Functional Organization of a Business

Organizations tend to fit into one of the following functional systems:

Bureaucratic

A bureaucratic organization is one that possesses precise rules, policies and regulations. If a question is asked, there is typically an answer available somewhere in the policy manuals. The lack of flexibility and creativity often prevents the adoption of a pure bureaucratic system for many organizations.

Entrepreneurial

An entrepreneurial system is the opposite of a bureaucratic system. This system is very common for newly formed organizations. The key advantage to an entrepreneurial system is flexibility, the ability to change and the constant desire to create. While there are indeed certain rules that must be followed, the work environment is ultimately dictated by the leader in charge. For instance, if the leader decides that working specific hours is unnecessary, some employees may decide to work a typical 9-5 shift, whereas others may choose to work 11 to 7, etc. The leader is content so long as the work is completed on time.

Merger

A merger system is a compromise between the bureaucratic system and the entrepreneurial system. Although specific rules and policies must be observed, creativity is still encouraged and accepted. For instance, a leader may require that employees work a regular schedule Monday through Thursday, but he or she may then permit them to work their own desired schedule on Friday.

Military

A military system is extremely bureaucratic and compartmentalized. In fact, the organization and structure themselves provide the greatest motivation for respect, responsibility, and salary. Everybody working in the system has a specific place or rank. In addition, there will always be a strict chain of command composed of narrow channels of sergeants, lieutenants, and generals. This chain of command is fixed and highly respected. In a military system, speaking over your supervisor's head is equivalent to outright treason.

Private

Non-publicly traded companies, or those that are not measured in Wall Street, are characterized by far simpler structures. This is typically driven by smaller business sizes. A single owner, partnership, or family business defines itself. The owner is oftentimes visible, well recognized, and approaches the business in a hands-on fashion. Although some of the larger private businesses may be traditionally organized, only the top individuals on top make the important decisions.

Corporate

Generally, the gradual maturity of a business will dictate and define how it molds into a corporate entity. Young companies may be somewhat 'free-form' or come-as-you-are. These companies are typically characterized by broad bands of control and very simple structures. But, as the company grows, issues such as company size, the number of employees, and the company's success cause organizations to begin to alter their structure and become more bureaucratic. Slowly, policies and regulations become the norm. Control tightens, a chain of command is identified, and more emphases is placed on publishing policy manuals and memos.