7 Types of Company Reporting Structures That Every Company Should Consider

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?

To determine which employees are in charge of different functions, departments, and the entire organization, businesses set up reporting structures. Their organizational structure is influenced by a number of variables, such as the size of the business, the industry, the goods and services produced, the current projects, the location of the business, and the individual expertise of the employees. Organizational structures can occasionally change due to internal factors like ownership changes or external influences like the global economy.

What are business reporting structures?

The interrelationship between various authorities in a company is referred to as a reporting structure. It is clear who reports to whom in this hierarchical chain of command. Some reporting structures in small businesses with a few employees are obvious. In these companies, the employer might be the only senior authority, and every employee would answer to them. In large corporations, where numerous activities occur simultaneously, the situation is different. Large businesses require formal reporting hierarchies.

A company’s reporting structure serves to inform employees of where and how authority is distributed within the organization. It makes clear the duties of different employees, including the manager or managers to whom they must report and the departments they are responsible for. Employees with functional expertise occasionally hold positions of authority without holding management positions.

Types of Reporting Structures

Organizational reporting structures come in a variety of forms, each with its own benefits and drawbacks. You can use the reporting structure that works for your business or that supports its growth cycle.

Here are the top corporate reporting structures:

1. Traditional vertical reporting structure

This is the most common organizational reporting structure. In this arrangement, a lone person controls the business. This person is the leader of the organization in the reporting structure and may be the company’s Chief Operating Officer (CEO) or the business owner. They guide their employees, who further manage the low-level employees. When represented graphically, this type of reporting structure looks like a pyramid, with the senior-most authoritative person at the top and the least authoritative employees at the bottom.

Depending on the size of the organization, the traditional or vertical reporting structure may have many layers. Small businesses typically have two levels, with the owner above all of the employees at the bottom level. As the company expands, the owner can then add layers of middle management, leaving the employees under their supervision while they concentrate on other things.

The primary advantages of a vertical reporting structure are:

2. Functional reporting structure

The functional reporting structure works best in a business with various divisions designed to carry out distinct tasks. For instance, a company might assign certain employees to work in the marketing division while others handle the IT and other research and development departments. Each department has a director or manager, and they all answer to the same executive. For instance, a marketing manager could answer to the vice president, whose responsibilities include the departments of IT, marketing, and research and development.

The functional reporting structure is similar to the traditional reporting structure in that it can have as many or as few management layers as the business requires. A small company may have two employees in its IT department working for a single manager, and three employees working for another manager in its marketing department. The two managers could then report to a business owner. The company can then add more departments with distinctive managers as it expands.

The advantages of a functional reporting structure are:

3. Divisional or product reporting structure

For large businesses with numerous products and sales channels, the divisional or product reporting structure is ideal. Because it enables authority hierarchies that reflect various product divisions or product lines, it differs from other organizational reporting structures. The various divisions each control their own resources and run like scaled-down versions of the umbrella organization. To oversee their sales, IT, marketing, and other operations, the divisions may have a number of distinct departments.

For example, a company that produces clothing and consumer goods may have two divisions for the two product categories. Executives from each division may have their own vertical reporting structures, reporting to the company’s overall leadership team. For instance, both divisional marketing managers might need to answer to the company’s chief marketing officer. The ability of various divisions in large organizations to make autonomous decisions is this reporting structure’s biggest benefit.

4. Line-and-staff reporting structure

Because it includes horizontal authority, the line-and-staff reporting structure differs from a typical vertical structure. Line represents the business positions necessary for day-to-day operations, such as manufacturing and sales. As a result, manufacturing and sales departments need line workers under the supervision of line managers.

Staff represents both line roles and business positions that provide indirect support for daily operations. This includes, among others, the human resources, legal, and marketing departments. These departments have staff, which means they need staff employees and staff managers.

Since staff positions provide the functional knowledge required to run the company, they can have indirect authority over line positions. For instance, a small company can only employ one human resource specialist. Although the HR executive may not directly supervise the production staff, they must still provide that department with knowledge and support. The HR executive may need to be notified and given the go-ahead before the production manager can add one or more new hires to their team.

5. Flat reporting structure

When there are no clearly defined authoritative positions within an organization, the flat reporting structure is effective. This indicates that decision-making is distributed equally across the organization as there are no managers or senior-level positions. Compared to large companies, small and medium-sized businesses can more easily implement this organizational structure.

With a flat organizational structure, each employee is responsible for ensuring that the company’s objectives are met. Such an organization is flat, and for it to be successful, its values, mission, and culture must all be seen as equal. In flat organizations, informal hierarchies can develop as a result of experience and seniority.

Flat reporting structures typically don’t work well for small businesses because they need employees with specialized knowledge and experience. For instance, in a flower shop, the florist, the salesperson, and the customer service representative could all exercise equal control over their respective dockets. Then, they collaborate to achieve the flower shop’s objectives.

6. Matrix reporting structure

When creating a matrix or hybrid reporting structure, at least two organizational hierarchies that meet the needs of the specific organization are taken into account. Most often, a functional structure is combined with another structure that specifically enables project completion.

The matrix reporting structure works well for large companies with numerous divisions, campaigns, and products. A hybrid reporting structure might be necessary, for instance, if a company is introducing a new phone. This is due to the possibility that the marketing manager would have to answer to the production manager, launch the new phone, and their own marketing director.

The hybrid structure allows companies to:

7. Network organization structures

Most businesses today run all of their services out of their main office. This makes it challenging to manage off-site locations and satellite offices while juggling vendors, independent contractors, and subcontractors. They established a network reporting structure to address this issue and make sense of the distribution of resources. Instead of emphasizing hierarchy, this internal structure places more of an emphasis on relationship and communication goals.

A network organization structure helps companies to:

Tips for implementing reporting structures

Choosing and implementing a reporting structure that is suitable for your business has numerous advantages. The business will achieve its objectives effectively and sprout faster. This is due to the fact that your staff members will effectively carry out each of their assigned tasks and occupy the roles to which they are suited. Consider the following advice when deciding on the organizational reporting structure to use:


What are the 4 types of organizational structures?

Functional, divisional, flatarchical, and matrix structures are the four types of organizational structures.

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.

What are the 7 organizational structures?

How locations are categorized for reporting purposes is determined by the reporting hierarchy. A location can exist in more than one reporting hierarchy. This is due to the fact that various users and user groups may have various reporting requirements.

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