What do you think determines how a company decides to structure itself?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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I think that the two main things that are likely to determine how a company decides to structure itself are the type of product it wants to produce and the basic personal philosophy of the person who founds it.  Eventually, the original structure may need to change, though, as the firm becomes bigger.

One factor that affects corporate structure is the nature of the product the company is making.  In general, it seems that the more that a company is trying to produce intellectual property, the more it needs to have a loose organization rather than strict lines of command.  Such companies want to be flexible and to encourage innovation and creativity.  Therefore, they will choose to have less hierarchical and strict organizations.

A second factor is the personal philosophy of the company’s founder.  If, for example, a company is founded by someone who believes in empowering workers, the organization’s structure is likely to be more horizontal.  There are likely to be fewer vertical relationships because the goal is to have more workers feel as if they can have direct input into the firm’s decisions.

This can all change, however, as the company grows.  A company that starts out with a loose organization may need to become more hierarchical and bureaucratized as it gets bigger and more complicated.

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