What is an organization?
Types of organizations are the different forms in which an organization can be presented. In this sense, depending on the purposes or objectives they pursue, their size, the sector in which they operate, or their legal form, these organizations can be classified into various types.
Some Important Points
- Organizations can have profit, social, or governmental purposes.
- They are divided into micro, small, medium, and large companies according to the number of employees and turnover.
- Organizations can belong to primary, secondary, tertiary, or quaternary sectors.
Types of Organizations: A Simple Explanation
In other words, organizations are entities formed to achieve specific goals and are classified according to their purpose, size, sector of activity, and legal form. They can be businesses seeking economic profit, organizations seeking social impact, government entities offering public services, and many other forms. These classifications help us understand how they function and their role in the economy.
Types of organizations based on the purpose pursued
In this case, we focus on the objectives or goals pursued by the organization.
Thus, we can talk about three types:
- Business organization: One of the most common, the company. In this case, the ultimate goal is to obtain an economic benefit. However, this must be accompanied by other objectives related to the environment in which it operates. This is the case of social or environmental objectives.
- Non-profit organization (NGO): This is a type of organization that does not pursue economic profit, but rather social profit. It carries out work that has an impact on society, nature, disadvantaged groups, or countries.
- Finally, we have the types of government organizations: These include those that offer public services. In this sense, services such as health, education, or security.
Types of organizations based on their size
Based on the size, although there are differences by country, they are usually classified taking into account the number of employees, turnover, or fixed assets, among other factors.
Thus, the classification shown includes those types that are most relevant in economies such as the Spanish one:
- Microenterprise: This is the smallest of all. Usually, with a maximum of ten employees, although this can vary from one country to another. Furthermore, turnover is low and, in addition, these companies have few infrastructures or fixed assets. In many countries, they represent the largest percentage of all, by far.
- Small businesses: These are usually those that, while having more employees than the previous ones, do not reach a high number, as shown by the types shown below. Usually, a maximum reference of fifty employees is established. They are not as numerous as the previous ones, but their percentage is also very high. They tend to be somewhat more capitalized and their turnover is higher.
- Medium-sized enterprise: They are often included together with the others, using the expression “SME”, which means “small and medium-sized enterprise”. However, sometimes it can be useful to separate them. In this case, the number of employees can reach two hundred and fifty. At the same time, they also have a greater volume of fixed assets. In addition, their size in the market is considerable, as is their turnover.
- Large companies: This is where companies of very different sizes are often mixed. From those with just over 250 employees to those with thousands. Many of them tend to operate in several countries and are therefore called transnational or multinational corporations. Their turnover is very significant, as is their market share, which is also larger.
Types of organizations based on the sector to which they belong
Depending on their activity and the sector in which they operate, we have four classifications of the types of organizations. On the one hand, we have three, which have been traditional, and on the other hand, the fourth, considered relevant as a result of technological development.
In this sense, the classification would be as follows:
- Primary sector: This includes companies related to agriculture, livestock, fishing, and fish farming. We are talking about those companies that are dedicated to the collection of the product, with minimal treatment.
- Secondary sector: This includes companies engaged in manufacturing and manufacturing. This would include all those companies that transform a raw material into a different product.
- Tertiary: This includes services, both private and public. In this case, there is a wide variety within the sector. From public services offered by the administration to small businesses or hospitality.
- The quaternary sector: Traditionally, this sector, related to technology, has been included in the tertiary sector. This was because its percentage of the total was a very residual value. Today, with the technological revolution, it has been considered more reasonable for it to have its own sector.
Types of organizations based on their legal form
This is perhaps one of the most important. We have not included the natural person, called self-employed in many countries. The latter is the individual entrepreneur who risks all his assets, or, on the other hand, that of a group of them who form a community of property.
- In relation to the business organization, we have limited liability companies or public limited companies. In both, the partners are only responsible for the invested capital. One variant is the sole proprietorship company, in which there is only one partner. On the other hand, there are cooperative companies and limited partnerships, in which the partners are responsible for all their assets and can be workers – the first – or partners and workers – the second.
- Regarding non-profit or governmental organizations, we can find associations or foundations; the former requires three members, and the latter requires an initial financial endowment. On the other hand, there are political parties, clubs, and governmental organizations themselves.
Examples of types of organization
Finally, let’s look at some examples and how we would classify them:
- Coca-Cola: We are dealing with a large profit-making company from the secondary sector, with the legal form of a public limited company or similar.
- Police or army: We are dealing with governmental, non-profit, and large organizations, and their sector would be services – in this case, the public.
- A political party: It would be a non-profit organization, similar to an association, and that acts as a citizen representation body.
- A fruit warehouse with the legal form of a limited liability company and with 15 employees: We would be dealing with a small, for-profit company that operates in the service sector and whose partners are only responsible for the assets invested.