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Concept of Hierarchy in the private limited company: Designation Guide

The success of any company is directly proportional to its members and organizational structure. Even the top global company which we generally see in Fortune 500 lot follows a similar mechanism to ensure they have an accurate managerial structure. The term ‘Managerial Structure’ includes top executives, investors, officers and supervisors. In a corporate structure, designation plays a vital role in assigning duties and responsibilities to the concerned authorities. To promote the sustainability and growth of the company organization structure is mandatory.

Let’s understand the concept of the private limited company

A Private Limited Company, or LTD, is a type of privately held small business entity. This type of business entity limits owner liability to their shares limits the number of shareholders to 50 and restricts shareholders from publicly trading shares. A private limited company is registered for pre-defined objects and owned by a group of members called ‘shareholders’. Startups and businesses with higher growth aspirations popularly choose Private Company as a suitable business structure. Due to this very reason, it offers a separate directors board and management team. 

Interestingly, almost 93% of the companies incorporated in India are registered as Private Limited Companies. Ministry of Corporate Affairs (MCA), is the governing body in India which regulates all Private Limited Companies in India. To incorporate any private limited company in India, a minimum of two shareholders are required.

A maximum of 200 members is allowed as per limitations. Nowadays, many companies are transferring into a private limited setup for favourable reasons.

Understanding the designation concept in Private Limited Company

‘Designations’ refers to the business titles given to the official working in the company. These titles must refer to the role and duties offered to the individuals working in the assigned department. Hence, the organizational structure especially in the private limited company plays a vital role in the systematic working and transparency credibility of the company.

Credit: Google Image

An organization in private limited setup follows the ‘chain of command’ system. The company at the top level consist of a board of directors, shareholders and its Chairman. The Chairman of the board is elected by the shareholders. The over-arching responsibility of the Chairman is to protect shareholders’ interests and ensure the company is run profitably and in a stable fashion.

In the next line of command board of directors elect Managing Director (MD) to look after the management of the company. In legal terms, a Managing Director means a person who is appointed either by passing a resolution at the company’s general meeting or by virtue of the Articles of Association (AoA). An MD also represent top-level management of the company and entrusted with substantial power regarding the management and affairs of the company. The Managing Director along with other Directors can assign top-executive officers (i.e CXOs), managers and supervisors.

Following the chain of command in management, Chief Executive Officer (CEO) is the head of top-executive officers in a corporate entity. The individual is responsible for making the managerial decisions and overall success of a private company. The BOD (Board of Directors) of a company has the power to appoint a CEO.

Further, a CEO is in charge of designing and implementing the policies and strategies for the organisation. CEO also guide the subordinates to complete the objectives of the company. One thing to note here is that there is no statutory obligation for the appointment of officers in a private limited company. However, directors are required compulsorily to be appointed for all company by the shareholders.

Role of top officers in Private Limited Company

Basically, there are four major departments in the private limited company those are; Sales and Marketing, Production and Manufacturing, Human Resource, and Financial Department. Apart from this, there are several other horizontal departments in form of Strategic, Technology etc. An individual who is the head of these departments is generally called a top-level executive of those departments.

Some of the prominent types of top-executives are as follows; Chief Operating Officer (COO), Chief Financial Officer (CFO), Chief Legal Officer (CLO), Chief Technology Officer (CTO), Chief Marketing Officer (CMO) and, Chief Strategy Officer (CSO). Let’s discuss their role and responsibilities within the company.

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Credit: Google Image

Chief Operating Officer (COO) holds the second position in the chain of command in the private limited company management hierarchy.  In some corporate entities, COO is also known as ‘Chief Operations Director’ or ‘Chief Operations Officer’. A COO acts as the focal point in executing business plans with the assistance of the CEO. He/she not only assists the company to work effectively but also ensure its financial strength. In total, the COO is both the leader and supervisor of the company, who confirms that employees and organisations are executing the Plans of the CEO.

Chief Financial Officer (CFO), is responsible for financial planning, monitoring the cash flow and other financial activities. CFO is similar to a controller or treasurer of a company. CFO also checks the accuracy of the financial statements and reports of the company. In addition, CFO also carries out SWOT Analysis of the company on regular basis. Other duties of the CFO involves; planning, book-keeping, budgeting, accounting, fundraising, setting up of internal controls, and other financial or accounting matters.

In a private limited company set up the next line of command is Chief Technology Officer (CTO). The individual is a senior executive in the technology department of a Company. CTO is responsible for managing, supervising technology maintenance and security aspect of the company. Furthermore, a Chief Financial Officer needs to oversee the technological process, policies, asset maintenance of the company.

Chief Legal Officer (CLO), is the senior legal executive, whose task involves lowering the company’s legal and litigation risk. Apart from that, the main function of a CLO is to advise on regulatory and legal concerns to stakeholders or employees of the company. CLO also handles the legal matter of the company and acts as the first person of communication with statutory authorities.

Chief Marketing Officer (CMO), is the individual at senior-most position handling marketing department of the company. The task involves; managing marketing campaigns, improving brand image, and increasing revenue. A CMO operates directly with marketing, sales, and development departments to combine marketing strategies and policies in every sub-division of the company. CMO of the company is considered to be a vital position who is responsible for direct revenue generation.

Chief Strategy Officer (CSO), often considered similar to Chief Operational Officer, is the top-level executive responsible to derive out a strategic plan for the trouble-free operation of the company. A CSO assisting the chief executive officer (CEO) with developing, communicating, executing, and sustaining corporate strategic initiatives

Role of managers or supervisors and subordinates in private limited company

All the managers or supervisors within the private limited company must report to the top-executive officer of their departments or divisions. Here are some of the role and responsibilities of managers across divisions;

Operations Manager, work involves assisting the company in building operational efficiency through strategic inputs.

Finance Manager, the role of the individual involves managing the financial operations of the company.

Technology Managers takes care of the technological aspect of the organisation under the leadership of the CTO.

Legal Managers, assist a company in handling legal and regulatory matters.

Marketing Managers are responsible for heading several functions in the marketing department of the company. They also assist in executing the marketing strategies and policies of a company.

Human Resource Managers leads the employees and their relations with the company. These managers act as a link between the employees and the management.

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Credit: Google Image

Apart from that, there are some other managers in the organizational structure of a company such as; Accounts Manager, Regional Manager, Functional Manager, General Manager etc. Sub-ordinates of the company works under the guidance of their divisional managers and they are the first line of executive officers in the implementation process. The term ‘subordinates’ refers to the employees who work with the managers to execute and implement several policies and strategies.

In-depth knowledge of the designations of a private limited company is crucial for someone who is interested in building a startup this will helps an individual in the sustainable growth of the company. Moreover, basic knowledge about the company is a must for every individual working in the private sector.

For more queries regarding types of companies and the difference between their ownership reach out in the comment section or for career counselling session reach out at [email protected]

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Aman Yadav

I describe myself a devilish curious breed, avid learner, fond of expeditions, relish bowling and part-time movie buff. Flairexperience in content development domain. I'm a small cog in the digitally transforming world.View Author posts