The Different Forms of Business Organizations

The form of a business organization takes may depend on the purpose, nature of operations, and resources of the company. However, a business organization’s form may change along with the changing times and the demands they present.

Changing Forms of Business Organizations

Change is constant and organizations continue to undergo various changes in form to ensure effectiveness, efficiency, and relevance in the world of business.

Business organizations may be traditional (simple, functional, divisional, profit, or nonprofit) or open/flexible in form.

Simple business organizations – business organizations with few departments, centralized authority with a wide span of control, and with few formal rules and regulations. These are easy to manage because of their simple form. However, a change of form follows as the company expands its operations.

Functional business organizations – business organizations that group together those with similar or related specialized duties that introduce the concept of delegation of authority to functional managers like the personnel manager, sales manager, or financial manager but allow CEOs to retain authority for strategic decisions.

Divisional business organizations – business organizations made up of separate business units that are semiautonomous or semi-independent, with a division head responsible for his or her unit’s performance. In other words, each division has its own functional organization and its own general manager; however, the central headquarters management maintains responsibility for the delineation of organizational goals of the individual divisions.


a collection of people working together to achieve a common purpose

Profit business organizations – business organizations designed for the purpose of achieving their organizations’ mission, vision, goals, and objectives and maintaining their organizational stability through income generation and profit-making activities. Immediate revenues or cost factors account for their success or failure.

Nonprofit organizations – business organizations designed for the purpose of achieving their organizations’ mission, vision, goals, and objectives, providing service to clients without expecting monetary gains or financial benefits for their endeavors. Their success or failure may be measured by the high or low evaluation scores they obtain.

Open/flexible business organizations – formed to meet today’s changing work environment.

Business Organization

a collection of people working together to achieve a common purpose in relation to their organization's mission, vision, goals, and objectives, sharing a common organizational culture

These affect and are affected by the environment and change, therefore, becomes inevitable; other forms that emerged under this form are:

  1. team structures – where the organization as a whole is made up of work teams (small, but focused) that work together to achieve the organization’s purpose; popular in a collectivist culture
  2. matrix business organizations – those which assign experts or specialists belonging to different functional departments to work together on one or more projects; exhibit dual reporting relationships in which managers report to two superiors—the functional manager and the divisional manager
  3. project business structure – a business organizational form with a flexible design, where the employees continuously work on projects assigned to them; projects may be short-term or long-term and members disband when the project is completed
  4. boundaryless business organization – a business organization whose design eliminates vertical, horizontal, or external boundaries, and is described to be flexible and unstructured; there are no barriers to information flow and, therefore, completion of work is fast
  5. virtual business organization – made up of a small group of full-time workers and outside experts who are hired on a temporary basis to work on assigned projects; members are physically dispersed and usually communicate electronically

Different organizations have different preferences as to the business form that is appropriate for their need/s and the purpose of their existence. Managers, therefore, must be creative in finding ways to structure or design and organize work in their respective firms.

Organizational Culture

the set of beliefs and values shared by organization members which guide them as they work together to achieve their common purpose