Text 3. Types of Governance Structures

Governancestructures are usually organised in either a centralised or decentralised manner. A centralised organisation typically places decision making authority with in high-level positions. This set up is often called a horizontal hierarchy or a functional structure. A centralised organisation's structure makes front-line staff and managers responsible for implementing the policies and procedures of executive management. However, it allows the least amount of creativity and flexibility for its staff. They are usually not involved in the decision making process.

Centralised organisations assign to each position very specific responsibilities and authority. Positions are also ranked according to supervisory level and importance. Those individuals who hold positions that are higher up in the organisation's hierarchy possess greater amounts of control and decision making ability. The main benefit of this system is clear lines of communication from top to bottom, though it can also be a bureaucratic set up which does not favour speedy decision-making. A wave of restructuring known as delayering has brought a change into traditional hierarchical structures with layers of middle management being removed. This development was driven by new technology and by the need to reduce costs.

In contrast, a decentralised organisation gives lower level employees the authority to make decisions that directly impact the company's customer or the employees' job tasks. They do not have to go up the chain of commands to get approval before acting. A decentralised organisation will directly engage all employees in decisions that might improve business conditions or job task efficiency. Another advantage of decentralised organisations is that the structure encourages more open communication. It also tends to result in higher levels of employee motivation and job satisfaction. Decentralised organisations are also referred to as flat or organic. Decentralised corporations give front-line employees and managers the authority to make and execute strategic decisions. Thus, the leading software developer Microsoft Corporation has a very flat organisational structure. There are no traditional levels between the average software tester and Bill Gates.

More and more manufacturers are organising themselves along product lines, where companies have separate divisions according to the product that is being worked on. In this case the focus is always on the product and on how it can be improved. Microsoft is a good example of a company that well-structured its product lines. Thus, in Ireland where the company is spit up into seven business units, each unit controls the localisation of their specific products and works closely with the designers in Microsoft's Seattle Headquarters.

In matrix structures a business is organised into project teams, led by project leaders to carry out certain objectives. Most corporate governance structures are comprised of a board of directors, an executive management team, and departments that may be organised according to function, division, or a combination of both. The board of directors usually represents the highest level of power, control, and authority in an organisation. It votes on the company's directives and help shape executive strategies.

Answer the questions:

1. How are governancestructures usually organised?

2. How does a centralised organisation typically act?

3. What are the benefits of centralised organisations?

4. What has delayering brought to companies?

5. What opportunities do decentralised companies give to average employees?

6. How is the structure of the decentralised companies often called?

7. What is a product line organisation made of?

8. How is Microsoft Corporation organised?

9. How is business organised in matrix systems?

10. What are corporate governance structures comprised of?