7 Types of Company Reporting Structures That Every Company Should Consider

There are many organizational models you can use to establish your reporting structure, depending on the maturity and goals of your business.

A company reporting or organizational (org) structure helps employees stay organized, work productively and coordinate to achieve the overall mission of the business. The reporting structure provides clarity when an employee faces an issue: who should they go to for help? Who should they approach for a key decision?

An effective reporting structure also creates checks and balances to help ensure the business is compliant and staying on budget. Here’s how to set up a reporting structure that is clear and efficient and keeps your business running smoothly.

A reporting structure refers to the interrelationship between various authorities in a company. This is a hierarchal chain of command that clarifies who reports to whom. Some reporting structures are self-evident in small businesses that only have a few employees.

Passive reporting structures: BBC English Class

What determines an organization’s reporting structure?

Companies set up reporting structures to identify which employees are in charge of various functions, departments and the entire organization. Their structure depends on several factors, including the size of the company, type of business, products and services produced, current projects, geographic locations and the employees individual expertise. Organizational structures can change occasionally based on external influences such as the global economy or internal factors such as change of ownership.

What are business reporting structures?

A reporting structure refers to the interrelationship between various authorities in a company. This is a hierarchal chain of command that clarifies who reports to whom. Some reporting structures are self-evident in small businesses that only have a few employees. These businesses may have the employer as the sole senior authority and all employees report to them. The case is different in large corporations where many activities take place simultaneously. Large businesses require formal reporting hierarchies.

The purpose of a businesss reporting structure is to direct employees on where and how the companys authority flows. It clarifies the functions of various employees, including the manager or managers they have to report to, and the departments that they handle. Sometimes, employees with functional expertise can hold authority, whilst holding no management positions.

Types of Reporting Structures

There are many types of organizational reporting structures, each with unique advantages and disadvantages. You can adopt the reporting structure that suits your organization or complements its growth stage and cycle.

Here are the top corporate reporting structures:

1. Traditional vertical reporting structure

This is the most common organizational reporting structure. For this structure, a singular individual sits at helm of the company. This could be the companys Chief Operating Officer (CEO) or business owner, and the individual is the head of the organization in the reporting structure. They guide their employees, who further manage the low-level employees. This kind of reporting structure resembles a pyramid when illustrated visually, with the senior-most authoritative individual at the top and the least authoritative employees at the bottom.

The traditional or vertical reporting structure can have many layers depending on an organizations size. Small businesses typically have two layers, with all the employees at one bottom level and the owner above them. The owner can then add middle management layers as the business grows and they have to leave the employees supervised as they focus on other things.

The primary advantages of a vertical reporting structure are:

2. Functional reporting structure

The functional reporting structure fits best into a company with several divisions that are set forth to accomplish individual tasks. For example, an organization could have groups of employees working in the marketing department as others handle IT and other research and development. The different departments have their own directors or managers who then report to the same executive. For example, a marketing manager could report to the vice president whose authority spans the IT, marketing and research and development departments.

Similar to the traditional reporting structure, the functional reporting structure can have as many or as few management layers as needed by a business. A small business can have an IT department with two employees under a singular manager and a marketing department with three employees under another manager. The two managers could then report to a business owner. As the business grows, it can then introduce more departments with unique managers.

The advantages of a functional reporting structure are:

3. Divisional or product reporting structure

The divisional or product reporting structure is ideal for large companies, which have many products and sales channels. It differs from the other organizational reporting structures because it allows for authority hierarchies that reflect different product divisions or product lines. The distinct divisions have their own resources, which they control and operate like smaller versions of the umbrella organization. The divisions can have several unique departments to control their sales, IT, marketing and other operations.

A company that manufactures consumer goods and clothing, for instance, can have two divisions for the two product types. Each division can have its own vertical reporting structure with executives who report to the overall leadership team of the company. This can include, for instance, the marketing managers from both divisions having to report to the companys overall marketing manager. The biggest advantage that this reporting structure has is the ability to empower various divisions in large organizations to make independent decisions.

4. Line-and-staff reporting structure

The line-and-staff reporting structure varies from a typical vertical structure because it includes horizontal authority. Line symbolizes the business positions that are required for daily operations, for example, manufacturing or sales. Therefore, manufacturing and sales departments are line positions that require line personnel supervised by line managers.

Staff symbolizes the business positions that offer indirect support to daily operations and line roles. This includes departments such as human resource management, legal and marketing, among others. Such departments are staff and require staff personnel and staff managers.

Staff positions can have indirect authority over line positions as they provide the functional knowledge needed to run the company. For example, a small business can have only one human resource professional. While the HR executive may not directly supervise the production personnel, they need to provide knowledge and support to that department. When the production manager needs to hire one or more employees to add to their team, they may have to notify the HR executive and get their approval.

5. Flat reporting structure

The flat reporting structure works for organizations that have zero distinct authoritative positions. This means that decision-making is equal throughout the company, as no managers or senior-level positions exist. Small and medium-sized companies can implement this organizational structure easily as compared to large ones.

A flat reporting structure makes a company self-managed, as each employee ensures they meet their companys goals. Such is a flat organization, and it requires a sense of equality in its values, mission and culture to succeed. Seniority and expertise can lead to informal hierarchies in flat organizations.

Small businesses typically require employees with unique expertise and experience for a flat reporting structure to work perfectly. For example, a flower shop can have a florist, a sales expert, and a customer service specialist who all have equal reign in their respective dockets. Then, they work together to accomplish the goals of the flower shop.

6. Matrix reporting structure

A matrix or hybrid reporting structure considers the needs of a particular organization and combines at least two organizational hierarchies that satisfy the identified needs. In most cases, a functional structure combines with another structure that particularly allows fulfillment of a project.

The matrix reporting structure suits large businesses that have multiple divisions, campaigns, and products well. For example, if a company is launching a new phone, it might require a hybrid reporting structure. This is because the marketing manager may have to report to the manager tasked with the production, launch the new phone and their own marketing director.

The hybrid structure allows companies to:

7. Network organization structures

Most organizations today operate all their services in one principal office. This makes it difficult to juggle between vendors, freelancers and subcontractors, while still managing offsite locations and satellite offices. To counter this problem, they set a network reporting structure forth to make sense of the spread of resources. This is an internal structure that focuses on communication and relationship goals rather than hierarchy.

A network organization structure helps companies to:

Tips for implementing reporting structures

There are many benefits that come with picking and implementing a reporting structure that is appropriate for your business. The business will achieve its objectives effectively and sprout faster. This is because your employees will occupy the roles they fit in and do each of their assigned tasks effectively. The following are some tips you should consider when deliberating on the organization reporting structure to employ;

FAQ

What are the 4 types of organizational structures?

The four types of organizational structures are functional, divisional, flatarchy, and matrix structures.

What is the best reporting structure?

1. Traditional. A traditional line organizational structure is truly the place to start for most companies, especially the smaller ones that don’t necessarily comprise a vast number of departments or require a major number of links in the chain of command/communication.

How do you write a reporting structure?

Building Your Team: How to Create an Effective Company Reporting Structure
  1. Define how you want your business to run. A message from. …
  2. Consider different org models. …
  3. Document roles and responsibilities clearly. …
  4. Integrate tools to enable cross-functional communication.

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