Who these supervisors report to will become evident in the following section.
The term 'managers' has been used here purely for representation purposes. It does not signify the position that the official person/s hold, though it may be the case in some organizations.
The next in line to supervisors is generally the management team. This management team looks over not only the work of the supervisors, but also keeps a track of the lower echelon, i.e., the labor force.
This team may have different levels within it, comprising vice presidents, assistant managers, managers, presidents of departments, etc. The posts and responsibilities handled by each person may vary from organization to organization.
Board of Directors
The next and probably the most influential in the pyramid of hierarchy is the board of directors. They are, in a way, the voice of the shareholders of the company. They are the upper most rung of the corporate ladder and therefore are the ones that make the most important decisions like takeovers, mergers, acquisitions, etc.
They are headed by a chairperson and are considered the most powerful people within an organization. They are the ones that oversee the appointment of the management team mentioned previously.
They also oversee the performance of the management team and employ the CEO, who again holds one of the most influential posts within the organizational structure.
The CEO can be dismissed by the board of directors, who can be dismissed by a vote by the shareholders or other directors of the board. The criteria for hiring and firing them will depend on the policy that the company follows.
In most companies, the shareholders are the silent and invisible force who actually control and govern the working of the organization. They are the real owners of the company, and every post and position mentioned previously depends on them for each of their jobs, duties, and responsibilities.
Most companies hold a majority of their own shares in order to prevent a wavering in the balance of their finances. However, shareholders still play the most important role, at least on paper and in terms of finances, in the organizational structure of a company.
The organizational structure mentioned here is a typical and classic example. Various other forms and types of organizational structures have evolved with the advent of globalization. However, this is the one that is still followed by many companies since their inception.