What is a business structure?
A business structure relates to the way the business is organized with respect to who makes the decisions and instructs what part of the business. Often drawn as a diagram, it shows the relationship between decision makers and the different departments within the company.
The corporate business structure
In the corporate business structure, any decision to be made is made centrally, either by one person or at the head office, the results of which are then communicated to the workers. This is the most “rigid” organizational structure, as workers have little or no voice or participation in the decision-making process, rather than having to follow the orders that are issued.
The business enterprise structure is most commonly found in individual merchants with only a few employees, or in organizations that have to make decisions quickly, such as publishing, where there is often very little time available to discuss things in meetings when there is a deadline that must be met. In this case, someone has to make a decision quickly without having to argue or justify it.
For a sole proprietor, you are often the sole owner of the business, and that’s what they say. Because they own it, no one has the authority to block or delay their decision. While many may seek the advice of the people they employ, they will often already have an idea in mind as to what they would like to see done, so they will likely make the decision right away.
Advantages of the entrepreneurial business structure
The main advantage of the corporate business structure is the ability to make decisions quickly. Without lengthy meetings and discussions, or proposals pending approval, decisions can be made almost instantly and changes are implemented. This allows companies to quickly adapt to any change in market conditions. It is also a leadership style used by governments in emergency situations, as virtually all countries have laws in place that allow legislation to bypass parliament or equivalent bodies and be enacted when speed and response time are the highest priority. .
Another advantage is that it is one of the least expensive commercial structures available and, in most cases, it will be the cheapest option. This is because there are no middle management levels to pay or keep (for example, company cars).
Third, everyone knows who is in charge and to whom they are accountable, which eliminates the chances of confusion being created if different department heads ask different workers for different things (for example, the head of the production department asks the workers to improve the quality of the product to spend more time on each one, at the same time that the head of the finance department requests more production to generate more income).
Disadvantages of the entrepreneurial business structure
Despite its advantages, there are a number of disadvantages to the corporate business structure.
Due to their autocratic nature, as workers are told what to do without having to participate in the decision, there is always a real danger that they will lose morale and motivation if they disagree with the decision. The degree of their discouragement will depend on a number of factors, such as how strongly they disagree, as well as the number of explanations (if any) they receive about why that particular decision was made.
Decision makers may not know as much about the problem, market conditions, etc. as they think they do. While they make quick decisions, they are not necessarily the best decisions, and it may be better for the company to have a specialized manager who is an expert in a particular area.
It may not be an appropriate organizational structure either if the business grows, as decision makers simply have too many decisions to make. As stated above, decisions can be made quickly in an enterprise business structure. But if there are so many decisions to be made that it causes delays as different employees wait for answers, it may actually be faster to appoint a manager and delegate responsibility for making certain decisions to them.
